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Increasing Urban Sustainability by Making Electricity Demand Side Management Appealing

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City and urban life requires appropriate planning via sustainable energy systems in the near future. While in the past supply had to follow demand, nowadays demand can highly contribute in obtaining stable supply-demand matches through electricity demand side management. In fact, with either stubborn large scale coal and nuclear units or strongly variable and dispersed renewable energy technologies, a flexible load that can follow supply is desirable. Especially, in urban areas where sustainability is becoming a key feature, the necessity of a new energy paradigm is inevitable. Plus, urban areas have the advantage of reaching a multitude of users at ones; i.e. spill-over effects. Consequently, this paper sets out to explore how demand side measures can reduce demand and shift peak capacity. Therefore, different demand side measures will be presented that should encourage several stakeholders to actively participate in achieving more flexible loads and contribute to more sustainable energy planning.
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Abstract City and urban life requires appropriate planning
via sustainable energy systems in the near future. While in the
past supply had to follow demand, nowadays demand can highly
contribute in obtaining stable supply-demand matches through
electricity demand side management. In fact, with either
stubborn large scale coal and nuclear units or strongly variable
and dispersed renewable energy technologies, a flexible load that
can follow supply is desirable. Especially, in urban areas where
sustainability is becoming a key feature, the necessity of a new
energy paradigm is inevitable. Plus, urban areas have the
advantage of reaching a multitude of users at ones; i.e. spill-over
effects. Consequently, this paper sets out to explore how demand
side measures can reduce demand and shift peak capacity.
Therefore, different demand side measures will be presented that
should encourage several stakeholders to actively participate in
achieving more flexible loads and contribute to more sustainable
energy planning.
I. INTRODUCTION TO ELECTRICITY DEMAND SIDE
MANAGEMENT
lectricity demand side management (El-DSM) has gained
and increased in its value considerable in the last few
decades. This has many reasons. Besides the overall energy
savings it should not be forgotten that in most cases El-DSM
comes at a price. Therefore, this paper will take a closer look
at the economic and behavioral aspects of El-DSM, thus
demonstrating the benefits for stakeholders, especially utilities
and household owners, but also the conflict between the two
of them and how both sides could be motivated via policies
and strategies to participate in El-DSM.
A. The past and present (Putting El-DSM in context)
According to Bellarmine (2000) In generating power the
concept has been straight forward. If the society demanded
more power, the power companies would simply find a way to
supply users even by building more generation facilities or
expanding the current ones. This concept of doing business
has been labeled as supply side management.”
However, the current situation on the electricity markets has
changed rigorously. Indeed, today many electricity markets
are liberalized and unbundled. There is a growing competition
among power generators which leads to the optimization of
generation but also a decrease of internal costs. In other cases
a Contacts: c.wimmler@fe.up.pt and golnar.hejazi@fe.up.pt
b Faculty of Engineering of University of Porto
c Massachusetts Institute of Technology
power plants were decommissioned or moth-balled. Although
there is a generally increasing demand for electricity, it is
intended by utilities to reduce excessive electricity generation
capacity. Similar as the case of Sweden in 2000 2001
weather fluctuations can cause extreme demand peaks
[Lindquist, C. 2001]. While Northern Europe is then affected
in its heating demand, severe weather fluctuations in Southern
Europe or Mediterranean climates like Iran often concern
cooling needs, especially in mid-summer. As a result of the
internationalization, today there is also a higher risk for
network bottlenecks in the transmission and distribution grid.
Last but not least, it should be mentioned that utilities have to
deal with risks of economic losses if they exceed the
subscribed load level.
It becomes obvious that the electricity system has changed
considerably in recent years. In order to cope with all these
challenges, El-DSM can be one solution. As for this report the
analysis will primarily assess the economic and behavioral
aspects of El-DSM. Though, demand side management can
also consider heating and transportation.
B. Interest in peak load demand reduction
Depending on the different actors the interests in peak load
demand reduction can be quite different. Table 1 summarizes
the different aspects from the consumer and utility point of
view. In addition, generators, national grid operators and the
society were analyzed. In terms of interests it can be divided
in technical, economic, environmental and social.
The main interests of this paper are the economic and social
aspects of consumers and utilities. While the consumer wants
to have lower electricity prices and network costs, utilities
want to decrease demand subscription fees along with the risk
of purchasing power on the spot market. In addition, utilities
intend to avoid investments in the network. As for the social
interests Abaravicius (2007) only stated the services that
ensure the specific consumer needs. Nonetheless, an increase
in the overall social welfare seems a reasonable interest for
stakeholders, even if there are times when El-DSM might not
be beneficial for the specific stakeholder.
Increasing Urban Sustainability by Making
Electricity Demand Side Management Appealing
C. Wimmler a,b, G. Hejazi a,b, E.de Oliveira Fernandes b, M. Matos b, C. Moreira b, S.R. Connors c
E
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Table 1: Different actors´ interest in peak load demand reduction [Abaravicius J. 2007]
Consumer
Utility
National grid
operators
Society
Supply
company
Network
company
Technical
Avoiding fuse
problems
Avoided
network
capacity
problem
Stable operation of
power system on
national level
Stable operation
of power system
on national level
Economic
Lower electricity
costs (peak
pricing)
Lower network
costs due to lower
fuse level
Lower risk
when
purchasing
power on spot
market
Lower demand
subscription
fees
Avoided
investments in
the network
Stable operation on
lowest cost
Avoided/postponed
investments in the
network
Economically
sustainable
electricity supply
Maximum use of
local production
Environmental
Avoiding peak
power plants near
living area (Not-
In-My-
BackYard)
Fulfilling goals
established by
environmental
certification
programs
Fulfilling goals
established by
environmental
certification
programs
Avoided new
network
construction
Least possible
environmental
effect
Social
Service ensuring
specific consumer
needs
Reliable
electricity supply
C. Types of demand side activities
As each of the demand side sectors (services, households,
industry and transportation) has its own characteristic of
energy activities, their interests and priorities of electricity
consumption need to be considered. At the same time the new
concepts regarding El-DSM, energy efficiency, insertion of
renewable energy and storage systems can be highlighted.
