Alcoa and McGraw Hill see big rewards in demand response

This summer's heat wave in Texas has put an historical strain on the state's electrical grid. Officials from the Public Utility Commission (PUC) and the Electric Reliability Council of Texas (ERCOT) have struggled to meet peak demand but could find significant help from demand response. 

Residential and small commercial customers provide the biggest opportunity for overall reductions in ERCOT, but the quickest return on demand response -- and the most financially savvy for electric customers -- might lie in the commercial and industrial markets today.  Fortunately, two great examples in other parts of the country show how Texas could be doing more in demand response.

Large commercial buildings typically face a number of hurdles when trying to upgrade their energy systems, particularly those with multiple tenants. In New York City, the Rockefeller Group Development Corporation saw these hurdles as an opportunity for a new approach to energy management.

By selling their demand reductions to the grid, in the manner proposed for ERCOT, they managed to reduce energy usage by 60,000 kWh per month and reduced peak demand by 1.4 MW. McGraw Hill now receives a net income (after payments for the financed upgrade) of $500,000 annually.

Rules in ERCOT might allow for this kind of savings already in some small ancillary services markets, so long as their metering system complies with ERCOT protocols.  Those ERCOT demand response markets are capped and already oversubscribed. As a result, developers who want to build smart buildings or upgrade older ones are looking to do business in other markets.

Next: Alcoa's novel approach to demand response