Demand Management and Demand Response: Energy Optimization Easy Wins

Demand management and demand response are simple ways to drive down energy costs and carbon emissions.

Demand charges can account for 30-70% of an industrial electric bill, which makes demand management an easy way to send money to the bottom line in energy-intensive industries.

This can be done in several ways:

Peak shaving
Power factor correction
Coincident Peak avoidance
Demand Response

Peak shaving

Standard demand charges penalize companies not for their total energy consumption, but for their highest recorded usage in a given period, typically the highest consumption during any 15-minute period in a month.

There are various ways to smooth out power demand, or “shave the peak.” Some examples may seem obvious, like not turning everything on at once. Simply staggering equipment start times by a few minutes at the start of a shift can have a meaningful impact on energy costs for many operations.

Other cases require software to help identify where and when the peaks are occurring and what is driving them. For example, Ndustrial’s Nsight™ software helped one facility identify compressor overlap that was causing nearly $40,000 a year in unnecessary demand charges. A simple modification to the control sequence solved the issue at no cost.

Ndustrial’s Nsight software helped one facility identify compressor overlap that was causing nearly $40,000 a year in unnecessary demand charges.

Power factor correction

Equipment like electric motors and pumps reduce a facility’s power factor, which can increase demand charges in many jurisdictions. Simple devices like shunt capacitors can be installed to correct the power factor within a facility. Doing so can not only reduce energy costs, but also help prolong equipment life and, in some cases, improve product quality.

Note that power factor is not the same as power quality, but that is a related area where technology can help identify critical issues. It’s not uncommon for facilities who install their own IoT meters to find that the power supply from their utility is of inconsistent quality. Such knowledge equips them to ask that the utility fix issues like overvoltage which can severely shorten equipment life if not addressed.

Doing so can not only reduce energy costs, but also help prolong equipment life.

Coincident Peak avoidance

There is another – and increasingly important – component of many companies’ demand charge known as Coincident Peak or CP. These programs charge facilities not only for their own peak demand, but also for their demand during peak periods on the grid. There are many variations of Coincident Peak programs, including the infamous 4CP program in Texas which can account for roughly 30% of a facility’s bill.

There are many ways to manage Coincident Peak charges, but using a smart approach has several major advantages including earlier predictions and lower “alert fatigue.” Importantly, a holistic software platform can also help users compare the expected benefits of Coincident Peak avoidance to the costs of curtailment, enabling quicker and more informed decisions.

The benefits of smart Coincident Peak management are significant. One medium-sized facility has saved roughly $400,000 a year using Ndustrial’s platform to predict CP periods up to 7 days in advance and adjust operations accordingly. One common rule of thumb in Texas is that 1 MW of load curtailment during 4CP events yields $25-50k in savings over the course of a year.

One common rule of thumb in Texas is that 1 MW of load curtailment during 4CP events yields $25-50k in savings over the course of a year.

Demand Response

The strategies above are all about reducing costs. There is another demand management strategy that actually earns money. By participating in Demand Response programs, companies can get paid by DR aggregators for reducing their electric demand when called upon. In essence, this allows individual facilities to participate in energy markets by providing load flexibility.

There are multiple types of DR programs, but all require curtailment with relatively little notice. Not all facilities are able to operate in such a flexible manner, but for those that can, participation can be lucrative. And while industrial facilities have been slow to commit to DR due to complex sequencing and ramp-down requirements, modern technology has lowered these barriers.

In fact, some facilities are beginning to not only commit to DR, but to automate their curtailment. The results are profound: now facility managers can participate in even the fastest-response programs with a simple text message approval, without compromising safety. They can also feel confident that the level of curtailment will be appropriate given the specific facility operating conditions and energy market prices at the time.

Beyond money: demand management and carbon emissions

During peak periods, it’s not just costs that go up. Grid operators also turn on older or less-efficient power plants that normally sit idle, leading to substantially higher carbon emissions. Reducing demand during these periods can be a key way for companies to reduce their Scope 2 emissions.

However, most companies are not able to track these effects. Carbon accounting traditionally uses annual emissions factors to translate energy use into CO2-equivalent (CO2e). Today, it is possible to track emissions on an hourly basis, allowing companies to authentically claim credit for reducing demand during peak times.

Any company looking to improve margins would be wise to consider which demand management strategies make sense for them. And companies with aggressive sustainability goals should consider tracking not only the cost savings from demand management, but also the associated greenhouse gas emissions reductions.

Companies with aggressive sustainability goals should consider tracking not only the cost savings from demand management and demand response, but also the associated greenhouse gas emissions reductions.