Moreover, saving energy and saving/shifting time of energy
usage are important concerns for El-DSM. In order to cover
and manage these aspects, peak load management, demand
response, energy carrier switching and distributed generation
need to be applied. Appendix 1 illustrates some of the main
activity levels, primary motivations, design and technology
actions as well as operation actions for each of the demand
side activities. Thereby, it becomes clear that energy
conservation, environmental protection and behavior are some
of the most important mean goals within the system
[Abaravicius J. 2007].
II. EL-DSM-ECONOMIC ASPECTS
As the economic aspects in El-DSM are rather broad, in this
chapter a general overview about different load management
measures along with different reasons for El-DSM is
presented.
A. Load Management Measures
Load management can be described as the process of
balancing the supply of electricity on the network with the
electrical load by adjusting or controlling the load rather than
the power station output. Therefore, direct intervention of the
utility in real time, by the use of frequency sensitive relays
triggering circuit breakers, by time clocks, or by using special
tariffs to influence consumer behavior can be used to
guarantee supply.
Load management measures can be divided in direct and
indirect ones. Direct measures deal with technical measures
such as switching on/off equipment as well as the satisfactory
services that can be maintained without continuous use of
electricity, i.e. hot water from preheated tank. In contrary,
indirect measures include the load control based on
regulations and economic measures but also tariffs and pricing
mechanisms to encourage customers to reduce their load
demand in peak periods. Therefore, it can be distinguished in
the following tariffs or pricing mechanisms:
1. Time-of-use tariff (TOU)
The TOU pricing directly reflects the utilities cost structure.
Thereby, the rates are more expensive during peak periods and
cheaper during off-peak periods. In the end, both the suppliers
as well as the end-users benefit from successfully designed
TOU rates.
2. Interruptible load tariff (ILT)
The ILT is designed as an incentive rate for consumers.
However, only consumers who interrupt or reduce their power
demand during the system peak period or emergency
conditions can apply for it. Thereby, the consumers sign an
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interruptible load contract with the utility, which allows the
later to reduce the consumer demand when required.
3. Tariff with load demand component (TLDC)
This kind of tariff depends in one part on the electricity fee of
the highest recorded hourly load value. For that reason
consumers are encouraged and motivated to reduce their load
demand as low as possible.
4. Real time pricing (RTP)
In the case of RTP the consumer or end-user price is linked to
the wholesale market price. Therefore, this pricing type can be
categorized as dynamic. Moreover, it can be stated that neither
pricing nor timing are set in advance.
5. Critical peak pricing (CPP)
The CPP can be seen as a combination of TOU and RTP. In
fact, it uses a special, increased rate on selected days with high
demand predication, thus trying to reduce demand when it is
most critical. In general, customers get informed day-ahead,
which allows them to make the voluntary reduction when the
CPP days occur.
6. Demand side bidding (DSB)
DSB gives end-users the opportunity to choose the time and
way of participation in real-time but also day-ahead spot
markets. Indeed, this process gives the consumer the chance to
be paid a market price when the market operator requires
withdrawing load. The process works in a similar way as
generators are paid for their supplied load.
B. Economic reasons for El-DSM
Economy is the wheel to move society. In fact, economies can
directly or indirectly increase or decrease energy consumption
due to its various tariffs or financial support mechanisms. In
terms of development this is in particular important as the
economy can help accelerating the process of making
technologies or processes mature.
Besides the tariffs and pricing mechanisms mentioned above,
there are many other economic reasons for El-DSM. First and
foremost the improvement of welfare in society should be
mentioned. This includes the reduction of energy dependency,
reduction of operation and maintenance costs, savings in
customer´s utility bills, but also to avoid supply costs or to
create jobs and new businesses.
In addition to these general aspects diverse rules, regulations,
incentives and trading schemes such as the trading of CO2-
certificates or the 2020 renewable energy targets can be stated
as economic reasons for El-DSM. What all of them have in
common is the reduction of energy consumption or energy
generated as well as to reduce costs.
III. EL-DSM-BEHAVIORAL ASPECTS
To start with the behavioral aspects of El-DSM two different
definitions about energy behavior and energy efficiency
behavior and curtailment behavior are presented.
“Energy behavior is defined as those aspects of direct
personal energy consumption that depend on personal
decisions. These include the decision for or against certain
electrical appliances, the choice for more or less energy
efficient appliances, the implementation of thermal insulation
measures and behavioral patterns which are independent of
technical aspects, e.g. switching off the light, using a lower
washing temperature.” (Bohunovsky, E. 2008)
“Energy efficiency behavior and curtailment behavior: These
concepts refer to an energy behavior that aims at conserving
energy. Energy efficiency behaviors are one-shot behaviors
and entail the purchase of energy-efficient equipment or
thermal insulation measures. Curtailment behavior involves
repetitive efforts to reduce energy use, such as lowering
thermostat settings.” (Abrahamse, W. et al. 2007)
On the European level several directives have been
implemented that aim to reduce energy consumption, mainly
by increasing the technical efficiency of energy use. Some of
the directives dealing with this matter are the European
Directive 2005/32/EC which gives a set of eco-design
requirements for energy using products, directive 2006/32/EC
on energy end-use efficiency and energy services or the
directive 2002/91/EC for energy performance in buildings
(European Commission 2012).
