As energy costs continue to rise and sustainability plays a more prominent role in the energy sector, commercial buildings are turning to demand-side energy management to control expenses and improve efficiency. This approach focuses on optimizing energy consumption, improving efficiency, and reducing costs while supporting environmental goals. By leveraging advanced technologies and proactive energy efficiency strategies, businesses can better control their energy usage, enhance operational performance, and meet sustainability benchmarks.
In this article, we’ll explore the fundamentals of demand-side energy management, the types of demand-side management programs available, and actionable strategies that commercial buildings can implement to achieve energy efficiency and cost savings.
What Is Demand-Side Energy Management?
Demand-side energy management refers to the strategies and technologies used to reduce or optimize energy consumption on the consumer’s side of the electric grid. Rather than focusing solely on energy supply, demand-side management targets the energy demand of buildings, industries, and residential areas.
In commercial buildings, this approach helps businesses:
- Improve energy efficiency.
- Reduce peak energy consumption.
- Lower energy bills.
- Contribute to grid stability.
Demand-side management is particularly valuable in deregulated energy markets, where businesses have the flexibility to choose retail energy suppliers. By becoming more energy efficient, businesses can qualify for lower electricity rates due to reduced capacity and transmission costs. To explore how deregulated markets impact energy management strategies, check out this guide to deregulated energy suppliers.
How Does Demand-Side Energy Management Work?
At its core, demand-side energy management involves monitoring and controlling how and when energy is consumed in a building. Advanced technologies such as smart meters, building management systems, and real-time energy analytics allow businesses to understand their energy usage patterns and adjust consumption during peak periods.
The key components of managing energy demand include:
- Energy Monitoring: Devices that collect electricity usage data in real-time.
- Load Control: Systems that automatically shift or reduce energy use during peak periods to avoid high demand charges.
- Demand Response Programs: Programs that allow businesses to participate in utility incentives that provide cash payments for reducing energy consumption during peak demand events on the electric grid.
- Energy Efficiency Measures: Upgrading to efficient lighting, HVAC systems, and insulation to reduce baseline energy use.
The integration of these components ensures that commercial buildings operate efficiently and sustainably. Learn more about optimizing energy usage in commercial buildings with this comprehensive energy efficiency guide.
What Are the 4 Types of Demand-Side Management?
There are four primary types of demand-side management programs, each addressing different aspects of energy consumption:
1. Energy Efficiency Programs
These initiatives focus on reducing overall energy usage through technology upgrades and operational improvements. Examples include retrofitting old lighting to new LEDs, upgrading HVAC systems, implementing a building automation system, and installing high-performance windows.
2. Load Management Programs
Load management involves shifting energy use away from peak hours to reduce strain on the grid and lower electricity costs. This includes demand response programs and time-of-use rate structures. Load shifting can be done manually by a building manager or can be automated through the use of a building automation system.
3. Distributed Energy Resources (DERs)
DERs, such as solar panels and battery storage, allow buildings to generate and store their own energy. These resources reduce reliance on the grid and provide backup power during outages. Many businesses and communities are shifting towards DERs as an alternative to the centralized power grid.
4. Behavioral Change Programs
These programs encourage users to change their habits, such as turning off lights when not in use or setting thermostats to energy-saving modes. Many organizations have energy policies encouraging employees to contribute to overall energy efficiency.
What Are the Benefits of Demand-Side Management?
Demand-side energy management offers several benefits for commercial buildings, ranging from cost savings to enhanced sustainability:
Cost Savings
Reducing peak demand and improving energy efficiency translates into lower utility bills. Reduced usage allows businesses to pay less for electricity and to reduce expenses by having to purchase less energy. Learning how to calculate business energy consumption is critical to identifying these cost-saving opportunities.
Environmental Impact
Lower energy usage means fewer carbon emissions, aligning businesses with net zero and sustainability goals. Furthermore, by curtailing usage during peak demand events, businesses can contribute to carbon reduction as power grid operators will need to rely less on natural gas peaker plants.
Grid Stability
Participating in demand response programs helps utilities balance supply and demand, reducing the likelihood of blackouts. Demand response incentivizes consumers to reduce demand during critical peak hours. This helps to stabilize the frequency of the electric grid and reduces the need for fossil-fuel peaker plants.
Increased Property Value
Energy-efficient buildings are more attractive to tenants and investors. For commercial buildings, lower energy costs have a direct impact on net operating income (NOI) and contribute to the building’s overall value.
Regulatory Compliance
Many regions have energy efficiency mandates, and demand-side management can help businesses meet these requirements. In New York City, for example, there is a mandate that all commercial and residential apartment buildings must replace outdated lighting with energy-efficient LED lighting.
For businesses aiming to align with net zero goals, check out our carbon-neutral energy strategy guide.
What Are the Strategies for Demand Response in Commercial Buildings?
Demand response strategies help businesses adjust their energy consumption during peak demand periods or when electricity prices are high. Common strategies include:
1. Peak Load Shaving
Businesses can utilize battery storage or backup generators to reduce energy drawn from the grid during peak hours and to perform peak load shaving. These backup sources of power can take part or all of a building’s energy load off the grid, resulting in large cash incentives for the business.
2. Automated Load Control
Automated load control systems leverage smart technologies to automate energy-intensive processes, such as HVAC systems, to run during off-peak hours. These technologies can be implemented to help curtail energy usage and even allow businesses to participate in demand response programs seamlessly.
3. Time-of-Use Optimization
Taking advantage of time-of-use electricity rates by shifting operations to times when energy is cheaper. Certain utility tariffs and energy supply contracts allow for less expensive electricity rates during off-peak hours. By running machinery at night or shifting certain processes, energy can become less expensive.
4. Participation in Demand Response Programs
Enrolling in utility programs, such as demand response, that offer incentives for reducing consumption during grid stress events. These are ideal programs to research and participate in if you are implementing any sort of demand-side management program. They allow you to earn additional revenue for your energy efficiency efforts.
Other Sectors: Industrial and Residential Applications
While commercial demand-side management is a key focus, industrial and residential sectors also benefit from demand-side management programs:
- Industrial Applications: Large manufacturing facilities use demand-side management to optimize energy use in heavy machinery and participate in demand response programs. In addition, strategies like natural gas demand response can further optimize costs.
- Residential Applications: Smart home technologies and energy efficiency programs help homeowners reduce energy bills and support grid reliability.
Need Help Managing Energy Demand?
Demand-side energy management is an essential tool for commercial buildings seeking to reduce costs, improve energy efficiency, and contribute to grid reliability. By adopting energy efficiency measures, participating in demand response programs, and leveraging advanced technologies, businesses can gain greater control over their energy usage and costs.
If you’re ready to optimize your energy strategy, Diversegy can help. Our team of experts specializes in creating tailored solutions that align with your business goals. Contact us today to explore how demand-side management can transform your commercial energy strategy.
