Top 5 Things to Consider in a Demand Response Provider
Nov 20, 2014

Not all providers for Demand Response are the same. There are a variety of terms and conditions which can easily affect how beneficial a Demand Response program really is for your facility. Here are 5 things to look for when choosing a provider:

#1 Payment Rate

Demand Response providers coordinate and manage your load enrollment with the RTO, (which requires membership, bonding, etc.) and take part of your payment as a fee for this service. Fees vary by provider and will affect your take-home revenue. There may also be penalties for non-performance, and differences in how payments are made if no events are called.

#2 Contract Term

Typical DR contract terms are for 5 years, with automatic renewals. Because payments for event performance are calculated using a baseline (your peak load contribution figure from the previous year) compared to your load during the actual event, your future plans for changing operations, equipment or the physical building will definitely impact your payments.

For example, what happens if you’ve built on an addition? Your peak load the previous year was 400 kW, but the addition increased this to 600 kW. An event is called and you reduce demand by 200 kW, bringing your demand down to 400 kW during the event. You expect to get paid for this reduction, but the provider doesn’t see this as a reduction at all (400 kW was your baseline, and your load during the event was still the 400 kW). All of this should be considered when entering into a DR contract.

Top 5 Things to Consider in a Demand Response Provider

Managing facility changes for the term of your DR contract will help you get the most out of your payments, and avoid having to pay for a program that you can no longer take advantage of.

#3 Up-front Costs

‘Ennoblement costs’, ‘installation costs’ and ‘software solution fees’ are among the types of costs that can be charged up-front, or taken out of DR payments, depending on the provider and program. If a provider does charge you for the installation of a meter, check to see how much, and how you will be paying for it. These costs can be substantial and may affect the profitability of the program.

#4 Meter Installation Fees

Special meter installation may be required by the provider in order for them to get the interval data needed from your account. And even if you already have an interval meter, some providers will install a gateway device that communicates with your building automation system, and charge you for it. Determining what is necessary and what is not, for your facility and participation in the program, is key. There are even some providers that will assume the cost of any meter installation they consider as necessary.

#5 Software/System Integration

Do you want your participation in demand response to be hands-on? Do you want to control what gets shut off and when, or do you feel more comfortable having a load reduction plan in place and letting the provider manage this for you during an event?

Most providers have software that set-up automatic controls with dashboards that will allow you to view real-time data on your performance. These are an extra cost and may require an ‘opt-out’. Without knowing, you may end up paying for a system that you don’t want or need. Knowing how you want to manage an event, BEFORE you sign a contract with a DR provider, is important.

Provider contracts range from 2 pages to 9 pages. Knowing what and where to look for these items can be an impossible task.  An experienced consultant like AUS, who works with multiple providers, can manage and negotiate payment rates, contract terms, meter installation costs and software requirements; working to get you the most benefits for your Demand Response program participation.

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