A Glossary of CRE & PropTech Terms
Energy consumption has been rising rapidly in recent years, while, at the same time, variability in demand and the frequency of extreme weather events have been increasing. The confluence of these phenomena makes it extremely difficult to distribute energy to the right places, at the right times, and in the right quantity. As a result, utilities are increasingly promoting Demand Response programs aimed at curbing peak demand volumes. So what’s the story behind DRs and how do they work?
History of DRs
Demand Response programs (DRs) emerged during the 1970’s when the U.S. was going through an energy crisis. At the time, energy shortages were becoming too frequent, forcing lawmakers to look for ways to avoid shortages and blackouts. The initial DR programs were very rudimentary; during peak energy demand periods, utilities could switch off
“high-energy” appliances such as an air conditioning unit. While rudimentary, they allowed the government to avoid building new power plants and prevent power failures.
As the 80’s rolled in, DR programs switched to “time-of-use” pricing, meaning utility pricing was highest during peak hours, incentivizing consumers to use energy at other times for a lower rate while flattening out the demand curve to ease the strain on the power grids. Over the following two decades, technology would allow utilities to gain precise readings of consumption by consumers through smart meters, allowing power suppliers to communicate directly with heavy-usage consumers. Currently, with smart grids, utilities now have control over dynamic pricing, real-time energy consumption monitoring, and automated demand response, automatically adjusting power consumption.
Why it Matters?
DRs offer incentives to property owners and building residents for agreeing to decrease, or re-allocate their energy consumption.
Take capacity payments for instance. Property owners that enroll themselves in DRs can be paid just for enrolling themselves as long as they agree to reduce energy when requested. One way you can do this is by installing a smart thermostat, and agreeing to allow the utility to control the temperature at peak hours. There are also credit or discount opportunities for consumers that keep consumption low. This can be attractive to building owners since they naturally want to keep expenses down.
Energy demand is skyrocketing—and power grids are feeling the pressure. From reducing energy costs to earning capacity payments just for being enrolled, DRs make properties more efficient and profitable. As we look ahead to a more energy-conscious future, DR programs aren’t just good for the grid—they’re great for your portfolio too.
