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Demand response: can we manage the power-hungry?

It’s been an eventful few weeks for the Green agenda: the appointment of Lord Deben (aka John Gummer) as the new chairman of the Committee on Climate Change coincided with the discovery by scientists that the ice covering the Arctic Ocean is at its lowest level in decades or possibly centuries, exceeding predictions and smashing records.

Whether such climate change is man-made or not, with finite sources of fossil fuel to rely on and anxiety persisting around nuclear plants, our current patterns of electricity consumption simply aren’t sustainable.  The only solution to meet peak demand is to develop clean and/or renewable energy sources (which could take years or even decades of effort, investment and policy-making), while curbing our appetite for electricity at specific times.

All well and good. But humans are emotional as well as rational beings. Some consumers willingly reach for a woolly jumper instead of the thermostat. This group, whether through environmental conscience or a tendency towards thrift, is typically proactive or at least compliant when it comes to modifying their habits. Such households feature heavily among the early adopters of voluntary smart meter initiatives, and take great pride and indeed satisfaction in watching their kWhs fall in an ongoing challenge to “beat the meter”. 

Others, however, regard the freedom to plug in and switch on as a basic human right.  They baulk at the Orwellian implications of having their usage monitored (“Big Brother is watching”), let alone exhortations to curb their power-hungry way of life.

Interestingly, the energy void we potentially face in the UK in years to come is one already being encountered in Japan. With few domestic energy resources, the Asian nation is only 16% self-sufficient and is the world’s largest importer of liquefied natural gas, second-largest importer of coal and third-largest net importer of crude oil.  In the wake of the Fukushima disaster, having shut down 12,000 MW of generating capacity between four nuclear power stations, Japan needed to smooth out its collective draw on energy.  A national awareness campaign was launched to encourage citizens to consume energy responsibly across the day and act in the wider industrial and social interest to prevent a further crisis. 

It is incumbent on the UK’s energy providers to act now to avert the need for heavy-handed state intervention in future.  That’s why the industry is increasingly looking to demand response programmes to dynamically optimise grid operations, and reduce the cost of electricity in wholesale markets. Not only does this ease pressure on the grid, but the savings generated can be passed onto retail customers in a virtuous circle.

Technology innovations can play a significant role in improving visibility and wielding the carrot rather than the stick of reduced or redistributed energy consumption. Energy retailers have the tools to make sense of “big data” from machine-to-machine interactions including smart meters and customer relationship management (CRM) systems using real-time analytics. Accurate market segmentation is the cornerstone of effective price discrimination strategies. These insights can be combined with Social and Mobile channels to drive meaningful customer engagement and incentivise responsible energy consumption.

For example, economy plans are nothing new as fixed contractual arrangements, but with live data, tariffs can become fully adaptive.  Time-of-use pricing, critical peak pricing, variable peak pricing, and critical peak rebates can positively reinforce responsible consumption patterns. 

Social channels can be used to stimulate healthy competition and peer pressure by allowing subscribers to compare their energy consumption with that of their neighbours on an anonymous basis.  This enables energy providers to provide a clear benchmark or profile of  “good” consumption and position their brand more favourably in the public eye by supporting financially and ecological prudence.

Energy companies already direct load control programmes that cycle industrial systems such as air conditioners and water heaters on and off during periods of peak demand, in exchange for lower bills.  While nobody is proposing disabling household appliances during the day, consumers could be sent mobile alerts and reminders in real-time with incentives to postpone energy-intensive activities until off-peak periods: “Mr Smith, you could save £1.04 if you wait until 10pm to spin-dry your pants” or “Mrs Jones, put down those hair straighteners or we’ll have to shut down the steelworks!”.  A little far-fetched, but you get the point.

The key thing is that for those whose habits are firmly entrenched, and who are unresponsive to traditional approaches, these technologies offer the potential of real-time, one-to-one communications and relevant rewards that can underpin Demand Response programmes and buy the Grid vital breathing space.

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