Are You Just Giving It Away?
Updated: March 16, 2022
As George Strait said “…Don’t you even want your half of everything?”*
Participating in a Demand Response program can be a challenging undertaking. Complex contracts, understanding Utility tariffs, gaining buy-in from impacted site managers, compliance measurement and verification, and payment reconciliation with counterparties to the DR agreement (more on that later.)
Here is the problem: You might be doing all that work – and making your customers and employees uncomfortable on the hottest days of the year – for only a fraction of the financial benefit you thought you were going to realize.
The most common strategy employed to prevent employees and customers from revolting when you turn up the temperature on your thermostats to meet your DR obligation is to “pre-cool” your building. The objective - “coasting” through the hottest times of the day during the DR event when your AC is basically turned off.
But, as the old saying goes, you may be robbing Peter to pay Paul.
You check your utility bill, and see that your site is charged for about 200 kW of "demand" each month throughout the summer at the rate of $24/kW.
Your building engineer determines that about 40% - or 80 kW - is used for cooling.
Your Utility offers to pay you to reduce your kW demand by $40 per kW for a fixed number of DR “events” per year (let's use 6 for example), as long as you are willing to respond to one hour event notification.
You contract to reduce demand by 60 kW each time your Utility asks.
The (6) one-hour DR event notifications are issued by the Utility.
You pre-cool your site each time to maintain some semblance of comfort during the DR event - when most/all of your HVAC will be disabled.
Later on in the year you receive your DR payment from the Utility for $2400, assuming you delivered those 60 kW @ $40/kW for each of the 6 times the Utility asked.
Here’s where it gets interesting:
When you turn up the HVAC to pre-cool your site, most if not all of the air conditioners will operate simultaneously.
Running all your HVAC at once will create a coincident demand peak which exceeds your "usual" kW utilization for the month, typically by at least 10%.
You will be billed for 220 kW of peak demand for the month instead of your expected 200 kW, for four or more of the hot summer months.
That excess demand charge will be billed each month in which your Utility "calls" a DR event.
Now let's look at the math:
Demand Response Program Participation Payments.....................$2,400
Excess charges from pre-cooling: 20kW x $24/kW x 4 months.....($1,920)
Balance remaining...........................................................................$ 480
80% of your Demand Response revenue was burned by sub-optimal procedures leading up to, during, and after each DR event.
Mitigating the impact of demand charges is a 24/7/365 process, and is directly related to achieving all the financial benefits that can be accrued through the wealth of energy incentive programs that are available. Put DemandQ's core expertise to work. We will help you achieve your energy savings and sustainability objectives.