How Gift Cards Keep the Lights On When the Power Is Short

When extreme heat or freezing cold threatens to overwhelm fragile power grids in places like California and Texas, there’s an effective, old-fashioned tool to avoid a shortfall: turn off the lights. But how to make this happen? The key may be “demand response” – voluntary conservation programs that kick in during critical hours. In many cases, civic-minded citizens are doing their part, simply choosing not to use the devices when the network is in greatest demand. But others are drawn to big financial carrots — as well as gift cards.

1. What is “demand response”?

It’s an umbrella term for a variety of voluntary, short-term efforts that encourage homes and businesses to reduce power during times when grid operators fear power supplies will meet high demand. Getting consumers to switch off is a key tool to help California avoid outages during a deepening heat wave this week, as temperatures soared above 110 degrees Fahrenheit (43 degrees Celsius) in some regions. It is also sometimes called “power shaving” and can, in a way, be considered a form of rationing.

2. What forms does it take?

They range from a simple call to arms to time-based rates and a range of financial incentives. According to the California Public Utilities Commission, demand response efforts have evolved to encourage customers to “shift electricity consumption from times of high demand to power supply at times when power supply is abundant in relation to demand”. For California, this crisis occurs between 4 p.m. and 9 p.m., when people come home from school or work and the sun begins to set on the many solar farms in the state. One example is the California grid operator’s “Flex Alert” notices distributed via Twitter and other channels, which alert customers to windows of time when they need to save energy. Notices were sent on August 31 and September 1.

Yes. Recent experience suggests that behavioral change has saved power grids from calamity on hot days. For example, during a peak on July 20, the Texas-based network operator managed to reduce demand by 2.5% from the level officials had forecast for the day. Reducing just 1% of electrical demand under such conditions can significantly reduce stress on days of peak demand, which some networks have experienced recently. Crypto miners and other large industrial companies in the Lone Star State are charged their share of transmission line construction and maintenance costs based on the amount of power they use during peak hours, which encourages them to slow down operations. Texas even holds a competition designed for companies to outdo each other, resulting in reductions of up to 30% in annual electricity bills for the winners.

4. What makes it possible?

First and foremost, power grids are no longer taken for granted by the people who benefit from them. In an era of global warming and prolonged drought, consumers are increasingly aware of the fragility of the grid as extreme weather conditions become more common. This makes it easier for operators, governments and utilities to promote conservation campaigns on Twitter and other media. That’s especially true in Texas, where the grid went down during a historic freeze in 2021, and California, which saw outages in 2020.

5. Are people really paid to cut their energy consumption?

In a way, sometimes yes. Wider use of smart meters and products like Google Nest allow businesses to leverage demand response efforts and control home thermostats, which can allow homeowners to receive utility bill credits public, gift cards and sometimes even amusement park passes. OhmConnect, a free service available in California, New York and Texas, pays customers to use less energy during peak periods, resells the collective energy savings to the grid, then passes the revenue on to their users in the form of money and prizes. . Large commercial users and factories, on the other hand, can participate in programs that allow them to be compensated for the reduction in energy consumption. Sometimes these entities may even sell electricity they have contracted to buy back from the grid at higher prices.

6. Where else is it used?

Demand response isn’t just a California and Texas phenomenon. Other US networks have forms of it, including those on the East Coast and Midwest. Outside of the United States, more and more countries need to step up their conservation efforts. In Japan – where an electricity crisis nearly led to blackouts in the capital earlier this year – the government has stepped up calls for citizens to take action, including watching an hour less television a day or by turning off the heating functions on the toilet seats. In Europe, which has been crippled by soaring electricity prices due to a cut in natural gas from Russia, aggressive efforts are being made to reduce power consumption to avoid blackouts. electricity and freezing homes this winter, including turning down thermostats, dimming lights and taking cold showers.

• A Bloomberg Businessweek article on how corporate energy reduction is helping save the grid in Texas.

• The California Guide to Demand Response Efforts and a Power Grid Alert System Fact Sheet.

• US Department of Energy Demand Response website.

• From the Archive: A QuickTake on America’s Fragile Power Grid.

More stories like this are available at bloomberg.com

Michael N. Clark