Demand-Side Management

By Carl Jenkins,2014-12-28 10:06
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Demand-Side Management

    Energy-counscious urban planning and development -

    - lessons from a case-study

    António Gomes Martins

    INESC - University of Coimbra, Portugal

    Rua Antero de Quental, 199

    3000 Coimbra - PORTUGAL

    Tel. 351 - 39 - 83 26 89 / 83 82 77 Fax 351 - 39 - 82 46 92 e-mail:

Panel 4, paper id. 5.2


    During the last fifteen to twenty years, DSM -- with this or other designation -- has made an invaluable contribution to sustainable development, allowing growth to be simultaneous with environment protection. The theory and practice behind DSM is actually fundamental to the Market Transformation concept, which relies on the action of both regulators, economic agents and consumers to achieve an energy efficient economy through education, technology replacements and adequate building and energy management. Utilities' attitudes towards energy efficiency promotion are adapting to market liberalisation. This is the reason why the well-known DSM designation tends to be avoided by utilities' people. Nevertheless it is necessary to keep energy efficiency as a key concept for action. The paper uses the EXPO'98 case as an example of a project in this direction. Namely, it emphasises the importance of local authorities in environmentally sustainable development.

    The paper tries to make a four-fold contribution: give a brief view of present market conditions that influence the attitudes of governments and energy suppliers towards energy efficiency -- at large and at the EXPO'98 level; present a summary of the main orientations that provide the background for the sustainable development of the urban space at the EXPO'98 site, from the points of view of energy and the environment; discuss some opportunities for energy savings and for influencing the rate of energy use according to the DSM portfolio of measures; propose some guidelines as a basis for possible future terms of reference regarding artificial lighting, as it has been largely overlooked in favour of thermal energy services.


    The concept of demand-side management (DSM) has been introduced in the USA, more specifically in the electricity industry, in the mid-eighties. It has been originally defined as the planning, implementation and monitoring of a set of programmes and actions carried out by electric utilities to influence energy demand in order to modify electric load curves in a way which is advantageous to the utilities. Changes in load curves must decrease electric systems running costs - both production and delivery costs -, and also allow for deferring or even avoiding some investments in supply-side capacity expansion. Thus, DSM has been driven by strict economic reasons. Energy efficiency was a privileged instrument for DSM implementation, as will be seen. Hence, in societal terms, this was a typical win-win situation, as consumers would also benefit from cheaper energy services, as overall efficiency would increase. DSM has been a major breakthrough that led to a great deal of innovation, both at business management and at technological development, and also to huge environmental benefits. Yet, a great number of DSM tools already existed previously to the concept, and had been in use by many utilities, namely those tools related to remote load control, known as load management (LM). But LM aims predominantly at influencing power use - the amount of energy used by unit of time, at specific times. Energy efficiency was actually a newcomer to the business, brought by DSM to the portfolio of utility management options. There are six main objectives defined in the context of DSM, known as: peak clipping, valley filling, load shifting, flexible load curve, strategic conservation and strategic load growth. Apart from strategic load growth (SLG), all other options require that the utility's system is under pressure and requires either capacity expansion or load relief. Cost-benefit analysis will dictate which options to adopt. In many cases utilities have opted for DSM in order to avoid or postpone important financial stresses.

    In general, DSM implementation options may be classified into several different broad categories: customer education, direct customer contact, trade ally co-operation, advertising and promotion, alternative pricing, direct incentives. Some measures pin-pointed in the text below are examples of some of them.


Problems facing utility-driven DSM

    Influencing the way electric energy is used has become an effective means of complementing supply-side options with the purpose of increasing overall systems efficiency. Determining the appropriate mix of supply-side and demand-side resources became the goal of the so-called integrated resource planning (IRP), allegedly leading to a global least-cost approach. Several difficulties had to be tackled with to solve the problem of cost-benefit evaluation of demand-side options. A standard approach has been designed for the purpose, which has only recently been adapted to the European specificities through an initiative of the European Commission, in 1996.

    DSM has been recognised as an ally to environment conservation as it leads normally to lower overall consumption growth and contributes to using available resources in a more rational way -- the portfolio of DSM even includes fuel replacement options. Huge savings, both financial, energy and environmental have been claimed, namely in the USA, as due to the massive adoption of DSM programs by utilities, bounded by strict regulatory constraints.

    The trend towards highly regulated DSM and IRP in the USA, actually forcing utilities to adopt certain decisions though with the guarantee of financial compensation, shows in itself that these instruments have been considered of high societal value. DSM has been identified since the infancy of the concept as a privileged tool for utilities to contribute to the societal goal of environment protection -- besides being profitable on its own in many cases. In view of this advantage, in some countries regulations have been issued and accompanying procedures implemented that sought to maintain economic advantage for the utilities while promoting energy efficiency on the demand side. Losses of revenues had to be compensated in some way, which is not possible, in strict economic terms, in a competitive environment.

