Powering Strong Communities
Energy Efficiency

Demand Response: Are Residential Customers Ready to Participate?

Demand response programs that incentivize customers to reduce load or shift load usage to off-peak hours can help utilities balance the grid with fast-ramping flexibility and defer system investments. The catch is this: Utilities can’t implement demand response plans alone. Customers must participate, but will they? Utility professionals say customers will play their part, and there are proven ways to boost participation.  

Baking It Into the Rate

Ava Community Energy, a community choice aggregation organization in northern California, supplies clean power to 683,000 customers, and its 615,000 residential customers were moved to time-of-use rates in 2021. This opt-out option follows the format imposed on the Golden State’s three biggest investor-owned utilities, which were mandated by the state to move all residential customers into TOU rates by 2019. Today, 70% of Ava’s residential customers remain on the TOU rate.

JP Ross, vice president of local development, electrification and innovation, said this is because people in the communities he serves are environmentally conscious and savvy about time-based rates, but other demand response rates are more complicated and less likely to gain traction.

For instance, the CCA piloted commercial critical peak pricing in 2019, where Ava Community Energy paid customers to reduce load up to eight days per year. “It had limited participation, and it’s hard to baseline a customer’s responsiveness to those programs,” Ross explained. “We did not continue that program.”

The CCA also is now looking at real-time pricing as an option, and Ross expects it to appeal more to aggregators or commercial customers than residential ones. It could, however, be paired with things like Nest thermostats that could automatically respond to shifts in wholesale power costs.

Taking a Load Off

A Nest thermostat program that supports peak load shedding has been a winner for the Electric Division of Westerville, Ohio. Utility Director Chris Monacelli explained that the program incentivizes customers with a one-time rebate to enroll. The program sends a pre-cooling prompt to thermostats when summer temperatures are expected to spike demand. That allows the public power utility to cycle thermostats and household cooling off during peak events.

“We have over 1,000 of our 15,000 residential customers enrolled in this program,” Monacelli said. “It nets us more than a megawatt of peak reduction during each event, and that’s almost 1% of our peak consumption. That’s fantastic for a program like this.”

Similar programs are available to members of Massachusetts Municipal Wholesale Electric Company, a joint action agency. At Shrewsbury Electric & Cable Operations, for example, 1.56% of the utility’s 16,000 accounts are enrolled in MMWEC’s Connected Homes program, which can call a peak event and shed load of connected devices up to five times per month.

The program allows customers to bring their own smart thermostats, water heaters, electric vehicle chargers, mini-split controllers, or batteries, explained Kate Roy, MMWEC director of communications and external affairs. Many enrolled customers have more than one device connected, and Roy said customers have the chance to opt out of each event by responding to a text or email with an opt-out button in it.

“More than 70% participate in a given event under normal circumstances,” noted Zoe Eckert, senior manager of sustainable energy programs and policy for MMWEC. “Those who sign up are interested in receiving the incentives. To do so, they need to participate in all events in a given month.”

Results in Shrewsbury are particularly high. With 251 households participating in a smart devices program, the utility shed 493 kilowatts per event — saving about $91,000 in 2023 — and avoided 4.5 tons of carbon emissions. In turn, customers received $5,895 in direct incentives.

New Technology, New Behaviors

Although Monacelli noted that some people still feel somewhat uncomfortable about handing off control of a home device to the utility, Rebecca Keane, Shrewsbury’s director of integrated resources and customer experience, sees some of that apprehension declining. “When I started in this field, there was a lot of mistrust of direct load control and allowing utilities into the home. I don’t see it as much anymore,” she said. Rather, she’s hearing concerns from people in her Massachusetts town about the performance of new technology, such as heat pumps in cold weather.

Chris Roy, general manager of SELCO, said it’s important to educate customers, and one theme his team drives home is that things like EVs and heat pumps are “superior technology” that can help consumers save in ways beyond energy use.

“Adapting to range differences with an EV is an adjustment, but at the same time, you’re not going to gas stations. There are savings there. And you don’t have spark plugs or oil changes. The only time I bring my EV to a garage is for the mandatory state inspection,” he said.