A. Behavioral Factors Residential Sector
According to Gruber and Schlomann (2008) the main
influencing factors for electricity consumption in private
households are: hot water preparation; cloth driers;
refrigerators; freezers; aquariums; air conditioning and electric
kitchen stoves.
In addition, it should be noted that if electric heating systems
are used, then space heating most likely has the highest
weight. Nonetheless, the electric heating demand highly
depends on the climatic conditions, whereas the heating
requirements in Northern European countries are generally
higher than those in Central Europe or the Mediterranean.
Though, the electric heating demand in northern countries in
winter time can be seen as the counterpart to air condition
demand in southern countries during summer time.
Bohunovsky (2008) analyzed the average energy demand for a
hypothetical 3-person household in the German speaking
countries. Thereby, it becomes obvious that based on the type
of energy use large differences in the demand for heating, hot
water and electricity can be achieved. While the average
heating demand is around 13,000 kWh per year, a conserver
might only use close to 10,000 kWh per year. In contrast, a
squanderer requires up to 22,000 kWh per year. Moreover,
with properly insulated buildings the heating requirements can
be cut half. In terms of hot water and electricity demand a
similar relation as for heating could be detected. In fact, the
average electricity demand is around 3,000 kWh per year,
whereas conservers use around 2,000 kWh per year and
squanderers up to 6,000 kWh per year.
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According to Bohunovsky (2008) the overall energy saving
potential between a squanderer and conserver for heating, hot
water and electricity can be as much as 5,700 kWh per year.
Once again, the highest saving results from heating (almost
4,000 kWh per year). On the other side, electricity and hot
water have a more or less equal saving potential of around
1,000 kWh per year.
Besides the energy user-type there is a high importance on the
number of people living in a certain building type. In the study
by Brauner (2006) the reference value was set for 1 person
living in an apartment in a multi-family house. The average
energy demand for 2 people in the same housing type can be
reduced by around 25% and for 4 people by almost 40%
respectively. Moreover, the average energy demand for 1-2
people living in a single family house is around 30% higher
than that in a multi-family house.
Another interesting study was undertaken by the Fraunhofer
institute for system and innovation development [Schlomann,
B. et al]. Thereby, the average electricity demand was set in
relation to the building type (single or multi-family
household), income and extraordinary equipment within the
household.
In figure 1 the yellow bar represents the average electricity
demand (~3,300 kWh per year) for a 3-person household. As
the green bars illustrate it is then important to consider the
building type. While in a single family household the demand
slightly surpasses the 4,000 kWh per year in a multi-family
house the consumption can be up to 2,000 kWh per year
below the average. The study also revealed that with
increasing income the electricity demand raises proportionally
until a certain level. Another feature of the study was the
assessment of extraordinary electric appliances on the
electricity demand. Thereby, it becomes clear why cooling
needs have such a high weight on the electricity demand. In
fact, even for a 3-person household the average electricity
consumption clearly surpasses 5,000 kWh per year.
After the assessment of various studies it can be concluded
that there is quite an immense energy saving potential in
private households due to energy behavior.
Although it would be also interesting to evaluate and assess
the behavioral aspects for heating and hot water, the main
sections of this report will focus on electricity. This is in
particular challenging as there are several conflicts between
the end-users and utilities.
In what regards the socio-technical context of energy use three
general approaches to change energy behavior in private
households can be categorized [Fischer, C. 2008; Mack, B.
2008; Haney, A. et al. 2010]:
(1) Energy efficiency: is improving the energy-efficiency
of products (characteristics of appliances or building);
(2) Structure: which means influencing the decision to buy
(house, appliance), i.e. shift in consumption or stock of
appliances, but also shifting resources; and
(3) Usage: which is changing the consumer behavior
(reduce temperature during night, days; ventilation habits), i.e.
different use of products or different operating times.
Figure 1: Influencing factors on electricity demand [Schlomann, B. et al]
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In order to measure the success of El-DSM certain success
factors need to be defined. These include [IFEU 2008; Mack,
B.; Hackmann, P. 2008]:
-group specific;
approach of consumers.
In the contrary there are several barriers for the efficient use of
electricity. A study undertaken by the Institute for Energy and
Environmental Research [Institut für Energie und
Umweltforschung 2006] identified 4 main barriers;
information, individual character, social structure and budget
(Figure 2).
Figure 2: Barriers towards an efficient use of electricity in households [Institut
für Energie und Umweltforschung]
In addition to the barriers of figure 2, many other possible
pitfalls and trade-offs should be considered [Berker, T. (2008);
Fischer, C.; Sohre, A. (2008)]:
-term effects of interventions (Experience has
shown that good results are often drawn back after some
time);
viors” (As
long as an energy saving behavior is rather seen as (too)
idealistic, (too) “green”, etc. by the general public, it will be
difficult to widely implement it);
Difficulties in social adoption and adaptation;
hich are widely
applied by people have low impact on the total energy
demand; their effectiveness is too low;
number of people (usually there is a trade-off between the
number of persons addressed and the intensity of
participation); and
that must be considered when changing the energy behavior.