     But it should be noted that when utilities use demand-side options, they can not take for granted that costs are recovered in the desired time span -- namely because estimates may be wrong, either relative to customer participation, occurrence of free-riders, unexpected behaviour of participants, or programmes' imperfections, etc. Hence some claims have been made that the true costs of saved energy are not so low as stated when compared to investments in new capacity -- in many cases they would have shown to be actually higher. In what concerns strategic load growth (SLG) in particular, it will be cost-effective when previous supply-side investments need recovery conditions which are not likely to exist without promoting energy consumption growth. But this promotion will assume SLG nature only if regulations impose it. Otherwise there will be plain load growth, eventually with some free-riders adopting conservative measures. Hence, all the implications and constraints of each DSM action must be carefully anticipated in order to take decisions in as much an informed way as possible.

    The present trend towards energy market liberalisation brings about some concerns, as for instance on how to prevent utilities from keeping the old perspective of selling kilowatt-hours instead of energy services. Some authors express fears that DSM may be in danger when confronted with plain market rules taking into account that regulation has been indispensable to make it work up to now where it has been successful.

DSM from a broader perspective

    European Union (EU) has been very active in recent years issuing directives on environment protection, some of which are mandatory to member-states. Obviously, energy efficiency plays a major role in EU policy for the environment and there are several financing schemes in the field of non-nuclear energies aiming at energy efficiency improvement. It is clear that a strong influence may be, and has actually been, exerted by governments towards improving the energy efficiency of national economies and reducing harmful environmental impacts of energy use. As a matter of fact, the present trend towards a liberalised energy market brings an accrued responsibility to governments in two main issues: appropriate regulation and consumer education through key information delivery. Only appropriate regulatory frameworks can put in place adequate stimuli directed at various economic agents - energy and equipment suppliers, energy service providers, consumers - for promoting energy efficient technologies and practice. If energy prices are driven by sales volume criteria alone, there is a narrow margin to be explored in utility-driven energy efficiency: either an energy supplier is occasionally confronted with capacity shortage and decides, to his own interest, to manage demand instead of investing in capacity expansion - provided that he has a franchise market - or, in a competitive context, provides technical advice to customers in order to retain them, which may include improvements in energy end-use efficiency to decrease energy service costs.

    Hence, national and local authorities intervention may assume several eligible forms like price regulation, legislation to influence building and systems design, incentive programmes to investment in energy efficiency at large, training programmes for designers and technical staff, consumer education, appliance labelling, even building labelling.


    The concept of demand-side management may, under these assumptions, be easily generalised. It may be driven by other agents besides energy suppliers -- namely governments and municipal authorities -- and may be understood broadly as a framework of actions and programmes aiming at energy efficiency improvement at the demand side. Ultimately, to comply with environmental protection.

Energy conscious urban planning - the EXPO’98 case-study

Objectives and strategy

    Since the very beginning, the urban project of the 1998 World Exhibition, EXPO'98, has been viewed with an integrated approach to rational use of natural resources. From the point of view of energy, this implied the consideration of a paradigm that may be expressed in four terms:

    design for energy efficiency

    provide efficient equipment

    use with intelligence

    monitor accurately to

    allow for usage corrections

    Paradigm of efficient use of energy from a perspective of systems life-cycle

    This paradigm is applicable to virtually any system where people live or work, that is to say, to an industrial facility, to an urban area, to a building of any size. According to the perspective on DSM presented above, the company in charge of the site of EXPO'98 assumed itself as an active agent in the promotion of energy efficiency at the demand side. The regulatory and legal framework within which it has been created favoured this attitude, as it had equivalent prerogatives to a municipal authority. At the start of the project a set of objectives has been stated, in the framework of a Global Strategy for Energy and the Environment, and the corresponding strategic actions have been delineated and implemented. The objectives may be briefly referred:

    ; plan the new urban area in such a way that it will be comfortable, both in interior and exterior spaces; ; consider this "city" as a single energy system, managing supply options and supply-demand interactions

    in the most efficient way possible;

    ; define DSM strategies in order to influence both urban and building design, avoiding high peak energy

    demands and unnecessarily high consumption levels;

    ; implement monitoring of the whole urban energy system as an essential support to an adequate urban


    ; assess environmental benefits of the strategies adopted both locally and from a wider perspective; ; disseminate results at national and European levels.

    The actions supporting this strategy may also be summarised in the following topics:

; perform climatic research on the area;

    ; provide designers with accurate data on the existent natural conditions;

    ; define general guidelines for urban planning;

    ; define terms of reference for the thermal characteristics of buildings and HVAC systems; ; provide consultancy support to building designers;

    ; propose the implementation of a district heating and cooling (DHC) system for the whole urban area; ; create an observatory of energy supply and demand.


