Integrating New Technologies
Into a Demand Response Ecosystem
The stakes are high for demand response programs.
As new technologies and devices are rapidly introduced to the market, a demand response ecosystem is emerging that provides utilities and program administrators with significant opportunities to enhance their customers’ experience, maximize benefits, and improve the effectiveness of programs.
ILLUME evaluated two water heater-based demand response pilots, revealing surprising findings about customer preferences and behavior. One pilot replaced electric resistance tank water heaters with communicating electric resistance or heat pump water heaters, while the other installed aftermarket controllers on customers’ existing electric resistance water heaters. The pilot evaluations shaped the creation of a demand response ecosystem framework based on ILLUME’s research and design principles, visually presented here to demonstrate the integration of new technologies into the system and offer guidance for stakeholders in optimizing decision-making.
The visualization is dynamic and clicking each node allows you to explore the interconnectedness of the demand response ecosystem.
Technology and Installation
Installing demand response-enabled technologies is a critical component of launching a pilot or program. This connection point within ILLUME’s framework considers the cost to install the technology and the customer’s experience during that installation.
While certain smart technologies are suitable for do-it-yourself (DIY) installation, ILLUME’s research reveals that incorporating demand response-enabled technologies into water heater equipment typically necessitates professional installation. There are two installation options for water heaters: 1) full-unit replacement (taking two to six hours), or 2) professionally installed after-market controllers (less than 60-minutes). A professional installation, regardless of how much time it takes, is more expensive than a DIY installation for the customer or the program.
While more costly, there are benefits to designing programs that require technology to be installed professionally. Customer-installed equipment carries the risk of incorrect or incomplete installations, which leads to customer disengagement and dissatisfaction.
The installation phase is a chance to engage customers, build trust, and enhance the overall program experience. The Education interconnection point of our framework delves into contractor and participant education.
Connectivity
To be a reliable demand response resource, the equipment needs to be connected and responsive. Using Wi-Fi for connectivity can pose challenges in rural areas without broadband internet, as well as any household experiencing a disruption in its internet service.
In a pilot comparing water heater controllers connected via cell networks versus Wi-Fi, ILLUME observed greater connectivity (although not flawless) in units connected through cell networks. Additionally, in another study on water heaters, we estimated that connectivity issues during certain events could have potentially reduced impacts by up to 25%.
If a program requires professional installation of the equipment or controller, then it’s important for the contractor to test connectivity and educate the homeowner or renter on what to do if the device disconnects from the internet or data network. If technology is expected to be installed by the homeowner or renter, then a series of communications and messages should guide them through connecting the device to Wi-Fi or a cell network even when the device is offline. Notifications from program implementers can also be a mechanism to communicate with program participants and confirm device connectivity.
Technology and Demand Impacts
Demand response programs are transforming the human-technology dynamic. Advancements in technology and emerging use cases are driving increased energy savings within residential demand response programs. Participants are empowered to actively manage their energy consumption and potentially realize financial benefits through flexible adjustments during event periods.
Residential demand response programs benefit from the inclusion of smart technologies like EV chargers and water heaters, particularly in regions with lower air conditioning prevalence or opportunities for technology integration to drive greater demand impacts. In ILLUME’s water heater demand response pilots, we observed modest impacts, averaging 0.15kW per household. While water heaters may not yield significant energy reductions, combining technologies and optimizing event periods in a demand response portfolio enhances demand impacts and mitigates post-event snapback. The Technology center point of our framework examines simulated load shapes by leveraging multiple connected technologies in two different demand response program scenarios.
To achieve program and portfolio objectives, program designers and implementers should assess the demand savings required and utilize simulation models within this framework.
Time of Events
Integrating any new technology into a demand response program portfolio indicates the need to carefully consider how and when people will interact with that technology. Residential peak heating and cooling usage is well documented, but other household equipment’s normal energy use may not necessarily coincide with system peaks.
In our water heater demand response pilots, we analyzed the load shape of water heater usage on typical summer and winter days using data from the water heater controllers. We observed that participants’ peak water heating during baseline periods occurred one to two hours later in the day compared to the demand response event periods in both seasons. This indicates that the timing of the demand response events aligned with periods when customers would experience minimal impact. As a result, customer satisfaction was higher during our pilot program.
To increase program impacts, program designers can stack technologies and scaffold event periods without risking customer dissatisfaction. The Technology center point of our framework illustrates how to strategize event timing and maximize impacts for a portfolio of programs in more detail.
Technology and Customer Experience
Customer behavior infuses every element of a program. Demand response events challenge participants to change their daily routines to shift their use of energy using equipment and their satisfaction is shaped by their experience in the program. Selecting cutting-edge technologies and cultivating trust with customers paves the way for program success.
Even the most hands-off demand response technologies will be impacted by customer convenience, comfort, preferences, and choices. Customers may express those preferences by overriding device settings or opting out during events. Keeping opt-out rates from other programs in mind, ILLUME’s water heater pilots were designed around the complexity of customer satisfaction versus setting higher demand reduction targets. For example, it was important that the water heater events did not deny program participants hot water, therefore if a household was about to run out of hot water the water heater would kick on regardless of whether an event period was in progress. This resulted in a somewhat lower demand reduction for the program, but customer satisfaction remained high and opt-out rates were lower than the industry average.
