Integrated Demand Side Management Gathers Steam Through Targeted Approaches

Integrated demand-side management (IDSM) has been a topic among DSM professionals and utilities in the United States for a decade. However, efforts to integrate energy efficiency and demand response (DR) in utility programs thus far has been challenging, and little progress has been made. Traditionally, energy efficiency and DR have been siloed within utilities, with misaligned goals and barriers to transferring funds between programs. Yet, the integration of DSM programs has become increasingly popular, especially in places such as California, where the combination of these programs has been used as a fundamental part of the state’s energy planning and strategy.

There is no standard definition of IDSM at this point in time, but the most common definition combines energy efficiency and DR technologies. There is also an aspect of integrating electric and gas DSM programs. More recently, integration has evolved to include other resources such as energy storage, solar, and fossil fuel-based distributed generation. The key drivers for advancing IDSM include technical, policy, and economic factors, such as increasing DSM goals and regulatory pressures, program cost reduction potential, targeted DSM, grid modernization, and smart thermostats.

Barriers to Overcome

However, the slow rate of IDSM program development points to a number of barriers to be overcome. These include utility organizational structures and budgets that are siloed and hard to cross-promote; energy audits that don’t consider both types of measures; cost-effectiveness and measurement and verification challenges with accounting for both types of benefits and potential double-counting; vendor conflicts of interest; and niche, early-adopter customer markets that may not accurately reflect the mass market potential for these offerings.

The move toward targeting DSM to specific distribution-level areas with high load growth or infrastructure constraints appears to be a growing trend. Historically, DSM programs were administered state- or utility-territorywide as a means to reduce overall system energy usage. As the electric grid has aged and general load growth has slowed due to economic conditions and the success of large-scale DSM programs, a more discreet form of DSM may be more effective and efficient. Even if systemwide load growth slows, many utilities will still have areas on their network with higher growth rates due to residential or commercial development.

An all-of-the-above DSM approach is valuable in such cases, since it may be unrealistic to have separate energy efficiency and DR vendors and marketing efforts to a small geographic territory. A combined effort makes sense so as to not overload customers with multiple messages. The concept of a non-wires alternative (NWA) has entered the lexicon, where a utility will look at other means of meeting its reliability requirements at a lower cost than a traditional distribution capital expenditure upgrade. Utilities such as Con Edison, National Grid, and Central Hudson have recently initiated such targeted DSM programs to address acute system needs.

Guidehouse Insights’ new report, Integrated Demand Side Management, covers these topics and case studies in addition to forecasting of future growth of IDSM. As utility models, policies, and technologies evolve, the integration of various resources will only increase in practice and importance.