B. Behavioral Factors Industrial and Commercial sector
In the industrial as well as commercial sector many companies
phase competing priorities at the management and owner
level. As being a market leader or being one of the leading
market companies it is very important to be a successful
company. Therefore, energy issues mostly only come after the
company´s market targets. Moreover, the choice for or against
El-DSM depends highly on the budget and expected payback
period of each individual company. In fact, in the current
financial crisis most companies aim for payback periods of
less than 3 years, in some cases even less than one year.
Depending on the industry or business type the effects of
behavioral changes can have smaller or larger impacts on the
energy but also cost saving potential.
Another issue that should be mentioned is that in many cases
the individual might not see the benefits of El-SDM. However,
on a larger scale the effects of El-DSM become clearer. In
order to successfully implement El-DSM in the industrial and
commercial sector it can be referred to some of the
characteristics that were used in Canada [NEB 2009b]:
Identification of dedicated energy management staff;
Baseline reporting and record keeping to identify
opportunities and track progress;
Endorsement of program goals and actions from top
levels of owners, management and finance; and
Supplementary information campaigns that foster a
conservation ethic within all areas of the organization.
On top of this it should be noted that in order to improve the
use of electricity efficiently (not using it for heating if there
are other solutions) and to implement El-DSM many federal
governments offer several energy conservation and efficiency
programs for industrial engineers and operators.
C. Behavioral Factors Transportation Sector
According to Rauh et al. [2006] mobility accounts for 45% of
energy demand in households with car, and only for 15% in
households without car. The national energy board (NEB)
[2009a] states that depending on the passenger vehicles
registered in a country along with the driving habits a
significant shift in energy demand can be created.
Figure 3 clearly illustrates the willingness of people to omit
cars for trips within urban areas. Moreover, it can be stated
that in the United States only 6 out of 100 people walk and 1
out of 100 persons rides the bike rather than using the car. In
many European countries there is a much higher tendency for
walking and bicycling. In countries such as Austria, Sweden,
Denmark or the Netherland more than 40% of the trips in
urban areas were made either walking or cycling.
The decision for or against driving can be based on the activity
(How far?, How often?; Shall I use public transport? And what
does it cost?) and purchasing preferences (weight and
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horsepower of car). Nonetheless, the driver decisions can be
influenced by:
bility of public transport;
Different prices for parking zones within cities
, taxi);
e (bus, car, taxi, or own car);
Availability of parking place in a city;
Restrict cars with high CO2 emissions from inner city;
etc.
Figure 3: Proportion of trips in urban areas made by walking and bicycling in
North America and Europe, 1995 [Pucher, J. and Dijkstra, L. 2003]
Moreover, according to the viscous cycle changes must start
from one point and then influence the remaining points in the
cycle. This can happen with the help of education and
information in the long-term (Pull) or due to legislation and
financial support mechanisms (Push) in short term
[UNESCAP 2008].
D. General behavioral issues
One of the phenomena’s that arises often along with energy
efficiency is the so-called rebound effect. In fact, increasing
the technical efficiency of energy use does not necessarily
mean a total reduction of energy consumption (i.e. energy
conservation), as the level of the according energy service
increases in parallel. This results in a lower decrease or even
an increase of total energy demand a paradox which is called
the rebound effect.
The rebound effect can be divided in 3 categories:
services increases in parallel;
saved money is used for other consumptions which also need
energy in order to be provided/produced; and
Economy wide: where new technology creates new
production possibilities and increases the economic growth.
Consequently, reasons for the rebound effect are more of the
same (e.g. two fridges instead of one), increase of comfort and
quality (e.g. higher heating temperature after insulation), but
also demand (population) and the market entry of marginal
consumers (those who could not afford so far). On the
contrary the rebound effect can be reduced by increasing the
price of energy (e.g. by taxes) in order to keep the price of the
energy service the same while increasing energy efficiency or
emission limits or by setting up extensive education
campaigns on the importance of energy savings before more
energy efficient technologies become widely available on the
market [De Wachter, B. 2007].
IV. BENEFITS, CONFLICTS AND MOTIVATION
The following sections outline the benefits for utilities and
building owners as well as the conflicts that might arise
between the two. Thereafter, a variety of motivations to
implement El-DSM will be presented.
A. Potential benefits for utilities
As initially stated, the focus of this report is laid on the
electricity side of DSM. In terms of the utilities a variety of
benefits should be listed. These include [Tatapower 2012]:
f service
power plants)
Create customer loyalty
drives long-term revenue and profit growth
staying longer typically costs less to serve
recommend utility to friends and colleagues and
provide valuable feedback
promoting both customer and employee loyalty
creates a virtuous cycle that lowers employee
churn and overall employee costs
The benefits by value driver for the utilities in Mid-West
North America were assessed by the Midwest Independent
System Operator Inc. Thereby, it was found that the main
benefits result from improved reliability, footprint diversity
and generator availability improvement [Electric Light &
Power 2012.
B. Potential benefits for buildings owners
Similar as for the utilities, building owners can expect a
variety of benefits through El-DSM. These include
[Tatapower 2012, Dullweber, A. and Petrick, K. 2011]:
0
5
10
15
20
25
30
35
40
45
50
Percentage
Country
Bicycling
Walking
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sts (bills)
energy knowledge
The linkage between the utility and customer benefits can be
demonstrated by the green utility model. Indeed, El-DSM
brings benefits for both, utilities and customers, whereas one
determines the other one [ACC Green Utilities 2012].
