Demand Response: Getting Paid to Reduce Kilowatts

Worthy of your time. Demand Response, the Con Ed program that gives some to get some.

The backdrop. Con Ed has a demand challenge. From May through September, when New York has its hottest and most humid days, the demand for electricity skyrockets. One way to meet this need is to do less with more. Instead of digging up streets to install new electrical infrastructure, Con Ed digs into its corporate pockets and pays customers to use less electricity.

Simply speaking, you get paid when Con Ed asks you to reduce your electrical usage. This happens during the May through September season, and in years past has occurred about four times each period. There is also a mandatory test event. To make participation attractive at the get-go, Con Ed will pay you to sign up. Called a reservation fee, it depends on how much load you can commit, but a 50 kilowatt commitment could put $10,000 in your coffers.

Go deeper. There are two separate programs under the umbrella of Demand Response - one is  peak shaving and the other is reliability (which is neighborhood by neighborhood). The peak shaving program is more appropriate for residential buildings who rely on building staff to manually adjust controls to reduce electric load. There are about 1,500 customers participating in both programs, says Shira Horowitz, manager of Demand Response.

How it works. To enroll in the program you have to commit to a kilowatt load reduction. You can enroll directly if you can commit 50kW, but most participants enroll through aggregators. These are companies who can steer you through the process and who can group together buildings that, by themselves, can’t meet the threshold amount. Additionally, aggregators can enroll you in a second demand response program offered by the New York Independent System Operators, which is independent of Con Ed.

• If your building is master-metered you’ll have a lot of electric load to work with, but if each apartment has its own Con Ed meter, you’ll only have load in the common areas to commit. This includes the lobby, boiler, exhaust fans, HVAC, elevators, pumps, cogen, common lighting,etc..

One level deeper. Reducing load and getting paid for doing so is great, but there is one caveat: you must have an interval meter. You can purchase one (the cost is between $1,500 and $2,000) or you can wait for Con Ed to install a smart meter. It’s in the process of installing them, but to date Staten Island is the only borough that is smartly metered. Westchester is almost finished, and they are starting to roll out Brooklyn and Manhattan now. All buildings will have smart meters by the end of 2022, according to Con Ed.

In your pocket. How much you earn depends on how much load you commit. Here’s how to figure that out:

• The program runs for five months each year so the first - and most significant - cash benefit is the sign-up. In a  50kW example, Con Ed will pay you $9,000. The calculation is $36 for each kW you commit (which is 50kW) times the duration (which is five months): 50kW x $36 x 5 = $9,000. The payment rate varies by location, but this is the typical one.
• The next dollar benefit is when you reduce your electric load during demand response events. In 2018, according to Horowitz, there were four demand response events, plus one mandatory test event, for a total of five events. Each event pays $1/kW hour for the duration of the event (events run for four hours), and the mandatory test runs for two hours). In our 50kW example, this results in $200 per event, and $100 per mandatory test. If 2019 follows the 2018 pattern, you will earn $900. Plus, of course, you won’t be paying for the electricity you are not using during these events.

Be smart. Demand response isn’t for everyone. The 50kW sweet spot is if your building has between 150 and 200 apartments and is master-metered, but really any building might benefit. Understanding these programs is not for the faint of heart, and working through an aggregator is a safer bet. The deadline to sign up for this year’s program is May 1.

To learn more about the Con Ed’s demand response program, go here. To learn about the NYISO demand response program go here. And to find an approved aggregator who can enroll and guide you through both programs, go here.