The Resurgence of Load Management

2/23/2001 By Gwyn Finnell, Hoffman Publications, Inc. - Can market-driven load management play a critical role in balancing electricity supply and demand? Technology exists today that will allow customers to alter their electric pattern demands in exchange for higher or lower energy costs - and enable energy companies to manage peak loads and increase profitability.

Is There Demand for Load Management?
According to William Smith, in his August 2000 Public Utilities Fortnightly article, "The Next Killer App: Load Management, Only This Time for Real," the energy industry is currently going through natural deregulation pains that other industries have experienced. But he believes that those pains - such as spiking prices and supply shortages - will eventually give way to enhanced customer choice made possible by what he calls an "Electrinet" - an Internet of free-flowing transactions between electricity suppliers and purchasers where "competition will replace the utility's duty to serve with a willingness shared between customer and marketer."

Smith's Electrinet concept is the basis for a compelling new energy services paradigm in which market-driven load management - and customer participation - can play a critical role in balancing electricity supply and demand. Given the right technology, customers are given a choice in determining their electric pattern demands, with corresponding higher or lower energy costs. While suppliers can offer customers flexibility and choice as a benefit, they can also use load management to intentionally balance supply and demand during peak loads on hot days, build off-peak loads to generate additional profitable revenue, and invent ways to succeed in a deregulated environment.

California Proves the Need
California's recent energy crisis dramatically illustrates the need for market-driven load management. The partially regulated state is currently experiencing significant power shortages, resulting in multiple stage 3 alerts and rolling blackouts. While reasons for the California crisis are complex, inadequate transmission capabilities and power generation resources have clearly contributed significantly to the crisis. But what if, for example, California energy companies could intentionally, briefly, and on a rotating basis shut down thousands or even millions of individual residential appliances such as air conditioners for just an hour at a time - and provide significant load relief equivalent to a large power plant?

Effective load management may certainly prevent California's rolling blackouts…and if Smith is correct, enable much more. "Load management plays such a vital role because of the real-time nature of electricity," states Smith. "It must be consumed as it is produced, and vice versa…Thus, load management, as a means for addressing economic or reliability issues, provides real value in a deregulated market." In the case of California, load management may offer a cost effective way to increase reserve quickly, and at a much lower cost than construction of peaking generation or transmission lines.

The Technology Is Ready
Despite the benefits, load management has not become standard operating procedure in the United States, in part because the initial technologies available were simple, one-way, open-loop systems - and in part because deregulation was not in place at the time to drive the industry to improve the technology. In the seventies and eighties, companies were under regulatory pressure to use load management, and yet they were forced to operate blindly because they were unable to verify changes in demand until months after taking action. Since communication with load-managed devices was VHF-driven, energy companies built their own VHF radio towers - a costly investment that further deterred interest in load management. Nor could energy companies provide customers load management options from which to choose, although this was of little concern in a non-competitive marketplace.

Today, however, load management technologies have entered the modern age. For example, smart duty cycling of air conditioners can reduce load by 0.9 to 1.1 kW per residential customer while raising the temperature in the residence only 2-3 degrees F from the original thermostat setting.

And companies are now operating in a deregulated marketplace that will require businesses to offer innovative products and services to meet unique customer needs. Smith notes that, to be successful in a competitive environment, load management must offer more functionality and control for both customers and businesses than previous incarnations. For example, systems must operate in real time (or nearly real time) to meet sudden market demands, as well as operate as a two-way, closed-loop system that allows businesses to instantly know and document demand changes resulting from load management. Load management systems must allow businesses to offer differentiated services to customers with diverse needs. And the services must be marketable on both an economic and reliability basis, offering value to every player in the electricity value chain - from generator to customer.

The list of requirements goes on. Yet the technology infrastructure now exists to enable interactive load management. Thanks to recent advancements in technology, companies can "piggy back" off of existing pager, cell phone, Internet, and network infrastructures and create a closed-loop system that can respond to market incentives, transmit power and data across a type of Electrinet (though full realization of that concept must occur in the future), and even enable customers to use Web sites to participate in energy utilization decisions. Companies no longer need to invest in VHF radio towers or operate in the blind regarding the effectiveness of load management. And they can offer expanded choices to customers and then raise and lower prices accordingly.

The technology seems to be working. One company that has successfully implemented interactive load management at over 1 million residences and businesses is Cannon Technologies, Inc. (www.cannontech.com). Cannon uses low-cost, fully redundant, 900 MHz commercial paging systems to communicate between the Master Control Station and the remote load control receivers that are connected to air conditioners, water heaters, furnaces, water and irrigation pumps and other devices at residential and commercial locations around the country. According to Jim Losleben, Director of Business Development, Cannon has over 1 GW of load under control, and its system can control up to 4 billion loads simultaneously or individually. The technology allows fine control, billing, and reporting detail for customers because the system can talk to load control switches and programmable thermostats and even allow customers to control days they can be switched on and off. Participating energy companies can piggy back off of Cannon's communications infrastructure rather than invest in their own.

Are We Ready?
The question is, what is stopping today's deregulated electricity industry from leveraging today's load management technologies? According to Smith, energy companies need more "reliable information on which to base the design and implementation of load management programs." Deregulation requires that companies understand the relationship between electricity demand patterns and supply assets across the entire 8760-hour spectrum and from the perspective of multiple supply chain players. In addition, companies must research the revenue opportunities, target customers and create profiles, develop customer qualifications, and measure customer receptivity to both economic and reliability marketing messages. Customers must be educated on how to respond to real-time requests so that psychologically, they respond to energy load changes without fear. And finally, program operations must be implemented and tested under peak demand circumstances.

In addition, state regulations must pave the way for implementation of current technologies, despite their limitations. The California ISO, for example, currently requires that for each load that is controlled, energy companies must be able to measure the load reduction within a few seconds at their operation centers. Currently, measuring each kW of residential load is not economically feasible. Perhaps California should re-examine such rules in light of the larger benefits of interactive load management features available today.

Deregulation will help drive the continued evolution of load management technology - and Smith's Electrinet may well be a reality in the not-to-distant future. If so, the deregulated energy industry will have extraordinary opportunities to use load management to expand customer choices, increase profitability, and optimize resources.

This feature is based on an article by William M. Smith, "The Next Killer App: Load Management, Only This Time for Real," published in the August 2000 edition of Public Utilities Fortnightly, as well as information provided by Jim Losleben, Director of Business Development for Cannon Technologies, Inc.

Reprinted with the permission of Hoffman Publications, Inc. VerticalNet commissioned Hoffman Publications, Inc. (www.hoffmanpubs.com), to write this story, which originally appeared on February 23, 2001 on www.electricnet.com. Gwyn Finnell is a senior writer at Hoffman, which specializes in providing writing services to companies in the energy industry.

For more information contact:
Jim Losleben
Director of Business Development
Cannon Technologies, Inc.
1212 E. Wayzata Blvd.
Wayzata, MN 55391
jim@cannontech.com
651.686.9547