Characteristic of the brand: distributed energy resources vs. response to demand: what’s the difference?


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Shell Energy – Brand Feature

Commercial and Industrial (C&I) facilities looking to modernize their energy strategies must navigate an ocean of potential solutions and terminologies. Because these solutions are constantly evolving and the scope of each can vary depending on the use case and vendor, it can be difficult for companies and their facility managers to explore potential avenues to take.

Two examples are Distributed Energy Resources (DER) and Demand Response (DR) programs. Both terms roughly describe the mechanisms behind the meter by which facilities can reduce grid energy consumption. But while DERs and DRs may represent similar goals, and in some cases the terms are used interchangeably, they technically align with different strategies and intentions. Here are practical explanations for facility managers considering their options.

(For a general overview of energy products that help large facilities increase sustainability, manage physical and financial risks, and develop energy resilience, see Shell Energy’s C&I Solutions Guide.)

What are distributed energy resources?

“Distributed energy” is a broader term than “demand response”. DERs, or DER portfolios, are frequently used as generic terms spanning multiple solutions and products, and there is some inconsistency in how the scope of DERs is defined.1.

The North American Electric Reliability Corporation (NERC) defines a fairly narrow working definition for DERs: “Any resource on the distribution system that generates electricity and that is not otherwise included… in the bulk electrical system. This NERC definition restricts the scope of DERs to on-site power generation and associated storage infrastructure and assets. When DERs are discussed from the perspective of network reliability or utility companies, this narrow definition is usually at the heart of the conversation.

However, DERs are often defined more broadly in practice, especially where more diverse audiences such as C&I end users are involved. For example, the Smart Electric Power Alliance (SEPA) extends the definition of DER to include direct load control, behavioral load shaping and energy efficiency technologies, in addition to generation and storage assets. electricity behind the meter. SEPA recognizes that DERs can be “used individually or in aggregate value for the network, individual customers or both. 2

The broader definition of SEPA probably resonates more with C&I facilities looking out for their own interests. In particular, energy efficiency and load management efforts are common first steps towards reducing energy costs and achieving long-term sustainability goals.

Takeaway meals: DERs could refer to various energy products and solutions, all focused on reducing dependency on the centralized grid. When navigating the energy market, it helps to know that solution providers can operate under different definitions of DER. Load management and energy efficiency services, two viable ways for C&I facilities to take their first steps towards a modern energy strategy, are sometimes but not always organized under the banner of DERs.

Simplified facility energy management: Shell Energy Inside is a subscription service that allows facilities to access personalized energy solutions behind the meter without the need for upfront investment. This program can help reduce energy costs, improve infrastructure, increase efficiency, produce and store energy on-site, all with professional, outsourced maintenance and guaranteed performance. Learn more.

What is demand response?

The Federal Energy Regulatory Commission has defined demand response as “a reduction in the consumption of electrical energy by customers relative to their expected consumption in response to an increase in the price of electrical energy or to designed incentive payments. to induce lower electrical energy consumption ”.

This definition carries a plain language explanation. Electricity costs more during times of high demand, which is why DR prioritizes “peak capping” – that is, using less electricity during peak activity. , as a means of reducing costs. During these peak periods, demand for electricity can exceed supply and lead to blackouts. R&D is seen to be mutually beneficial for electricity users and grid operators, as it helps facilities save money and avoid downtime while reducing pressure on the grid.

A facility participating in DR receives advance notification of peak events or other triggers (collectively referred to herein as DR events) from the DR program operator or competent authority so that it can reduce its consumption. energy accordingly. Actions taken may include adjusting thermostats, turning off lights, and reducing or reprogramming non-critical operations.

Additional infrastructure is not technically required, but it can improve a facility’s ability to take action. For example, smart lighting, HVAC systems and other equipment can be automated or controlled remotely for quick response. Backup generators or solar batteries can provide alternative energy sources during DR events.

Participation in demand response can financially benefit energy customers through several mechanisms, depending on the contract, regulatory environment and other factors. Customers can avoid paying higher prices during peak demand, they can receive capacity payments to meet reliability triggers (a type of DR event), or they can “sell” excess energy back to the retailer. energy or ISO and receive credit or statement checks as compensation.

Takeaway meals: Since demand response and DERs use similar technology and infrastructure, the distinction between the two can become blurry. For facility managers, the functional difference lies in the action to be taken (reduce usage or activate production) in response to disaster recovery events.

Expertise in response to demand: MP2 Energy, a wholly owned subsidiary of Shell Energy, provides complete demand response solutions throughout PJM and ERCOT (eight states plus the District of Columbia), with 600 MW of distributable load under contract. These solutions can integrate with DERs and the retail offering for complete end-to-end solutions. Learn more.

Considerations for pursuing DERs versus responding to demand

Once the distinctions between the two are understood, energy users considering RED and R&D programs may still have questions regarding the energy strategies and products that could generate the most value. The following questions and observations can help inform these decisions.

  • What regional considerations and regulatory requirements are in effect? The value of capacity, transmission costs, frequency and severity of energy price spikes and the ability to export electricity to the grid are all factors taken into account in the potential value of response to demand. Environmental regulations and available subsidies can inform DER investments.
  • Are integrated solutions available? Many energy efficiency, DER and DR goals are more easily achieved by a portfolio of solutions rather than by a single technology or service. An energy partner who offers flexible and comprehensive options can help C&I customers save resources during procurement and implementation processes.
  • What initial investment is required? Some DER solutions, such as Shell Energy Inside, follow a subscription model that allows energy users to benefit from DERs without the need for upfront expenses.
  • How much space is available for on-site energy production and storage? Small facility footprints can prevent large-scale on-site production and storage, which may prompt more focus on such efforts as manual peak peaking and improving energy efficiency.

Of course, these considerations only scratch the surface of a facility’s unique situation. For more information, look for DER and demand response professionals who understand your region, operations and regulatory environment.

Shell Energy is well positioned to help C&I facilities modernize their energy strategies to save money, meet regulatory requirements and meet sustainability goals. Consistently ranked among the top 3 gas and electricity distributors in North America, with a distinctive portfolio of distributed energy and demand response solutions, the breadth and scale of our expertise can move your business forward. . Download our C&I Solutions Guide to learn more about our full line of energy products, or contact us to start the conversation.

1 https://www.nerc.com/comm/Other/essntlrlbltysrvcstskfrcDL/Distributed_Energy_Resources_Report.pdf

2 https://sepapower.org/resource/distributed-energy-resources-capabilities-guide/

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