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The Off Switch

Rather than building new power plants just to meet peak electricity demand on hot summer afternoons, why not just persuade people and companies to use less electricity? "Demand response" is quickly taking hold in Texas.

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On the hottest summer afternoons, some appliances start behaving a little differently around Texas.

At the Hyatt Regency Hill Country Resort and Spa in San Antonio, the lobby lights get dimmer. In Austin, as many as 80,000 home air-conditioners begin cycling on and off at the local utility's behest, as do 32,000 in San Antonio. SeaWorld in San Antonio reduces the amount of electricity powering water-filtration systems for its animal exhibits.

These adjustments, rare and often imperceptible, are part of a new effort to manage electricity more wisely. The theory goes like this: Rather than building expensive new power plants that would get turned on only during some late-summer afternoons, when electricity usage peaks, why not just persuade people to use a little less electricity during those critical hours?

This concept, which is spreading across Texas, is known — inelegantly — as "demand response." It is primed to become more important in the years ahead: The Electric Reliability Council of Texas, which operates grids in Texas, forecasts that Texas peak demand will increase by 10 percent between now and 2015, as the state's population and economy continue to grow. Utilities either give large customers such as SeaWorld a credit on their electricity bills for participating or, in the case of home air-conditioners, pay for a new programmable thermostat, worth $200 to $300, and install it for free. Homeowners don't get any rate break for participating, and they probably won't save enough power on the few afternoons when air-conditioning cycling occurs to make a big difference in their bills. However, the new thermostat, with its sophisticated settings, can (according to Austin Energy) help homeowners save up to 20 percent on their bills.

Around the country, about half of electric utilities have some type of demand response program, estimates Steve Nadel, executive director of the American Council for an Energy-Efficient Economy, a national energy-efficiency advocacy group. In Texas, they're needed because on a typical summer day, power use at 5 p.m. is a whopping 50 percent higher than it is at 9 a.m.

"We get a few [complaints] on occasion," says Bruce Evans, the director of customer solutions and delivery for CPS Energy, the San Antonio utility that operates the air-conditioning program. Mostly, however, things run smoothly. "Even last summer, which was 100 degree day after day, I didn't really notice any problem," says Michael Kjar, a San Antonio resident who participates in the program. Last year, CPS's air-conditioning cycling kicked in only on 20 days, and this year — which has been cooler — it has so far been activated only three times, according to Evans. Only about one out of 20 customers participates in the program, but Evans hopes to recruit more.

More power companies around Texas are exploring demand response programs. (Unfortunately, Texas' much-ballyhooed wind power produces well below its potential at peak hours). Austin, like San Antonio, wants to expand its air-conditioning program; flyers appeared on the doors of some Austin houses earlier this month advertising the program.

The Lower Colorado River Authority, which supplies power for a number of municipal utilities and rural cooperatives, is developing pilot projects with the San Marcos Electric Utility, Bluebonnet Electric Cooperative and Pedernales Electric Cooperative that will test demand response, among other new tools, according to Ti Mougne, a demand management analyst at the LCRA. The testing will involve cycling air-conditioners, water heaters and pool pumps on and off. If all goes well, Mougne says, a broad demand-management plan, which would also include energy efficiency and smart-grid technologies, will be implemented in seven to 10 years. (Mougne could not give an estimate of the anticipated costs.)

In the Panhandle, the Golden Spread Electric Cooperative is looking into demand-response programs involving irrigation, says general manager Mark Swirtz. Farmers use a tremendous amount of energy 24 hours a day to pump water up from their wells during the summer; this accounts for about 30 percent of the co-op's electric load. With help from a $20 million smart-grid grant from the federal government, Golden Spread will spend the next year exploring a possible demand-response program for irrigators.

Irrigation programs have been used extensively in some farm-heavy states: In Idaho, for example, Idaho Power can now shave up to 7.8 percent off its peak by paying farmers to turn off their pumps at peak times. In Texas, Hondo-based Medina Electric Cooperative has been doing this since 1984 and may have the only irrigation demand-response program in the state. Almost all of its farmers participate, meaning the co-op turns off their pumps some afternoons every summer in exchange for a hefty discount on their bill. The program costs $1 million a year, according to Brian Bell, a co-op representative, but on the days it kicks in, demand for peak power — which is expensive — drops by an average of 15 percent.

As Texas pursues demand-response programs, one challenge is the makeup of ERCOT, the grid operator, notes Suzi McClellan, the state affairs director for Good Company Associates, an Austin-based energy-efficiency and renewables consulting firm whose clients include two national companies that specialize in demand response. Electricity generation companies — coal and gas plant operators, for example — and their allies are strongly represented on ERCOT's board, and also many of its committees. The generators get very high prices for their electricity when demand is strong and may therefore take a dim view of peak-saving programs (perhaps especially in the sluggish economy, which has already helped to keep down electricity prices).

Enormous electricity users, like refineries and chemical plants, can offer savings that help ERCOT maintain reliability. ERCOT does not, however, allow demand-response "aggregators" to bid into the market to offer power reductions from slightly smaller electricity users, says McClellan (although they can help out the grid in emergencies). These aggregators, which operate nationally, pay other companies like Wal-Mart or Sprint-Nextel to be available to turn out a few lights in their stores, or turn off certain machines, for a few hours if the grid needs assistance. In turn, the aggregators get paid by grid groups. Two major national aggregators, Enernoc and CPower, are Good Company clients.

The Federal Energy Regulatory Commission — which regulates electricity markets in every state but Texas — has taken an active role in encouraging greater demand-response efforts from utilities. Last month, FERC came out with a report titled a "National Action Plan on Demand Response."

McClellan says state rules for energy efficiency could also do more to encourage demand-response programs. Electricity providers are also required to offset 20 percent of their growth in demand with energy-efficiency measures. Under a proposal before the Public Utility Commission, that number would increase. But under these rules, demand response, a close cousin of energy efficiency, is "really only used after [utilities] reach their goal, to maximize their bonus," McClellan says. "So it's not used as much as it could be in those programs."

Utility representatives say another key innovation will be the "smart grid." Once ratepayers get time-of-use pricing plans — with electricity more costly in the afternoon and cheaper at night in the afternoon — they should have an additional incentive to reduce peak demand use.

The entire concept of demand-response raises the question: if lights can be dimmed and air-conditioning cycled in the late afternoons without most people noticing or caring, can't some of these savings happen throughout the day?

"It leads our customers to ask that natural question," says Gregg Dixon, a senior vice president with Enernoc, adding, "They begin to realize that some of that demand-response ought to be permanent efficiency."

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