New England households still have a lot of oil-based furnaces, Roy added. “With a heat pump, you just set it, and it runs,” he continued. “You’re not on a maintenance plan. You don’t have to buy supplemental heat insurance to cover spills and fires.”

In Ohio, Westerville gets nearly 100% compliance with Power Up, its EV-charging program designed to get EV owners to charge their vehicles during off-peak hours. “We offer an incentive of $300 upfront as well as $0.04 off per kilowatt-hour for customers to charge at night,” Monacelli said. “We estimate we’ve got about 400 EVs in our footprint, 129 applications in that program, and more than 50 enrolled. That saves us another half a megawatt in reduction right there.”

That’s impressive for a demand response program that happens daily. So is Ava Energy’s two-year-old Resilient Home program, which is available to residential customers with solar plus storage installations. “The vast majority of our 60,000 residential PV solar systems installed are standalone solar,” Ross said. Still, the CCA now has 1,200 residential solar plus storage systems participating in a virtual power plant that leverages household storage four hours a day, every day.

Ross noted that participation remains high, but the CCA is still looking to change the incentive from one that pays once upfront to one that pays for ongoing participation. “If you provide a customer only upfront incentive and then they opt out later on, you have no recourse,” he said.

A Helpful Nudge

All of these programs indicate that customers who try demand response stick with it and deliver savings.

What about the customers who aren’t engaged yet? For utilities that want to bring customers into such programs, the Smart Energy Consumer Collaborative, a nonprofit research organization, has customer segmentation insights.

According to Jason McGrade, SECC deputy director, recent research shows a shift in consumers’ attention to environmental concerns. McGrade said the environment used to be a differentiation between customer segments, with some customers driven to demand response programs largely to help the planet. “It’s becoming table stakes for consumers now,” he added. “The vast majority of consumers have environmental concerns. Now the big motivators are related to technology and willingness to engage with the utility.”

SECC segments consumers into five buckets:

  • Green pioneers represent what SECC calls “the sweet spot” for targeted demand response marketing. They understand the technology and have made the connection between their own electric usage and grid impact. Among the segments, these are the top earners and top electricity consumers.
  • Connected pragmatists are moderately tech-savvy but not concerned about the impact of their electricity usage. McGrade says hurdles exist in getting them engaged. One is that they tend to be young and renters. He also says they might not have awareness of utility programs, but they’re a group worth cultivating, particularly with social media.
  • Simply sustainable consumers would like to save energy, but they’re technology averse.
  • Trusting traditionalists understand the link between their energy use and the environment, but they don’t realize what their utilities could offer. McGrade said traditionalists and sustainable consumers care about control and bill predictability, so they would likely respond to things like TOU rates. “These people would take part in direct behavioral changes,” he explained. With them, traditional media, email, and bill inserts are good bets.
  • Comfort seekers are motivated by home comfort but unlikely to engage with a utility or buy technology to shift energy use. “These are not necessarily the folks that you want to spend your marketing dollars targeting,” McGrade noted.

A robust marketing effort is key.

MMWEC serves multiple utilities, and, Roy said, “We can see that utilities with proactive marketing get much higher participation levels than those that aren’t marketing as actively.”

“Customers like programs that help them save money,” said Ross. “By and large, they’re also not interested in spending a lot of time on managing their energy bills, which is why it’s really important to have offerings out there that allow for low effort on the part of customers.” He pointed to things like thermostat programs where the utility manages devices for the customers to help them reduce their energy bills.

Monacelli noted that Westerville highlights the added advantage of being a public power provider. “We tell people we’re saving money and passing those savings on to customers.”

Some utility leaders pointed out the parallels to how other companies turn marketing messages into a form of service. “Consumers get recommendations on Netflix and Amazon, so they’re used to getting personalized suggestions from companies,” McGrade said. “Consumers expect their utility to tell them where they can save energy and money.”

So, go ahead: Give your customers a nudge.

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