Does the average utility customer really know the difference between energy efficiency and demand response? 

“No one—if they thought about it—would go one day to customer Joe to talk about energy efficiency and then come back the next to talk about demand response,” said Dan Delurey, the executive director at the Association for Demand Response and Smart Grid (ADS).

To the typical customer, energy efficiency and demand response are effectively the same thing—so why aren’t they being integrated? That's the question Delurey is posing. In an effort to break down the barriers, Delurey and ADS are bringing the smart grid and energy efficiency communities together at the National Summit on Integrating Energy Efficiency and Smart Grid on October 15-16, 2013 in Washington, D.C.  

Utility Dive spoke with Delurey about how the silo effect between energy efficiency and smart grid came about, why integration needs to happen and how we can achieve it. Here’s what he had to say.
 

THE SILO EFFECT

When demand response first hit the energy scene, Dan Delurey never expected there would be a silo effect. “I always looked at demand response and saw it as a natural twin to energy efficiency,” he said.

The energy efficiency and environment groups were skeptical, Delurey explained. They thought it was a utility load-building scam, they saw meters as something that did not in and of itself save electricity and they believed demand response was all about using backup generators that were unclean and inefficient.

On the utility side, meanwhile, demand response and smart grid represented intimidating levels of investment. “If you consider this to be a zero sum game,” Delurey said, “then all of a sudden you had other new things for which available funds might be spent on.” As a result, there was very little meshing of traditional efficiency with smart grid and demand response. 

The silo effect is perhaps best exemplified in federal legislation, which typically has one section for energy efficiency and another for smart grid and demand response. Another example is the Department of Energy, which has one assistant secretary for energy efficiency and another for demand response.

“That’s just the way it’s been. It’s institutional inertia,” Delurey said. “It’s hard to point to any place where integration is happening. And it’s the policy, the programs and the delivery models that are holding things up.”
 

COMING SOON: INTEGRATION

The reason for integration is simple. “There’s just plain more savings to be wrung out of a building if you use demand response and smart grid technologies on top of what’s already being done in energy efficiency,” Delurey explained. “But whenever there’s change, there is always someone who wants it and wants it really fast, and there’s also someone who is being changed, whose automatic knee-jerk reaction is: ‘Don’t change anything!’”

For utilities, the big problem with energy efficiency is that energy efficiency inherently reduces energy consumption and thus their revenue stream. Of course, energy efficiency remains a least-cost alternative to building new power plants and while there are decoupled markets and efficiency incentives, utility business models largely still stand in the way of integration.

“When I think about new business models and regulatory models, it’s not as though the utilities can’t change. In fact, they’re going to have to change,” Delurey said. “I think it’s easy to say the regulatory model needs to change before the business model. That’s what a utility would say. But it’s not either one. It’s got to be everybody doing it together.”

Utilities shouldn’t resist integration, Delurey argues, but try to make it happen with potential partnerships with new players such as information technology and demand response companies because they “value the relationships that utilities have with their customers.”

“It’s really not that big of a lift to get everyone thinking in an integrated manner,” Delurey said, "and the National Summit is intended to try and get everybody together on this idea.”
 

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