March 29, 2005

WASHINGTON, D.C. -- A new study by the American Council for an Energy-Efficient Economy (ACEEE) examines recent experience with demand response (DR) programs across the United States and seeks to better understand the relationship between demand response and energy efficiency. The study raises timely issues as the continued growth of electricity demand is putting stress on the U.S. power grid and leading to a resurgence of interest in "demand-side" resource strategies.

The Midwest blackouts and price spikes in 1999, California's energy crisis of 2000–2001, and the great Northeast blackout of 2003 were warnings of the very real risks of price spikes and system outages that many states and regions face today, and DR is being touted as one form of insurance against those risks. However, the United States also faces other energy-related challenges (such as rising environmental emissions, soaring energy commodity prices, and overall energy resource depletion), which require more comprehensive energy efficiency strategies.

DR programs seek to reduce electricity demand at critical times through price signals, advanced metering and control technology, and customer load curtailment actions. DR is distinguished from energy efficiency by the fact that its primary goal is to reduce peak demand, not to reduce total energy consumption, though some DR programs can do both. DR programs have become increasingly popular among utilities and other electricity service providers, building on similar types of customer load management programs that have been in place since the 1980s. Certain states and regions have been especially active in developing and offering demand response programs, notably California, New England, the Northwest, and New York and other Mid-Atlantic states, but DR programs of some type can be found in most states.

Despite the rise of DR programs, the ACEEE study found that there has been little research on how such programs and initiatives affect customer energy consumption at times other than the relatively short periods of peak demand. Many DR programs have features that could be employed to also enhance overall energy efficiency. However, other DR strategies (e.g., simply shifting load to off-peak time periods) may save no energy and can include features that have the potential to impede energy efficiency improvements.

"Simply pursuing demand response without incorporating energy efficiency would be unfortunate," observed Dr. Martin Kushler, ACEEE Utility Director and co-author of the report, "because energy efficiency provides benefits beyond peak load reduction, such as reduced air pollution and preservation of our energy resources." Moreover, many energy-efficient technologies, such as high efficiency lighting or air conditioning, also help reduce peak electricity demand. "Demand response and energy efficiency clearly can be complementary, and it's critical that we design programs that both reduce peak demand and improve overall customer energy efficiency," added Dr. Kushler.