Moreover, it becomes clear that an optimization of services on
the supply side, leads generally to improved conditions on the
demand side. What both sides can gain are improved services
and a generally lower price, either in terms of cost of
generation or purchase price.
C. Potential conflict between utilities and building owners
However, El-DSM does not only elicit benefits. There are a
variety of potential conflicts between utilities and building
owners. This regards the sharing of benefits of energy
efficiency, different goals and objectives, preferred periods for
El-DSM, billing issues, service quality and the fact that
utilities face the arduous challenge of continuously seeking
ways to drive operational efficiencies throughout all layers of
the organization in an effort to reduce costs, while end-users
seek for the lowest price at the highest service quality.
In table 2 it was tried to oppose the plans and desires of
utilities to those of building owners. Thereby, it can be seen
that utilities are aiming for cost reductions within the utility as
well as long-term security, whereas the building owners prefer
low prices and good service quality.
Table 2: Potential conflict between utilities and building owners
Utilities
Building owners
Want less competition but long-
term security
Want competition between
utilities to choose best option for
them
Prefer long-term and loyal
customers
Want to chance their suppliers
quite easily
Invest/expand steadily (in
renewables)
Seek utility that offers services
of high quality at lowest price
Substantial future investments
are necessary for utilities to be
competitive
Need to provide necessary back-
up as well as grid
stability/operation
Make technological
enhancements in network
communication, network asset
management, service and
customer management
Ensure infrastructure flexibility
to meet future demands
Prefer more predictable energy
pattern
Produce energy locally
(renewables and green image)
Another important issue that needs to be mentioned is that the
new grid infrastructure bears a lot of technical challenges,
such as [Mendes, G. et al. 2011]:
Voltage change screen;
Overcurrent contribution screen;
Open conductor screen;
Islanding screen;
Power flow studies of various types;
Annual simulations;
Detailed islanding studies;
Harmonic analysis, especially if the DG has
characteristics known to produce harmonics;
Inverter interaction with the distribution system;
Insulation coordination;
System unbalance analysis: impact of one-phase DG or
impact on system negative- and zero-sequence values on the
generator; or
Short circuit analysis.
It is therefore understandable that utilities do not agree to
cover all incidental costs. In fact, while building owners would
like utilities to pay all development and improvement cost,
utilities would like to charge their customers - at least to some
extent.
However, in the near future smart grids will be implemented
as a tool to assist, predict, control and monitor the energy
demand and supply as well as to make a two-way connection
between both sides. As for the smart grid and its nationwide
distribution it will therefore be interesting to see how to
implement smart meters and a smart grid, and to which extent
utilities and building owners will pay for it. Moreover,
technological implications associated with the adoption of
smart metering are enormous and deployment will necessitate
upgrades throughout a utility’s entire operational
infrastructure. Some of those challenges include [TMCnet
2008]:
Existing meters will require replacement;
Databases will need enhancing to be capable of handling
massively increased amounts of data sent in real-time;
Billing systems will need upgrading;
Network bandwidth will need to be massively improved;
Customer management processes will have to be
transformed.
The utility demand side management spending of Californian
utilities is represented in figure 4. While in the early years
(1989-1993) no separation between the different activities has
been made, up from 1993 the investments can be split into
load management and energy efficiency. Throughout the years
energy efficiency received a much higher attention, although
the overall investments have been decreasing between 1995
and 2004. Since 2004 an increasing trend could be
experienced.
8
Figure 4: Utility demand side management spending [Cpower 2012]
D. Policies and strategies for motivating utilities
In order to motivate utilities for El-DSM a variety of policies
and strategies can be applied. This includes the decoupling or
shareholder incentive mechanisms. In this rubric the most
known strategy is a cost benefit calculation, which can cover
shared net benefits, cost capitalization, bonus for performance
targets, revenue per customer decoupling or decoupling in
combination with an incentive system [Sedano, R. 2009].
Moreover, there are different pricing type strategies, such as
the marginal cost pricing (pure competition equilibrium),
affine function of the marginal cost (regulated equilibrium) or
monopolistic pricing which is chosen by the generator to
minimize its costs while knowing the optimal consumers'
reaction to the proposed price of electricity (Tempered
Monopoly Equilibrium or so-called Stackelberg-type
equilibrium) [Lavigne, D. et al. 2000].
Besides the pricing strategies utilities are obliged by various
laws to improve their energy performance. The liberalization
of the electricity sector also led to a separation of the regulated
side of the business (transmission and distribution) from the
unregulated side (generation, trading and retail). This is in
particular important as price-fixing within the supply chain
can be reduced considerably. In addition, for each part of the
supply chain different motivations for improvement can be
implemented, monitored, revised, supported or penalized.
Apart from the motivations stated above, there are many other
interesting motivations that should be taken into account from
utilities. For instance, guaranteeing a higher percentage of the
power mix from green fuel sources increases competition
among utilities, but also the number of loyal customers that
seek for green energy utilities. The hiring of energy service
managers can help make El-DSM more attractive, especially
in the industry and commercial sector. This accounts
especially for hidden EDSM. While the utility might not see
these potential improvements in the first place, energy service
managers are experts in this field and therefore might find
many additional energy saving or efficiency potentials. It is
also suggested to use turn-key DSM tools which include for
instance cost benefit analysis [Holmes, J. et al. 2000].
