California Utilities’ Residential Demand Response Expansion Challenges

Plans by California’s three dominant investor-owned utilities to expand their residential demand response (DR) programs are hampered by a lack of customer awareness, low adoption rates of smart thermostats and program narrowness, according to a recent market survey for Southern California Edison.

These programs would help meet growing reliability threats from climate crisis-exacerbated extreme weather events by rewarding utility customers for shifting home energy use to support grid needs.

The biggest barriers to participation in DR programs “are low awareness and lack of smart thermostat ownership,” independent consultant <a href="https://edisonintl.sharepoint.com/teams/Public/regpublic/Regulatory%20Documents/Forms/AllItems.aspx?id=%2Fteams%2FPublic%2Fregpublic%2FRegulatory%20Documents%2FPD%2FCPUC%2F21369%2FA1701012%20et%20al%2DSCE%20DR%20Process%20Evaluation%20Reports%20%28SEP%29%2DPublic%2Epdf&parent=%2Fteams%2FPublic%2Fregpublic%2FRegulatory%20Documents%2FPD%2FCPUC%2F21369&p=true&ga=1" target="_blank" rel="noreferrer noopener">TRC said in a March report . When customers understand the programs and technology, their attitudes shift.

Strategies for notifying customers of DR events and for helping them learn “to prepare for or respond to” events also need improvement, TRC said.

Finally, TRC found that 58% of customers in SCE’s DR programs would like to add smart water heaters, 56% want to add solar battery systems, and 52% are interested in EV chargers. It said SCE should “consider expanding” its DR program to include those technologies.

The “most important finding” is that a majority of customers support “expanding the program to include other types of smart technologies,” said V. John White, Center for Energy Efficiency and Renewable Technologies Executive Director.

Private sector residential DR aggregators made significant contributions during California’s August 2020 outages. State leader OhmConnect reduced total energy usage by almost one GWh from Aug. 13 to Aug. 20, 2020, CEO Cisco DeVries told Current. The <a href="https://edisonintl.sharepoint.com/teams/Public/regpublic/Regulatory%20Documents/Forms/AllItems.aspx?id=%2Fteams%2FPublic%2Fregpublic%2FRegulatory%20Documents%2FPD%2FCPUC%2F21369%2FA1701012%20et%20al%2DSCE%20DR%20Process%20Evaluation%20Reports%20%28SEP%29%2DPublic%2Epdf&parent=%2Fteams%2FPublic%2Fregpublic%2FRegulatory%20Documents%2FPD%2FCPUC%2F21369&p=true&ga=1" target="_blank" rel="noreferrer noopener">independent market survey for SCE describes how the IOU’s current DR program can be expanded to match private sector performance.

During the outages, OhmConnet’s customers earned over $1.3 million through 739,000 adjustments to devices and appliances, including 580,000 done automatically with only 20 minutes notice, and “without a single failure in dispatch,” DeVries reported .

In response to the outages, the California Public Utilities Commission Emergency Reliability Rulemaking's Phase 2 decision ( D.21-12-015 ) enlarged the IOUs’ procurement and cost recovery latitude for summer 2022 residential DR programs. It also expanded the programs’ capabilities to protect reliability by including electric vehicles, batteries, and new customer-owned smart devices.

The September 2022 statewide shortfall may be 200 MW or 2,400 MW, CEC said. DR rewards customers for voluntarily and temporarily reducing usage and gives IOUs the flexibility to meet varying needs.

The IOUs respond

Residential DR’s unique value to IOUs is shown in a January 2022 California Energy Commission forecast , according to a Pacific Gas and Electric May 2 CPUC filing . DR enhances IOUs’ ability to meet “the evolving complexities of electric grid needs,” PG&E acknowledged in proposing to double its DR portfolio from 2022’s 495 MW to over 1,000 MW in 2027.

