Oil & Gas
July 9, 2023
Demand-side management (DSM) refers to a set of strategies and initiatives aimed at managing and modifying consumer energy consumption patterns in order to better match energy supply. DSM strategies can include programs that incentivize consumers and industry to shift their energy use to off-peak times, such as time-of-use pricing, as well as initiatives that encourage the reduction of their overall energy consumption by capitalizing on energy efficiency incentives. DSM is typically employed by electricity and natural gas utilities in order to reduce peak demand, improve grid stability, and reduce the need for expensive new power plants and transmission infrastructure. In short, it is a lot cheaper to incentivize the reduction of energy use than it is to add more capacity. This is an extremely important concept in the face of ever-increasing demands on our energy infrastructure.
Typical features of DSM programs:
Although DSM is used broadly across North America, in both regulated and deregulated markets, currently Alberta does not have a DSM program in place. While the province has taken steps to promote energy efficiency and renewable energy adoption, such as through Energy Efficiency Alberta (ERA) and the Renewable Electricity Program, there has been limited focus on DSM initiatives. This contrasts with every other province in Canada, notably British Columbia and Ontario, which have implemented successful DSM programs that have resulted in significant reductions in energy consumption and peak demand. Without a DSM program in place, Alberta is missing out on opportunities to improve grid stability, reduce carbon emissions, and lower energy costs for consumers.
While it is true that DSM programs come with a cost, a study of programs across North America has found that they are almost exclusively cost-positive. The costs of an effective program can be less than 1% of consumer billing with a 7.5:1 return on investment. DSM programs are also shown to improve consumer billing consistency by reducing exposure to commodity price shocks, due to weather events or other unpredictable incidents.
Reducing the carbon footprint of electrical power grids is crucial to combatting climate change. Nearly a quarter of global emissions are created by power generation, and the demand for electricity continues to climb steadily. While much of the focus is on decarbonizing those energy sources and implementing more renewables, DSM should not be overlooked as an important tool in reducing the carbon footprint of power grids. Any kilowatt of power that is saved is a kilowatt of power that does not have to be generated. The US Department of Energy estimates that energy efficiency programs can reduce household consumption by as much as 10–25% and 20–30% for industrial users.
DSM is shown to be particularly effective in reducing the carbon footprint of power grids because it addresses the root cause of the problem: energy consumption. By reducing demand for electricity during peak periods, power grids can avoid the need to ramp up the use of fossil fuel-powered generators, which are typically used to meet peak demand. The increasing adoption of home air conditioning and electric vehicles (EVs) are great examples of why time-of-use pricing and technologies such as smart grids will continue to become more essential.
DSM can also help to reduce the need for new power plants and transmission infrastructure, which are expensive and have notable environmental impacts. This includes hydroelectricity and other renewables, which are not without their own significant environmental and social costs.
Implementing a DSM program will require a concerted effort from Alberta utilities, regulators and consumers. Utilities will need to invest in the necessary infrastructure and technology to enable time-of-use pricing and other demand-side management strategies. Regulators will need to create policies and regulations that incentivize utilities to invest in these strategies and promote their adoption. Consumers, from households to heavy industry, will need to be educated on the benefits of demand-side management and encouraged to modify their energy consumption patterns accordingly.
It’s time that Alberta joined nearly every other jurisdiction in North America and adopted DSM programs for its electrical and natural gas energy supply infrastructure. Indeed, it’s time for the province to work smarter, not harder, to enable a more sustainable and resilient power grid that helps to combat climate change.
Rob Eagleson, P.Eng
SysEne Consulting Inc.
Energy Efficiency: Industry’s Hidden Gem
Is Alberta Mismanaging Its Energy?
Business-As-Usual Tunnel Vision and Mine Decarbonization