Demand response, one of the biggest potential solutions to manage surging power needs across the grid, is set to double worldwide by 2020.
According to Navigant Research’s “Market Data: Demand Response” report, demand response (DR) sites will grow from 10.3 million today to 21.9 million in 2020, representing 155,479 megawatts (MW) of potential electrical load curtailment.
This expected growth is a big deal. DR is already helping US grid operators keep the lights on during this summer’s heat waves, and it could not only help balance growing demand in developing economies, but also help integrate more renewables onto the grid in North America and the European Union.
Demand Response, Explained
First, a bit of a primer on what demand response means. Generally speaking, DR is any kind of agreement between an electrical utility and its customer where the customer agrees to reduce power consumption by a pre-determined amount when peak demand hits the grid and power supplies are tightest.
Utilities view these “reserves” as a way to shave electrical demand when they need it most, helping to not only keep the grid stable, but prevent having to dispatch the most expensive power plant options. In return, customers are compensated for their participation, either in the form of bill credits or direct payments. Data also suggests that lowering power demand through DR reduces utility rates for the following year. Sounds like a win-win situation, right?
So far, DR has proved incredibly successful in North America. 95% of the more than 1,300 DR programs currently underway across the globe are located in North America, with a potential peak power reduction capacity of 66.4 MW, roughly 9% of US peak demand.
More than half of total DR program participants are large commercial and industrial customers, and curtailment payments for industrial customers alone are projected to reach $4.3 billion by 2019. DR has been credited with reducing the need for new generation in PJM Interconnection, the world’s largest grid operator, and helped New York State’s grid operator prevent blackouts during this month’s record-setting heat wave.
North American Success Primed To Spread Worldwide
But now the benefits of DR are set to spread rapidly in most other regions of the world, and that could have a major impact on energy access and fuel mix in fast-growing economies. Navigant’s report expects global load curtailment to grow at a compound annual growth rate of 13.5%, mainly fueled by the European and Asia-Pacific regions, with smaller but notable growth in the Middle East and Africa.
“While the majority of DR sites today are residences located in North America, the technology will expand rapidly to include homes, commercial buildings, and industrial facilities in many countries,” said Marianne Hedin of Navigant Research.
Perhaps more promising than overall growth, Navigant predicts automated demand response (ADR) programs where utilities can curtail demand without customer action to grow faster than the market average. Europe’s need to integrate a larger number of renewables will fuel its ADR growth, while Asia-Pacific markets may effectively “leapfrog” over the basic DR programs directly into ADR adoption.
Fast DR growth in these developing countries will be integral to managing future energy consumption. The US Energy Information Administration recently projected energy use will increase 56% worldwide by 2040, with most of the growth coming in non-developed countries, and most of the electricity demand being met by fossil fuel generation.
Demand response alone won’t solve the quandary of how to lower rising power needs and cut emissions from electricity generation, but it’s a start. Hopefully as energy needs grow, DR will help global grids get smarter, better able to integrate renewables, and less dependent upon dirty fossil fuel plants.