SCE and San Diego Gas & Electric echoed that same commitment. Innovative DR offerings can help SDG&E “work toward the state’s climate goals” and toward “a stronger more integrated and reliable grid of the future,” said its filing , which did not specify an installed capacity target for the $156.6 million in cost recovery it requested between 2024 and 2027.

SCE will build “an automated, technology agnostic, ‘mass market’” program for residential customer participation and new technologies, according to its filed proposal . It will provide 819 MW of “average peak” capacity between 2023 and 2027 “at an estimated cost of $942 million.”

TRC recommended that SCE launch new pilots to improve customer awareness of DR programs. They will make it “easier for customers to understand and participate,” which “is key to using residential demand response to increase reliability and enable the transportation and building electrification,” Director of Advanced Energy Solutions Chanel Parsons told Current .

A private sector pioneer

Many of the proposed IOU solutions were pioneered by OhmConnect over seven years of building technology and customer engagement capabilities, DeVries said. Flexible DR “is the only way to solve the blackout issue in the near term without fossil fuels,” and “we can now do it at scale, in real time, and in measurable and predictable ways.”

Its California customers answered calls over 300 days in 2021 with increasing automation capabilities for nearly 250,000 devices and appliances, including thermostats, batteries, and home car chargers, DeVries said. It is targeting 600 MW of California DR capability for summer 2022, he added.

The concept of residential customer DR programs has existed for decades, but traditional utility approaches produced “mediocre results,” DeVries said. Many regulators and utility leaders concluded residential DR was unreliable, but the CPUC ruling “confirmed it can be a significant flexible load with the use of OhmConnect’s approach to customer engagement,” he added.

The new filings show the utilities are becoming more consumer-oriented and working to piece together their “patchwork” of underperforming DR programs, DeVries observed.

SCE is making ambitious changes to its three current residential DR programs that reward smart thermostat owners and controllable air conditioner owners for helping flatten peak demand , Parsons told Current . By August, it expects over 1.6 million residential customers to be in the three programs, allowing about 210 MW of peak demand reduction, Parsons added.

But its filing describes OhmConnect-like “next generation” residential DR with a streamlined single incentive program for customers who allow utility access to “any smart device, smart service, smart vehicle, or smart appliance,” Parsons said. It will support SCE’s 2027 DR program peak demand reduction target of 800+ MWs while helping lower customer bills and meet state policy goals, she added.

As recommended in <a href="https://edisonintl.sharepoint.com/teams/Public/regpublic/Regulatory%20Documents/Forms/AllItems.aspx?id=%2Fteams%2FPublic%2Fregpublic%2FRegulatory%20Documents%2FPD%2FCPUC%2F21369%2FA1701012%20et%20al%2DSCE%20DR%20Process%20Evaluation%20Reports%20%28SEP%29%2DPublic%2Epdf&parent=%2Fteams%2FPublic%2Fregpublic%2FRegulatory%20Documents%2FPD%2FCPUC%2F21369&p=true&ga=1" target="_blank" rel="noreferrer noopener">TRC’s March report , new SCE pilots will seek to improve customer awareness of DR programs, Parsons added. Making it easier for customers to understand and participate “is key to using residential demand response to increase reliability” with the challenges from rapidly growing transportation and building electrification, she said.

TRC also found that awareness of the ability to opt out of events if necessary is especially lacking. Awareness that “SCE will not control customers’ thermostats directly” and that they can “lower their thermostats at any point, if an event becomes uncomfortable” is important, TRC stressed.

Huge potential

SCE is planning to “maximize the simplicity and benefits” of DR programs for all its customers in what it sees as a “multi-device, device-agnostic future” of smart technologies, Parsons said.

It is a future that should also include private sector providers, DeVries said.

“The CPUC directed utilities to use OhmConnect’s approach, with ratepayers subsidizing their programs,” he said. “Private sector providers should either have comparable subsidies or a health insurance-like annual open enrollment allowing customers to choose a demand response provider from all offerings. The market potential is huge, and both utility and private providers can be successful."