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Demand Response FAQ:

Who qualifies for Demand Response programs?

Qualification for a DR program varies from region to region, but in general, any customer that is willing to remove their business from the grid when an event has been issued can qualify. Typically, those businesses rely on an installed asset to provide power for the facility, but that is not necessary in all cases.

How do you ensure Demand Response events do not interfere with facility operations?

Your facility requirements will be spelled out in any DR contract. This ensures the grid operator knows in advance what you can and cannot do. No one likes surprises, so clearly defining what your facility needs are is an important step in the process.

What type of notification does the facility receive before a Demand Response event?

You may receive notification by email, phone, text, or fax. The advanced notification depends on which program you are in and which options you have selected.

What if we can't participate in a declared event?

The Demand Response programs have different requirements for load reductions during declared events. Consequences of not participating or not dropping load can range from no impact if you are in a voluntary program to financial penalties that offset any rate savings in mandatory programs.

What type of incentives are offered and when will I see them?

Multiple incentives are available to DR participants; from cash payments to reduced electric rates. Each RTO or ISO operates their own energy auction which sets the wholesale energy price for the next 3 years. These wholesale prices are used to calculate what each kilowatt hour is worth and each region offers a different amount based on expected need/demand. Your facility’s past electrical usage is used to establish your rate.

Why is demand response necessary?

Occasional storms and heat waves, as well as periodic power plant repairs and maintenance have the potential to affect supply and demand of electricity. When demand is high and supply is short, power interruptions can sometimes be the result. Building enough power plants to satisfy every possible supply and demand scenario is one possibility, but the cost and environmental impact of that would be tremendous.

Demand response programs are designed to be both fiscally and environmentally responsible ways to respond to occasional and temporary peak demand periods. The programs offer incentives to businesses that volunteer and participate by temporarily reducing their electricity use when demand could outpace supply.

Why should my company get involved?

Demand response provides a way for your company to advance power reliability on your terms. Your voluntary participation will help enhance electricity reliability for everyone—which is great news for you, other businesses, and all residential users. With demand response, you can take small (and big) steps to reduce your electricity demand. By doing so, you'll be giving a whole lot back—and earning incentives, too.

When are demand response days most likely to occur?

Demand response days are declared when demand for electricity threatens to outpace supply, which typically can occur during hot summer days. Additionally, this can happen if generation facilities are closed for maintenance, transmission lines are damaged, or during periods when the price to purchase added electricity escalates.

What if I already have a generator?

We will evaluate your existing assets and make recommendations. Some older equipment will qualify as is, some will require retro-fit with emission controls to qualify for demand response and capacity programs.

Either way, Vector Energy Systems handles all contracting and permitting, as well as the potential funding for any additional equipment or retro-fit.

Glossary of Terms:

CSP’s - Consolidated Service Provider

FERC - Federal Energy Regulatory Commission

POLR - Provider of Last Resort

LSE’s - Load Serving Entities

IPP - Independent Power Producer

PPA - Power Purchase Agreement

ESCO or ESP - Energy Services Company or Energy Services Provider

CHP - Combined heat and power

Also known as cogeneration, or co-gen, CHP is the simultaneous generation of electricity and useful heat from the combustion of fuel or a solar heat collector.

RTO - Regional Transmission Organization

A regional transmission organization (RTO) in the United States is an electric power transmission system operator (TSO) which coordinates, controls, and monitors a multi-state electric grid. The transfer of electricity between states is considered interstate commerce and electric grids spanning multiple states are therefore regulated by the Federal Energy Regulatory Commission (FERC). [1] The voluntary creation of RTOs was initiated by FERC Order No. 2000, issued on December 20, 1999. [2] The purpose of the RTO is to promote economic efficiency, reliability and non-discriminatory practices while reducing government oversight.

ISO - Independent System Operator

An independent system operator (ISO) is similarly an organization formed at the recommendation of the Federal Energy Regulatory Commission (FERC). In the areas where an ISO is established, it coordinates, controls, and monitors the operation of the electrical power system, usually within a single US State, but sometimes encompassing multiple states. RTOs typically perform the same functions as ISOs, but cover a larger geographic area.

Regulated Vs. Deregulated Markets

Regulated markets feature vertically-integrated utilities that own or control the entire flow of electricity from generation to meter.

Deregulated markets require utilities to divest all ownership in generation and transmission, and are only responsible for distribution, operations, and maintenance from the interconnection at the grid to the meter, consumer billing, and acting as the provider of last resort (POLR). This allows the consumer to “shop” for the best available rate.

Distributed Energy

Distributed energy (also known as distributed generation) refers to power generation at the point of consumption. Generating power on-site, rather than centrally, reduces or eliminates the cost, complexity, interdependencies, and inefficiencies associated with transmission and distribution through the local utility.

Demand Response

Demand Response (DR) provides an opportunity for consumers to play a significant role in the operation of the electric grid by reducing or shifting their electricity usage to on-site power generation during peak periods in response to significant weather events (hot or cold), time-based rates, or other forms of financial incentives.

DR programs provide financial incentives for installing equipment, provide funds to help preprogram energy management and control systems, can lower the cost of electricity in wholesale markets, and in turn, lead to lower retail rates.

Our Demand Response programs offer incentives to businesses that reduce the energy use of their facilities during times of peak demand or demand events.

Methods of engaging customers in demand response efforts include offering time-based rates such as time-of-use pricing, critical peak pricing, variable peak pricing, real time pricing, and critical peak rebates.