Demand response (DR) is a program that incentivizes consumers to reduce their electricity consumption during peak demand periods. This can help to avoid or reduce the need for expensive investments in new power plants and also help to lower electricity prices for all consumers. Utilities companies today are looking to gain a competitive edge by implementing DR programs to improve customer relations and maximize value. As per a report published by the American Council for an Energy-Efficient Economy (ACEEE) in August 2022, DR programs saved US customers $2.6 billion in 2021 and an average of $1.9 billion per year over the past five years(1). As per another study published by the National Renewable Energy Laboratory (NREL) in June 2022, DR programs saved US utilities $10.1 billion in 2021 as well as an average of $8.9 billion per year over the past five years(2). These programs are also helping reduce greenhouse gas emissions as customers use less energy during peak periods.
Implementing DR Programs
There are several ways to implement DR programs. Some common methods include:
- Time-of-use pricing: Consumers are charged different rates for electricity depending on the time of day. Peak demand periods are typically charged higher rates, which encourages consumers to use less electricity during those times. According to the NREL, 8% of customers in the USA are opting for time of use (TOU) programs2. California has one of the highest rates of TOU adoption in the country, with over 20% of customers participating in TOU programs.
- Critical peak pricing: During certain critical peak events, such as a heat wave or cold snap, consumers may be asked to reduce their electricity usage by a certain amount. If they do so, they will be eligible for a financial incentive. Critical peak pricing (CPP) programs have been successful in reducing peak demand in the USA. For example, a study by the Pacific Gas and Electric Company (PG&E) found that such programs helped reduce peak demand by over 100 megawatts (MW) in 2022 (3).
- Direct load control: Utilities can remotely control certain appliances, such as air conditioners and water heaters, during peak demand periods. Consumers who participate in this type of program are typically given a financial incentive. For example, under the new Technical Regulator Guidelines, South Australia is mandating that certain air conditioners installed after 1 July 2023 be demand response ready(4).
There are a number of best practices that can enable utilities to successfully implement DR programs. These include:
- Designing programs that are tailored to the needs of consumers: Different consumers have different needs and preferences, so it is important to design DR programs tailored to the specific needs of the target population. For example, some consumers may be more willing to participate in time-of-use pricing programs, while others may prefer to participate in direct load control programs.
- Providing clear and concise information to consumers: Consumers need to be able to understand how DR programs work and how they can benefit from participating. Utilities should provide clear and concise information about their DR programs, including the types of programs available, the incentives offered, and the terms and conditions of participation.
- Making it easy for consumers to participate: Participating in a DR program should be as easy as possible for consumers. Utilities should make it easy for consumers to sign up for programs, and they should provide clear instructions on how to manage their participation.
- Monitoring and evaluating program performance: Utilities should monitor the performance of their DR programs to ensure that they are meeting their objectives. This includes tracking the amount of electricity saved, the cost savings realized, and the level of consumer satisfaction.
The implementation of such initiatives can be complex and challenging due to the need to process large volumes of data, integrate outdated and disparate legacy systems, and engage with multiple stakeholders.
SAP is an ideal choice for implementing robust Demand Response (DR) programs, offering a plethora of features specifically tailored to meet the unique requirements of DR initiatives. For example, SAP BTP empowers utilities to implement and optimize demand response programs. BTP enables seamless data management and integration, advanced analytics, customer engagement, and automation. It also offers scalability as well as integration with IoT and smart grid technologies.
In this article, we will explore implementation strategies that we have implemented for a leading utility enabling them to achieve remarkable success in implementing DR programs using SAP.
This approach leverages both the SAP and MDMS systems to effectively manage and process DR events. The MDMS (Meter data Management and Synchronization) system takes on the crucial responsibility of performing usage calculations to finalize billing determinants during DR events. Once the DR events are evaluated, the MDMS system calculates the necessary billing determinants and seamlessly transfers them to SAP S4HANA for further processing. Within SAP, these billing determinants and DR events are processed to calculate the appropriate credit that will be accurately invoiced to the customer. To ensure a seamless enrollment process for customers participating in DR programs, the C4HANA suite and self-service channels play a vital role, allowing for easy and efficient customer registration.
This approach is well-suited for scenarios where a robust MDMS system is readily available and capable of executing complex calculations of billing determinants. By relying on such a system, organizations can confidently manage the intricate aspects of DR events, ensuring accurate and precise billing calculations for customers. For example, DR events are processed by both MDMS and S/4HANA systems. While MDMS calculates usage, S/4HANA ultimately generates bills based on those calculations.
For customers lacking a robust legacy MDMS application, this approach offers a viable solution by allowing the processing of complete interval data directly in SAP. Leveraging the energy data management (EDM) functionalities within SAP takes on the responsibility of analyzing interval data to finalize the billing determinants and calculate the credit amount associated with DR events. By leveraging SAP’s advanced capabilities, complex calculations of usage and billing can be seamlessly performed within the system itself. This option provides increased flexibility in handling interval data, particularly in scenarios involving multiple DR programs or the integration of distributed energy resources (DERs) such as net energy metering. These situations often necessitate intricate calculations, and SAP’s comprehensive functionalities make it an ideal choice for such complex tasks. For example, in this case the MDMS will process interval data to S/4HANA in EDM. S/4HANA then utilizes this data, along with DR events, to calculate usage and generate billing. This approach offers more flexibility in scenarios involving net energy metering usage calculations or processing of 3rd party charges along with DR events.
In this collaborative approach, utility companies forge partnerships with third-party service providers, such as energy-as-a-service (EAAS) providers, to effectively manage their demand response programs. These EAAS providers play a pivotal role by aggregating DR resources from multiple customers and offering them to the utility company as a unified and substantial resource. By doing so, the utility company gains enhanced control over demand response management, enabling them to achieve their reliability and economic goals more efficiently. Within this collaborative framework, both the utility company and EAAS providers share responsibilities for managing the DR programs and customer enrollments. The EAAS providers take charge of analyzing interval usage data and performing the calculations required to determine the appropriate demand response credits. Meanwhile, the utility companies capitalize on the robust features of SAP, such as convergent invoicing, to process utility charges and integrate the demand response credit amounts provided by the service providers seamlessly. With this approach, utility companies can effectively leverage the expertise and resources of EAAS providers, enabling them to optimize DR programs. This collaboration streamlines operations, ensures accurate billing calculations, and ultimately improves customer experience.
The table below outlines various demand response program scenarios and recommends approaches for implementation: –
The successful implementation of demand response (DR) programs requires tailored planning, clear communication, easy participation, and diligent performance monitoring. SAP offers robust solutions for efficient data processing, legacy system integration, and collaboration with third-party providers. By leveraging these solutions, utility companies can drive energy efficiency, optimize resource management, and enhance customer satisfaction in DR initiatives. With the right strategies and technology, DR program implementation becomes seamless, ensuring a reliable and sustainable energy future.
- American Council for an Energy-Efficient Economy (ACEEE): https://www.aceee.org/blog/2017/02/demand-response-programs-can-reduce
- National Renewable Energy Laboratory (NREL): https://www.nrel.gov/docs/fy22osti/80649.pdf
- Demand response reports Demand Response Reports and Case Studies (pge.com)
- Air conditioning regulation Change Air conditioners regulation change | Energy & Mining (energymining.sa.gov.au)