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The Demand Component of Electric Service: Linkages to Service Reliability and Need for Transparency

This white paper distinguishes the demand component of electric service (measured in kW's)—distinct from the energy component (measured in kWhr's)—and emphasizes the need for power demand cost transparency. Customers' experience with electric service reliability is described in terms of continuity of electric service, availability of service, and restoration time after service interruption. The paper discusses the connection between power demand and electric service reliability, as experienced from the end-use customer's perspective, and highlights ways that customers can contribute to overall system reliability through choices surrounding demand usage.
The alignment of retail demand response (DR) programs with wholesale markets is identified as a key enabler for affordable and sustainable electricity. Various options for alignment are identified, including dynamic pricing of energy usage, pricing of demand usage, triggering DR based on wholesale cost conditions, and demand subscription or other forms of billing customers based on their individual demand usage.
Although customers can adjust power demand, the paper identifies as problematic the current situation in which residential customers in the United States tend to regard electricity choices as pure energy choices because of a lack of transparency over the demand component of electric service on residential electricity bills. Until customer bills expose the demand component of electric service, customers will have difficulty discerning the value of demand responsive technologies, such as energy storage and home energy management systems, as well as other technologies applicable to managing power demand within customer premises. However, as more classes of customers recognize that electric service provision goes beyond the supply of energy, the retail marketplace may better recognize and value the supporting bulk assets, grid capacity, and ancillary services utilities also procure to ensure the reliable delivery of electric service enjoyed by customers.

Document Type:
White paper