In terms of external motivations utilities can be motivated by
the voluntary usage of smart meters by consumers. Therefore,
promoters must make the process attractive for all
stakeholders to get involved with. For that reason the
government needs to implement the necessary “carrots”
(awards and incentives) in form of diverse support schemes.
Moreover, governmental support for the installation cost of
smart meters or making it mandatory (i.e. new buildings)
would be helpful. In addition, financial support or higher
remuneration rates for transmission grid expansion can help
increasing the utility´s motivation. Another alternative present
various designs for domestic and international carbon trading
schemes.
Last but not least energy contracting could be mentioned.
Here, utilities could directly get in contact with customers,
thereby improving both their services and the customer’s
satisfaction.
E. Policies and strategies for motivating building owners
For building owners the motivations to participate in El-DSM
are quite different. Therefore, the first encouragement to
reduce the load demand in peak periods can result from
different tariffs and pricing mechanisms as described in the
economic aspects.
Another important motivation is the creation of customer
loyalty. This starts with seamless meter readings, correct bills
as well as services that are timely, helpful and friendly.
Therefrom, a strong relationship can be built. However, this
depends on creating enough positive interactions to actually
influence the customer’s perception. The process of utility-
customer interaction is illustrated in appendix 2.
In line with costs and loyalty comes the positive “spill-over”
effect, which can generally be described as effects beyond the
intended range and expectations on other behaviors or actor
which were not included in the intended participant tool. In
fact, the more people participate the higher are the chances of
increasing El-DSM measures [Peters et al. 2012].
Similar as for utilities there is a whole set of EU approved
energy policies to improve market conditions for consumers.
Even smart meters with their variety of benefits can be seen as
a motivation for consumers [California Public Utilities
Commission 2012].
utility;
time-based rates;
bills;
Make informed decisions by providing highly detailed
information about electricity usage and costs;
9
power plants, or avoiding the use of older, less efficient power
plants as customers lower their electric demand;
In the contrary, the smart meter issue covers the following
aspects:
But, as benefits are shared, costs should be shared; -
rollout of smart meters; which will then decrease prices;
All in all motivations for both utilities and building owners are
strongly required to improve El-DSM. Besides the financial
support schemes and mechanisms widespread behavioral
changes can be obtained. This is very important to achieve
regional, national and international energy targets. Especially
in urban areas where large amounts of energy are required,
sustainable energy planning considering El-DSM will be an
essential feature in the upcoming years.
V. DISCUSSION
It has been outlined above that El-DSM is essential for
sustainable development. In urban areas the effects, but also
the possibility, of applying El-DSM are enormous. Figure 5
illustrates how El-DSM could contribute towards sustainable
development. In fact, Sustainable development is
development that meets the needs of the present without
compromising the ability of future generations to meet their
own needs [WCED 1987].
Reduced energy demand through efficiency and El-DSM is
certainly one solution. While the effects of applying only
either of the two measures already have a significant impact
on the load profile, the combination of both concepts is truly a
sustainable path into the future. Figure 5 exemplifies how each
of the measures performs individually, plus what would be the
result of combining both approaches (red line).
It is important to state at this point that energy efficiency
measures are strongly encouraged nowadays through a variety
of regulations. In fact, new building stock or appliances are
required to comply with minimum standards. Therefore, it is
reasonable to state that energy efficiency measures alone
could reduce the energy demand of a household by 25%
[York, D. et al. 2007]. However, this is subject to the current
status and age of the building as well as appliances in use.
On the other side El-DSM is not mandatory yet. Regulations
that oblige, both, utilities and households owners to participate
in El-DSM are scarce or often not yet existing. Consequently,
it will be interesting to see how El-DSM will be incorporated
in sustainable energy planning in the upcoming years. The
implementation in urban systems will be even more
interesting, as a larger amount of participates can be reached
more easily, i.e. mass roll-out of smart meters, positive spill-
over effect, etc. For the purpose of this study it was assumed
that if households adapt to participate then 10% of their peak
demand (between 6am and 6pm) can be reduced.
Lastly, it should be noticed that the in figure 5 represented
load profile was primarily based on one household. However,
the effects of El-DSM and energy efficiency can easily be
multiplied in urban areas. Therefore, the overall electricity
demand within a defined urban system could be reduced
considerably, i.e. peak load capacity by as much as 30%.
Moreover, through the manifold participation in El-DSM the
share of renewable energy systems can be increased without
increasing back-up systems at the same share. For urban areas
to become sustainable, this would be a major contribution
from the consumer side.
Figure 5: Effects of combining energy efficiency and El-DSM on load profile
Another study representing the Ontario conservation strategy
is illustrated in figure 6. The majority of energy savings can be
achieved through energy efficiency and demand management
in the next 20 years. Other measures such as self-generation,
fuel switching or reduced use have a much smaller
contribution in reducing electricity demand. Moreover, the
combined approach leads to overall savings in the range of 20-
25% [NEB 2009b].
Figure 6: Ontario Conservation Strategy [NEB 2009b]
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
00:00
01:30
03:00
04:30
06:00
07:30
09:00
10:30
12:00
13:30
15:00
16:30
18:00
19:30
21:00
22:30
Current demand Peak shifting (PS)
Energy efficiency (EE) EE & PS
10
VI. CONCLUSION
It can be summarized that El-DSM is omnipresent for utilities,
building owners and consequently the city/urban area in
overall. While the technical aspects have improved in the last
decades, it is now time to make El-DSM appealing with
economic and behavioral aspects. Both, utilities and building
owners have a variety of benefits. However, due to different
interests and individual benefits there are various conflicts.
