Realizing the "Full Value" of Demand Response:  A Q&A with DR Pioneer Luke McAuliffe

A: I’ve been in the demand response space for 5 years now and got my start in New York, which is the oldest demand response market in the country. I’ve had the opportunity to sell many different types of demand response programs, including emergency, economic and synchronized reserve programs.

A lot has changed in the last five years. For my first few years in the space, 50:50 splits, where the demand response provider shared 50% of the curtailment payment with the customer, were the norm. That’s because at the time most customers simply viewed demand response as “found money.” But now demand response is becoming a commodity, and so many more demand response providers are in the space competing for business – both good for the customer’s wallet.

One last change of note: Customer awareness about demand response has increased significantly. But there is still a ways to go.

A couple things. First, customers should realize that demand response markets are in flux and quite complex. It’s important to take time to understand the value demand response participation can afford and work with someone who knows the markets and programs well and will act with their best interests in mind.

Second, for those customers willing to participate in demand response programs, I’d encourage them initially to enroll in the easiest program first – emergency demand response – BUT also actively investigate and be open to pursuing synchronous reserves and, definitely, economic demand response if these programs are available to them.

In my experience, there are so many companies and institutions that could effectively participate in demand response programs but just aren’t. They aren’t for a variety of reasons, but these often boil down to top decision makers not prioritizing their organization’s participation or simply not knowing enough about demand response to be comfortable participating. We also know that many facility managers balk at recommending demand response out of fear that they will be unable to meet the terms of the curtailment agreement. The unfortunate thing here is that this fear is somewhat misplaced: the consequences for not meeting curtailment requirements typically are not severe. In both cases – with top-down decision making and facility manager worries – education is the key remedy. That is the case, too, for many current DR participants who only participate in emergency programs. There is more out there, and taking the time to learn about these additional programs can double or even triple their Demand Response revenue and help potentially lower their energy costs.

I’ve seen the demand response market move a long way from where it started, and I strongly believe demand response is becoming a commodity. With that, customers are rightly demanding a higher percentage of the curtailment proceeds for something that is fundamentally their asset. World Energy understands this market evolution and knows how to transact in energy commodity markets in a way that greatly benefits the customer. I’m at World Energy because the Company is on the right side of this equation and sees demand response as just one of the tools customers can use to manage energy cost.

I’ll be discussing all these issues, with an emphasis on helping participants better understand their demand response opportunity and how to extract its “full value.” I’m looking forward to it! 

Savings to Savor:  City of Millville, NJ

At World Energy Solutions, we work to turn the complexity of energy management into real bottom-line impacts for the clients we serve. This past month, we were delighted to see how one such customer, the City of Millville, NJ, used the savings it gained from procuring electricity through World Energy to give its citizens something they could really savor: an avoided tax hike. The City’s success was spotted by David Wyld, Director of the Reverse Auction Research Center, who writes about it here. Congratulations, City of Millville!

Market Resources

Rate-cap expirations are spreading across Pennsylvania. By the close of 2010, the entire state will be open to competition. Watch our webinars to learn what you can expect in your utility service territory, along with strategies you can implement now to mitigate your energy price risk.

~ Russell Williams,
Executive Manager and
Chief Engineer of the
Chester Water Authority