Demand Response Has Been Part of America’s Energy Plan for 40 Years. Why Should the next 40 be any Different?

April 22, 2021

The idea that reducing a watt of energy on the demand side can be just as valuable as generating one on the supply side in a time of grid stress is hardly new. Nor is the idea that such a solution helps thwart both energy-related and environmental crises. 

The origin of demand response can be traced to roughly forty years ago when both the US and the world grappled with many of the same energy and environmental issues we are still trying to solve today. 

Let’s take a trip back to the mid-late 1970s and see if a few things don’t look and sound familiar.  

The oil crisis of 1973 sent shockwaves throughout the world, raising concerns on the security of electricity supply in the US while pointing to a need to diversify the nation’s power generation mix away from a fossil fuel dependency and toward a mix with a greater share of renewable and clean energy sources. 

Global environmental awareness had grown to a movement large enough to be seized upon by newly-elected American president Jimmy Carter who, within a month of taking office, donned a cardigan sweater, sat before a roaring White House fire, and urged Americans to join him in conserving energy in a nationally-televised fireside chat.

During that broadcast on February 2, 1977, the president related how a particularly harsh winter had depleted the domestic supply of natural gas and fuel oil. He warned of dark consequences that awaited the most powerful country on earth if we as a nation failed to devise a sound energy plan for the future. 

Sound familiar?

The 39th POTUS didn’t outright cite demand response as a means to a profitable and sustainable end that night in 1977, but he did allude to the Public Utility Regulatory Policies Act (PURPA), a piece of legislation that would be enacted in 1978 to promote more competitive energy markets in the US by allowing “non-utility generators” to participate in them. 

The act would prove to be a landmark piece of legislation, setting the country on the road to conservation and the development of clean and renewable energy sources. It would also open the door to demand response as a viable solution to keeping both the electric grid and the environment in balance. 

That open door paved the way for the deregulated, competitive energy markets we have today to replace the vertically-dominated regulatory ones that had existed for most of the 20th century. It also would prove to be the seed that would soon mature and bear the lucrative fruit of modern demand response. 

Fast forward back to the present. Federal legislation is still working to ensure energy markets remain competitive with clean and renewable energy sources securing a just and reasonable position place in them. 

Order 2222 from the Federal Energy Regulatory Commission (FERC) is a case-in-point. The Order is the latest in a series of directives aimed to create a fair balance between traditional generators on the supply-side and distributed energy resources seeking to enter markets on the demand side.   

Issued in September 2020, Order 2222 calls for the removal of barriers preventing distributed energy resources (DERs) from competing on a level playing field in the organized capacity, energy, and ancillary services markets run by regional grid operators.”

Order 2222, widely hailed as a landmark achievement in the history of the energy industry is about more than just creating more competitive markets. By allowing DERs, including demand response, their just seat in the marketplace, Order 2222 enables the US electric grid to take a giant leap toward a cleaner future. 

Consider this recent data on demand response performance in the US:

In 2019, the most recent year for which the data is available, the combined wholesale demand response capacity of all regional system operators in the US grew to 27,000 MW. 

How much environmental pollution did all that demand response save the country in 2019 by providing a resource that would have otherwise been supplied by a traditional “peaker” plant?

According to the EPA, the 27,000 MW of capacity from all commercial DR participation in the US in 2019 prevented the greenhouse gas emission equivalent of what an average passenger vehicle would produce were it to drive a little more than 142 million miles.

That same total of reduced load roughly converts to the carbon dioxide emission equivalent of 63 million pounds of coal being burned. 

In 2020, CPower’s more than 1,700 customers contributed more than 4,000 MWs of capacity to demand response,  effectively reducing the energy equivalent of 7 million pounds of coal that would otherwise have been burned and released into the environment. 

Helping the grid stay balanced and keeping the air clean aren’t the only benefits to demand response. 

The global demand response market is projected to value at USD $24.71 billion by 2022, an increase from the $5.7 billion valuation of the same market in 2014,  according to a recent report published by Million Insights market research firm.

Much has been made in this publication and others in the energy industry about the evolving electric grid and demand response’s role in helping to bridge past, present, and future. 

As you read these words, energy markets and electric utilities across America are refining their demand response programs and introducing new ones, providing organizations with a lucrative and socially responsible way to use their energy assets to support grid reliability in this critical time of transition. 

America opened the door for demand response nearly forty years ago. Closing it now (even just a little bit) would be a step toward the past in a time when the country should be crossing the bridge to energy’s future.

Published by

Mathew Sachs

Mathew Sachs

Mathew Sachs is CPower’s Senior Vice President of Strategic Planning and Business Development. He has over 15 years of experience in energy the industry, developing and implementing distributed and renewable growth strategies.

Mathew Sachs
Mathew Sachs

Mathew Sachs is CPower’s Senior Vice President of Strategic Planning and Business Development. He has over 15 years of experience in energy the industry, developing and implementing distributed and renewable growth strategies.