The Time of Event connection point in our framework further examines the circumstances that influence decisions to opt out of an event, override device preset controls, and how weather and event characteristics can motivate behavior.
Notifications
Demand response event notifications serve as a means to prepare customers and their homes for upcoming events. These communications present utilities and program administrators with an opportunity to re-engage participants, foster trust, and enhance participation. Our framework aids programs in striking a balance between accommodating customer preferences for participation control and minimizing the risk of customers opting out when demand reductions are necessary.
In our recent evaluations of water heater pilots, the utility provided advanced event notifications and an opt-out mechanism for customers. Remarkably, the opt-out rates were extremely low, and customers reported minimal disruptions to their routines during events. Interestingly, customers expressed a preference for receiving notifications even if they chose not to opt out. Allowing customers to confirm their participation enhanced their engagement and reinforced a sense of control over their homes.
Clear communication can encourage customer engagement and empowerment. Utilities can enhance messaging by explaining how event preparation works, the reasons behind it, and the potential energy usage and bill savings for participants. ILLUME’s research also highlights that customers appreciate receiving information about the overall grid impact resulting from their participation, fostering a sense of involvement in a larger cause. For a more comprehensive understanding, the Customer Experience and Behavior connection point examines optimizing the customer journey.
Technology and Event Preparation
One of the keys to demand response program success includes focusing on customer comfort and peace of mind. Event preparation, otherwise known as pre-conditioning in HVAC-based programs, refers to the practice of adjusting or preparing energy usage patterns in advance of a demand response event. By pre-conditioning energy usage, participants can optimize their response to demand response events, potentially achieving greater energy savings.
In ILLUME’s water heater pilots, we observed that pre-heating water had minimal impact on participants’ experiences and snapback effects. Given the additional complexity of implementing pre-heating measures, such as transmitting or receiving additional signals and incorporating a mixing valve for safety, we concluded that pre-heating water is not worthwhile. However, event preparation strategies will vary depending on the technology. Using this framework helps define the role of each technology in relation to the other nodes and whether event preparation is necessary.
Customers have different priorities during the event prep period. Stacking technologies within a demand response portfolio of programs can also reduce the snapback and shift load off-peak as illustrated in the scenarios within the Technology center point of this framework.
Education
Education and comprehension among customers and contractors play a crucial role in the success of demand response programs and events. By ensuring a clear understanding of the program’s value, objectives, and operational procedures, both customers and contractors can maximize the effectiveness of the program, leading to greater impacts and outcomes.
Contractors are key partners in the framework ecosystem and rely on utilities for up-to-date information about their demand-side management programs, technologies, sales coaching, and technical consultations. Through regular training opportunities, contractors can extend the utility and its implementation team’s reach.
It’s important to prepare contractors to answer questions from homeowners and renters or direct them to a program representative to avoid confusion or misinformation. In the water heater pilots, ILLUME conducted, many homeowners and renters wanted clarification on how the utility would call a demand response event and if the utility could control their water heater outside of an event period. The contractors were educated and prepared for these questions and left behind informational pamphlets on the pilot for customers.
As further explained in the Installation Costs and Experience connection point of our framework, technology that requires professional installation incurs higher costs, but it also provides an opportunity for an educational touchpoint that can also improve customer experience.
Stacking Technologies for Optimization
The role of demand response in the residential sector is evolving due to technological advancements, customer experience (and interest), and the further proliferation of distributed energy resources connecting to the grid throughout the United States. The opportunities for demand response portfolios go beyond peak load shaving and shifting as new value streams are being created for the utility and its customers. The impact of each technology added to a demand response portfolio may vary. Therefore, the way in which each technology is utilized within the portfolio is a crucial consideration that lies at the heart of our framework.
The following scenarios showcase the interplay of factors within a demand response portfolio, focusing on two water heater demand response pilots. These pilots involved multiple stacked technologies and use data from our water heater pilots along with supplementary data sources. We generated visualizations to simulate load shapes across 1,000 average customer homes in two distinct program design scenarios. Our simulations incorporate forecasted participation rates and evaluation-verified-per-household impacts.
Scenario 1: Maximize Impacts
In Scenario 1, we illustrate how a demand response program portfolio can maximize demand impacts during its peak demand period by simultaneously drawing on resources from three technologies: thermostats, water heaters, and electric vehicles (EVs).
Scenario 2: Strategize Timing
In Scenario 2, we model how a demand response program can scaffold event periods for the same three technologies (smart thermostats, water heaters, and EVs) to reduce demand throughout the day and mitigate post-event snapbacks.
Maximize Impacts
This demand response program portfolio includes 1,000 homes participating in a variety of technologies, including thermostats, water heaters, and electric vehicles. This simulation is designed to maximize impacts and reduce demand during the system’s summer peak period.
Strategize Timing
Scenario 2 is designed to stack demand response events of multiple technologies over a longer period of time. The peak demand for residential air conditioning, water heating, and electric vehicle (EV) charging occurs at different times during the afternoon and evening. This scenario demonstrates how scaffolding event periods will allow the utility to mitigate pre-cooling and snapback effects during the system’s peak demand hour.