For that reason policies and strategies from an urban
perspective are essential to motivate all stakeholders for El-
DSM. Moreover, El-DSM is essential to cover the growing
electricity demand, but also for the future adaptation of the
smart grid concept towards sustainable development in urban
areas. In this regard it should be noted that economic
incentives, support mechanisms, regulations and penalties help
making El-DSM economically attractive, but also to change
the utilities and building owner’s behavior.
In the end, behavioral changes can lead to significant energy
reduction. The overall gains of El-DSM are immense, both in
financial terms but also for energy requirements. On top of
this El-DSM can be seen as the first step towards a future with
smart girds and advanced metering infrastructure; basically a
step towards sustainable development. Due to scaling and
spill-over effects such movements could best be applied in
larger urban areas.
11
VII. APPENDIX
Appendix 1:
Table 3: Demand side activities [Abaravicius J. 2007]
Appendix 2:
Figure 7: Building customer trust (Dullweber, A. and Petrick, K. 2011)
12
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IX. BIOGRAPHIES
C. Wimmler graduated from the University of Applied
Science Kufstein with a BA in European Energy Economics.
Thereafter, he received a MSc with distinction in Renewable
Energy Enterprise and Management from Newcastle
University. At the moment he is pursuing his PhD at the
University of Porto in the MIT Portugal Sustainable Energy
Systems program. His special fields of interest include
offshore renewable energy technologies, energy planning and
management as well as isolated energy systems.
G. Hejazi was born in Tehran. She graduated from Iran
University of Science and Technology with a BSc. in
Industrial Engineering and from Newcastle University with a
MSc. in Renewable Energy Enterprise and Management.
Currently she is undertaking her PhD in the Sustainable
Energy Systems MIT-Portugal Program at the University of
Porto. G. Hejazi has worked for several years in the Farayaz
Material Engineering Research Center and the Material and
Energy Research Center. Her special fields of interest include
managerial aspects of renewable energies and sustainable
energy systems in remote areas.
E. de Oliveira Fernandes is a full professor at the Faculty of
Engineering, University of Porto, Portugal. He obtained his
PhD on Applied Sciences at the Federal Institute of
Technology (Lausanne, Switzerland) in 1973. Devoting the
last 30 years of his career to teaching, research, consulting and
public activities on various topics related to energy and
environment, he was the founder of a RTD group on Building
Thermal Physics with major pioneering activities in Portugal
on Passive Solar Technologies in Buildings, Indoor Air
Quality, and Energy and Environment in the Urban Space.
M. A. Matos was born in 1955 in Porto, Portugal. He received
the El. Eng., Ph.D., and Aggregation degrees. He is with the
Faculty of Engineering of the University of Porto (FEUP)
since 1978 (Full Professor since 2000). He is also coordinator
of the Power Systems Unit of INESC TEC. His research
interests include classical and fuzzy modeling of power
systems, reliability, optimization, and decision-aid methods.
C.L. Moreira is a senior researcher in the Power Systems
Unit of Instituto de Engenharia de Sistemas e Computadores
do Porto (INESC Porto). He obtained the electrical
engineering degree (5-year course) in 2003 and the Ph.D. in
2008, both from the Faculty of Engineering of Porto
University, Porto, Portugal. His main research interests are
focused on microgrids dynamics and control, smart grids and
smart metering.
S. Connors is director of the Analysis Group for Regional
Energy Alternatives (AGREA) part of the M.I.T. Energy
Initiative (MITEI). AGREA’s primary research focus is in
strategic planning in energy and the environment, with an
emphasis on the transformation of regional energy
infrastructures (e.g. “energy pathways”) to simultaneously
address energy security, climate change, and other energy
challenges. As an extension of his role as director of AGREA,
Mr. Connors also coordinates several international energy
initiatives involving MIT. Mr. Connors is currently a member
of the U.S. Dept. of Energy’s Wind Program Peer Review
Panel, and a member of the editorial board for the journals
Wind Engineering and Sustainability Science.
ResearchGate has not been able to resolve any citations for this publication.
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This paper explores demand side management (DSM) strategies, including both demand response and energy efficiency policies. The aim is to uncover what features might strengthen DSM effectiveness. We first look at key features of residential energy demand and the limits to energy indicators. We then turn to historical energy intensity trends in the sector which uncover its large untapped potential. A range of barriers to energy efficiency accounting for this gap are surveyed as well as a number of potential policy responses. This reveals the necessity of a portfolio approach with bundled strategies that simultaneously impact different parts of the market, enhance the strengths of individual measures while compensating for their weaknesses through the use of complementary policies. Evidence from the international experience, in Denmark, Germany, Japan, and US is reviewed. This helps us to contrast and shed some light on the UK experience. We conclude with an emphasis on the need for a holistic underpinning approach and the indentification of a number of attributes that reinforce DSM strategies.
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In this multidisciplinary study, an Internet-based tool was used to encourage households (N=189) to reduce their direct (gas, electricity and fuel) and indirect energy use (embedded in the production, transportation and disposal of consumer goods). A combination of tailored information, goal setting (5%), and tailored feedback was used. The purpose of this study was to examine whether this combination of interventions would result in (i) changes in direct and indirect energy use, (ii) changes in energy-related behaviors, and (iii) changes in behavioral antecedents (i.e. knowledge). After 5 months, households exposed to the combination of interventions saved 5.1%, while households in the control group used 0.7% more energy. Households exposed to the interventions saved significantly more direct energy than households in the control group did. No difference in indirect energy savings emerged. Households exposed to the interventions adopted a number of energy-saving behaviors during the course of the study, whereas households in the control group did so to a lesser extent. Households exposed to the interventions had significantly higher knowledge levels of energy conservation than the control group had. It is argued that if the aim is to effectively encourage household energy conservation, it is necessary to examine changes in energy use, energy-related behaviors and behavioral antecedents.