Paradigm and practice

    The first term of the above mentioned paradigm of efficiency at the demand side is very well illustrated at the EXPO'98 urban level by two components: the urban design approach used and the terms of reference for buildings.

    Urban planning has been informed by a study where solar radiation distribution on the site and on the buildings has been anticipated for several configurations, and the effects and interactions among variables such as building heights, vegetation and wind have been experimented for different seasons in order to evaluate possible design outcomes in terms of exterior comfort conditions.

     The terms of reference for buildings establish maximum limits for building energy needs. The limit values are 50% of those in the Portuguese regulations for the building considered as a passive system and 60% of those generally applicable to active systems (HVAC). Hence, designers are compelled to conceive buildings and associated systems in a way that the results are well above the standards. Further actions have been put forward trying to foster the application of the terms of reference, through the provision of support to building designers. Consultancy has played an important role in the design of several main buildings of the EXPO'98 site. The solutions adopted represent in most cases examples that have already been used to illustrate the real possibility of implementing very efficient buildings. Here, not only the first term of the paradigm is fulfilled but also partly the second because, as a rule, active equipment for the various energy services within the buildings are highly efficient.

    The most common solutions adopted fall into some categories that illustrate the kind of possibilities there are to comply with the terms of reference.

    ; natural ventilation through stack effect

    ; mechanical displacement ventilation

    ; integral insulation of the building envelope

    ; heating and cooling sources from the DHC networks, avoiding boilers and chillers

    ; heat recovery

    ; variable speed drives for pumping and ventilation loads

    ; night ventilation and free cooling

    ; daylight use through appropriate fenestration, up-lights and shading devices

    ; efficient technologies for artificial lighting

    ; energy management systems

    Several recent buildings act as examples for future efficient designs.

    Efficiency and environment protection is also informed by options at the supply-side, as the district heating an cooling networks exemplify. It consists of an urban distribution network of hot water and a similar one of chilled water, fed by a gas-fired co-generation system complemented by an absorption chiller and a chilled water storage tank.

    The networks allow for a clean and efficient alternative to individual HVAC plants distributed among buildings, as they potentially avoid the use of local systems for heat and cold generation. The monitoring phase of the urban site, which is based on an agreement among the various energy suppliers and energy service providers involved, closes the loop of efficiency management. With appropriate data collection, organisation and processing, the so-called Observatory has the potential to become a key instrument to demonstrate the goodness of many solutions implemented but also to timely correct management procedures and eventual technology malfunctions.

A prospect of increasing awareness

     The above stated paradigm of efficiency is not a novelty. Appropriately adapted, it suits to almost any reality where management seeks to use resources in a rational way. EXPO'98 is not only an integrated approach to environmentally and energy conscious urban design. It is mainly the demonstration of the feasibility of this type of approach.

DSM opportunities

    Experience shows that in countries where liberalisation is more advanced, utilities show a natural tendency towards maximising profits and, hence, to promote energy sales. This is clearly at odds with energy efficiency promotion and led to the abandonment or, in the best cases, to a strong decrease of DSM utility-driven initiatives.

    A broader content has been proposed above for DSM, which enlarges the list of actors with an active potential role in the promotion of energy efficiency: authorities, utilities, consumers, energy service


    companies, equipment manufacturers. Though traditionally utilities play a major role in DSM, the initiatives of local, regional or national authorities in general will have to be intensified. Nevertheless, regulation will have to be adapted to the prevailing market conditions at every moment in the future. It is definitely different to issue regulations in conditions of franchise market to some energy types of supply or to do it when suppliers of the same energy form compete with each other for customers. Namely, energy price is strongly influenced by the form of market organisation. Hence, a good regulation today may become obsolete tomorrow and accrued difficulties may arise.

    However, as long as franchise markets prevail, competition will exist among suppliers of alternative forms of final energy for the same end-uses (e.g. electricity and gas for water heating in washing applications). This may play a positive role in the dissemination of the most efficient and environmentally benign technologies, provided that consumers are well informed.

    The list of opportunities below has been organised according to what seems to be the most likely situation of the energy market in the short- and mid-term in Portugal and in the urban area of EXPO'98 in particular. Uncertainty cannot be eliminated. In the working perspective used, franchise market organisation is assumed for the supply of electricity, gas, hot and chilled water. This eliminates, for the time being, the difficulties identified above, associated to competition among suppliers of the same energy form.

Categories of DSM measures and impact on emissions

    The objectives of DSM in its conceptual formulation have been referred before as: peak clipping, valley filling, load shifting, flexible load curve, strategic conservation and strategic load growth. It should be retained that this list informs a definition of DSM where the main objective is modify