Demand Response (DR) refers to the process of adjusting electricity consumption in response to signals from the grid operator, utility, or market. The goal is to balance supply and demand, particularly during peak usage periods or when there is a risk of grid instability. Customers can participate in demand response by reducing or shifting their energy use, either manually or automatically, in exchange for incentives or lower energy costs. DR programs are essential for optimizing grid efficiency, reducing strain on infrastructure, integrating renewable energy, and lowering electricity costs. They are commonly implemented in commercial, industrial, and residential settings using smart technologies, including thermostats, appliances, and energy storage systems.

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Demand Charge and Response with Energy Storage

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Commercial and industry (C& I) customers incur two types of electricity charges on their bills: one for the amount of energy usage and another one for the maximum demand during certain billing periods. The second charge type is known as Demand Charge (DC), which could account for over half of a customers’ electricity bill. Those C& I customers often sign up for Demand Response (DR) programs to contribute to peak demand reduction as well as to receive incentives and rewards from participating in the programs. The critical factor of achieving both DR and DC reduction is to recognize the nature of these two types of problems and create an effective strategy that can handle them at the same time by which the benefits from DR incentives and DC reduction are maximized. This paper discusses the possible DR scenarios with DC reduction framework for C& I customers who use a Behind-the-Meter (BTM) energy storage and proposes a consistent real-time procedure of deciding battery’s charging and discharging set points to solve the problem of maximizing the rewards by conducting DRs as well as the savings by reducing DC costs.

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