Energy and Smart Building Industry Blog

What Retailers Should Know About Demand Management

retailer_energy_adviceWhen retail stores and chains adopt a demand management program, they can take advantage of utility incentives and shift their demand curve to avoid peak rates. The problem is, it can be hard for retailers to do this, especially across a portfolio of locations.

Demand management refers to programs that incentivize customers to reduce kW Demand for short periods. Utilities offer these programs in efforts to preserve grid integrity and flatten the demand curve to avoid brownouts and blackouts. 

Utilities are getting down to managing the balance of grid supply and demand in ever shorter increments. Some demand management events last between 15-minutes to an hour, or as long as several hours. The notification period (when the utility lets you know you need to curtail electricity) also can be as short as minutes in the event of an emergency, or as long as a day or two. In rare cases, the exact date may even be forecasted ahead of time.

Of course, managing demand to avoid peaks is always desirable, to avoid hitting the peak rates, or changing your peak for the future. Peak load shifting or shaving are popular ways to avoid peak rates. Check out our article on Adaptive Energy Management to see one way of peak shifting.


What Kind of Demand Management Incentives are there? 

Incentives vary a lot and can really add up.

Incentives can include:

    • Lower net unit pricing in exchange for reduction during peak periods
    • Tariff-based incentives with short-term increases in electricity cost
    • Compensation to high volume users who abide by mandatory curtailment during heat waves
    • Rebates for agreed-upon power reduction during high demands - sometimes this is referred to as negawatts.
      • Negawatts are an asset that can be traded or sold back to electricity companies - although managing this requires a sophisticated energy management system to monitor the kWhs saved. 

Smart grids will see more incentives evolve as the technology improves how utilities and energy users communicate, monitor, trade, and manage energy usage 24/7 and not just during demand management events. 

Adaptive Energy Management - How to Use Your Buildings as a Battery

Barriers to Demand Management Adoption

So what holds retailers back from taking advantage of demand management programs? Often the sheer amount of building control strategies involved and the amount of program types keeps retailers shy of investigating and planning to make a move on programs. 

Some companies feel they already have an efficient system and do not want to impact operations unnecessarily. One study shows that retailers can be uneasy that company goals could be hindered or that 24/7 operating businesses like hotels cannot reasonably shift power usage without impacting customer comfort.   

Types of Demand Management Programs

There is a wide range of programs throughout the country. And as smarter technology and smart grids evolve, so too will the variety of options and opportunities. The primary commercial programs include Demand Response Programs, Peak Demand Programs, and proactive internal demand management.

Demand Response Programs

Demand response and Automated demand response programs see the customer limiting their kW consumed during times specified by a utility. 

Types of programs include:

  • Emergency Demand Response

This is a program that offers incentives when a utility declares an emergency due to system capacity or reliability issues.  

  • Economic Demand Response

This is a program that offers incentives during typical or identified peak demand times when electricity prices are high.

  • Ancillary Services Demand Response 

This is a program that offers incentives that aid in supporting the transmission of electricity loads. 

The above are some of the more common programs, but as mentioned, programs come in all shapes in sizes throughout the country.

Peak Demand Response Programs

Peak demand programs focus on offering credits for reductions. 

Types of programs include:

  • Critical Peak Pricing (CPP)

CPPs offer credits during specific seasons/times of year when a utility declares a CPP event. 

  • Real-Time Pricing (RTP)

RTPs target temperature-driven prices, with price reductions offered for customers who lower kW during these times.

  • Time of Use Base (load) Interruptible Program (TOU-BIP)

TOU-BIP are programs where credits can be accumulated for energy reductions with as little as 15-30 minutes notice from a utility. 

  • Demand-Side Energy Management 

This is a program that offers incentives through demand response auctioning, capacity bidding (CBPs), and energy storage initiatives. 

Internal Demand Management

Increasingly we are seeing top-performing companies taking advantage of incentives from multiple programs and even developing their own programs that they take to utilities to consider. While this is rare, and hard to find information about as these companies tend not to broadcast these strategies, it just goes to show there are many evolving, flexible demand management programs out there. 

  • Microgrids

This is a program that offers incentives for those power customers that have renewable energy storage capabilities either on-site or through a third-party.   

Management & Verification 

Managing multiple control systems that monitor store locations can be an impossible task and certainly doesn't allow for proactive response and management. Additionally, utility companies often require precise Measurement and Verification (M&V) reporting when businesses opt into demand management programs.

Smart Building IoT Solutions 

A centralized control system gives customers visibility into systems across locations and the tools to manage systems despite local users manually changing the controls. An Energy Management System (EMS) gives energy customers a way to keep up with the M&V requirements. 

A robust EMS system can:

  • Quickly dig into any location and identify conditions, issues, and statuses

  • Enable multi-action strategies that automatically react to kW usage, weather, occupancy, and more

  • Give charting and historical trend data, including multi-point trending

  • Give visibility of datasets across any location on any building control system for comparing and analyzing 

  • Allow access on multiple points of building data such as zone and supply temperatures, sensor status and set points

  • Highlight problematic readings to help quickly identify issues and increase efficiency at the location level

Customer Comfort

Customer comfort does not have to be sacrificed for retailers to take advantage of demand management programs. Unfortunately, a lot of energy and facility managers misunderstand this. With the right placement of sensors and the best software and management tools, it is possible to manage setpoints and store energy for use during off-peak times. We cover this in some detail in our post What Should Building Setpoints Be Set To? 

PhoenixET helps retailers gain precise building management control over multiple locations. These controls drastically save money, cut down on power usage, improve occupant comfort, and allow for data analysis across thousands of data points to meet demand management objectives.

We have put together five case studies spanning a variety of industries that outline how PhoenixET helps customers meet and exceed energy saving targets. You can access the studies on the below link.

See Case Studies

Additional Resources

4 Common Myths of Energy Conservation in Building Management

Adaptive Energy Management Guide

Building Management Technologies Guide

Are You Managing Your Energy Spend?

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