Article
We present a general methodology to study the electricity market of a country or region, under various pricing mechanisms. The approach is based on modifications of a large-scale techno-economic model, and is applied to a realistic model for the Province of Québec. Mathematical programming and a new decomposition procedure are used to simulate different electricity pricing schemes and their effects on the producer's and consumers' decisions. Three types of pricing are analyzed, each one corresponding to a different equilibrium: marginal cost pricing, leading to a pure competition equilibrium, an affine function of the marginal cost, leading to a regulated equilibrium, and monopolistic pricing, chosen by the producer to minimize its costs while knowing the optimal consumers' reaction to the proposed price of electricity (Stackelberg-type equilibrium). The three equilibria are described and justified, and a large-scale application to the province of Québec is presented and discussed in some detail.
Demand Side Activities for Electric Load Reduction
  • J Abaravicius
  • Lund Lund
  • University
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Examining the Peak Demand Impacts of Energy Efficiency: A Review of Program Experience and Industry Practices, American Council for an Energy-Efficient Economy Our Common Future: Report of the World Commission on Environment and Development
  • D York
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Einsparungspotenziale und neue Instrumente für eine nachhaltige Energiewirtschaft [Energy saving potential and new instruments for a sustainable energy economy
  • W Abrahamse
Abrahamse, W., et al. (2007) The effect of tailored information, goal setting, and tailored feedback on household energy use, energyrelated behaviors, and behavioural antecedents, Journal of Environmental Psychology, Volume 27, Issue. 4, pp. 267-276. ACC Green Utilities (2011) Delivering low carbon energy efficient utilities, retrieved from: http://www.asiacleancapital.com/green-utilities/, last accessed 22.10.2013. Bellarmine G. (2000) Load Management Techniques, Electronic Engineering Technology, Florida A&M University, pp. 139-145. Berker, T. (2008) Energienutzung im Heim als eine soziotechnische Praxis -Untersuchungsergebnisse, Trends und Strategien, [Energy usage at home as a socio-technical practice -research results, trends and strategies], Einsparungspotenziale und neue Instrumente für eine nachhaltige Energiewirtschaft [Energy saving potential and new instruments for a sustainable energy economy], Oekom Verlag, pp.175-192. Bohunovsky, E. (2008) Behaviroural aspects of energy consumption in private households, participatory approaches for energy conservation, Vienna, TU Vienna.
Effiziente Beratungsbausteine zur Verminderung des Stromverbrauchs in privaten Haushalten
  • J Holmes
Holmes, J. et al. (2000) Design alternatives for a domestic carbon trading scheme in the United States, Global Environmental Change, Volume 10, Issue 4, December 2000, pp. 273-288. Institut für Energie und Umweltforschung (2006) Effiziente Beratungsbausteine zur Verminderung des Stromverbrauchs in privaten Haushalten, [Efficient consultation to reduce electricity consumption in private households] Zwischenbericht, Heidelberg, IFEU.
Methods to secure peak load capacity -Experiences from Sweden
  • C Lindquist
Lindquist, C. (2001) Methods to secure peak load capacity -Experiences from Sweden, Proceedings of Conference Methods to Secure Peak Load Capacity on Deregulated Electricity Markets, 7-8
The impact of technology-push and demand-pull policies on technical change -Does the locus of policies matter?
  • June
  • Saltsjöbaden
  • Sweden
  • B Mack
  • P Hackmann
  • G Mendes
June, Saltsjöbaden, Sweden. Mack, B.; Hackmann, P. (2008) Stromsparendes Nutzungsverhalten erfolgreich fördern, Strom sparen in Haushalt.,Trends, Einsparungspotenziale und neue Instrumente für eine nachhaltige Energiewirtschaft, Oekom Verlag, pp. 108-123. Mendes, G. et al. (2011) On the planning and analysis of Integrated Community Energy Systems: A review and survey of available tools, Renewable and Sustainable Energy Reviews, Volume 15, Issue 9, pp. 4836-4854. NEB (2009a) Canadian Energy Demand: Passenger Transportation -Energy Briefing Note, retrieved from: http://www.neb-one.gc.ca/clfnsi/rnrgynfmtn/nrgyrprt/nrgdmnd/pssngrtrnsprttn2009/pssngrtrnsprttn -eng.html, last accessed 15.05.2012. NEB (2009b) Attitude and Behaviour: Shaping Energy Use -Energy Briefing Note, retrieved from: http://www.neb-one.gc.ca/clfnsi/rnrgynfmtn/nrgyrprt/nrgdmnd/tttdbhvrshpngnrgs2009/tttdbhvrshp ngnrgs-eng.html, last accessed 22.10.2013. Peters, M. et al. (2012) The impact of technology-push and demand-pull policies on technical change -Does the locus of policies matter?, Research Policy, Volume 41, Issue 8, pp. 1296-1308. Pucher, J. and Dijkstra, L. (2003) Promoting Safe Walking and Cycling to Improve Public Health: Lessons from the Netherlands and Germany, American Journal of Public Health, Volume 93, Issue 9, pp. 1509-1516.