It’s Hot Outside. Are You Signed Up for Demand Response?

With real-feel temperatures hitting triple digits again today, co-op and condo boards that have not already signed up for electricity “demand response” have an added incentive to get with the program.

Historically, the backbone of the utility business model has been volume: more electricity consumption means more profit for companies like Con Edison. Contrary to popular belief, there are times when the interests of the utility and the consumer do align – specifically, when it benefits everyone if consumers temporarily reduce their energy usage. In New York City and across the country, utilities have developed programs that compensate customers for reducing their electricity usage during times of peak demand, such as today’s heat wave. These programs are known as demand response, and they’re designed for commercial buildings and for multi-family residential buildings, including co-ops and condominiums.

The primary duty of a utility like Con Edison is to manage the fragile balance between supply and demand along the grid. If at any point demand overwhelms supply, customers will experience brownouts (partial outages) or blackouts (complete outages) to their electricity service. Grid reliability becomes incredibly challenging during periods of peak demand – especially during the summer months, when air conditioning usage in every home, business and factory spikes all at once. If the balance turns negative, utilities must call upon one of their specially-designed “peaker plants” to produce extra power. These plants usually rely on fossil fuels and are extremely expensive to build, but they operate for only a few days of the year. The electricity these plants create is also more costly, and consumers end up footing the bill.

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But in the early 2000s, utilities discovered they could approach the supply-demand equation from the other side. Rather than paying an arm and a leg to construct a new power plant, they could incentivize behavior that would reduce energy demand. Demand response empowers the consumer to play a part in the overall function and health of the power system. During times of peak demand or reduced supply from generators, energy users are called upon to take measures that will shrink their footprint and alleviate pressure along the grid. Participants can make money by changing the temperature on their thermostats, turning off lights, shutting off certain equipment altogether, or utilizing technologies such as batteries or energy storage.

Demand response technology has made impressive advances in the past two decades. When the utility or grid operator announces a “demand response event,” building systems will automatically implement pre-programmed actions, allowing the consumer to get paid without any manual effort. The events themselves only last for a few hours each day and typically occur a few times during the year. In New York City, both Con Edison and the New York Independent System Operator (the state’s grid operator) offer demand response programs. As an added benefit, these programs remove the reliance on fossil-fuel-powered peaker plants, thus reducing carbon emissions.

Demand response is a win for all parties involved. The utility is left with adequate power supply to support its customers during extreme weather, and it avoids significant capital expenditure. Participating co-ops and condos reduce their overall consumption and get paid to do so. Energy markets and regulation may be rapidly evolving in New York City, but demand response is here to stay. Smart co-op and condo boards are always looking for ways to reduce their carbon footprint. If they haven’t already done so, they need to get with this program.

Alexander Zafran is a senior consultant and business development lead at Aurora Energy Advisors. If you’re interested in learning more about energy procurement, he can be contacted at azafran@aeadvisorsllc.com.