Every month, Tabloid Graphics, a New Jersey-based printing company, receives a check from Hess Energy Marketing for $1,375. This coming June, reports Stephen Brosious, the company's General Manager, "the payments will go up to $1,807/month."

What has Tabloid done to get these payments? Nothing.

Sounds too good to be true--almost like welfare, right? But it's not—and it's not a chapter out of the Sopranos, either. Tabloid Graphics is a member of Hess Energy's demand response program, and its monthly check is a legitimate benefit of participation. As a demand-response customer, Tabloid pledges to curtail its energy consumption during times when the grid is being maxed out. In return, the printer gets a monthly check, even if it doesn't have to curtail operations, which is how things panned out last year.

The printer will receive an additional payment whenever it does have to "shed load," as the industry term has it. "Were that to happen, we'd be paid a good chunk of money," Brosious reports. Would there be business costs associated with doing this? "Yes, but we'd shut down operations in a way that would minimize the financial hit."

Tabloid is benefiting in other regards, too. To help the company develop its demand response strategy, a Hess engineer did a comprehensive energy audit of the plant. "It was very helpful, and it also opened the door to a further exploration of how we could be more energy efficient," Brosious says.

The energy services company also supplies Tabloid with an energy-consumption dashboard application called the Hess PowerPort. "By using it," Brosious recounts, "I found out that I was using lots of energy on the weekends. Since then, we've reduced our downtime energy-consumption rate by 90%."

That Tabloid is in such a highly competitive industry makes Hess's program all the more appealing. "Every couple of days a customer calls and says, 'I've found a better price,'" Brosious reports. "In this environment, we're always looking to save money. The demand response program helps us stay competitive."

With its combination of education and hard cash, Hess's demand response program is, in Brosious's words, "a no-brainer." But what's in it for Hess? Why is it paying customers to not buy their electricity? For one thing, it's a cost-effective way to deliver grid stability. "It means you don't have to build new generators or call on other resources to meet demand when it exceeds current capabilities," says John Deese, Hess Energy's Manager of New Product Development. Avoiding building new plants not only saves money, but also prevents expanding the company's carbon footprint.

Also, Hess is compensated for its sales activities by the regional power pools, which have a vested interest in seeing customers reduce their energy consumption during peak usage periods.

Not only commercial customers benefit from demand response programs. "There have been programs on the residential side for years," says David Kathan, a communications manager for the Federal Energy Regulatory Commission (FERC).

Gulf Power, a subsidiary of Southern Company, offers what spokesman Jeff Rogers calls the "most successful residential [demand response] program of its kind in the nation." The program, which was launched close to two decades ago, uses a programmable thermostat to control larger residential appliances such as HVAC equipment, and pool and spa pumps.

In addition, Gulf Power has started installing smart meters that read a customer’s meter remotely and generate their bill without requiring a representative to visit their property on a regular basis. These advanced metering devices will eventually enable customers to decide how and when to consume energy based on the price at current hour or day, saving them money and reducing peak demand.

Demand response is a significant presence on the energy landscape. According to a December 2008 report by FERC, about eight percent of customers in the U.S. are currently in some kind of demand response program. Not only that, but "(t)he potential demand response resource contribution from all U.S. demand response programs is estimated to be close to 41,000 MW, or about 5.8% of U.S. peak demands," representing an increase of about nine percent over 2006 levels.

Also leading the charge in demand response is energy management company EnerNOC. The company recently signed an eight-year deal to provide demand response services to Xcel Energy, while the city of Boston will also enjoy the financial benefits of demand response through a deal with EnerNOC.

Advances in smart grid technology such as smart metering are expected to fuel the, er, demand for demand response programs. A significant role is likely for ZigBee, an ultra-low power wireless networking standard that enables two-way communication at the home area network (HAN) level. Smart meter manufacturer Itron has already announced advanced metering implementation plans totaling more than 14 million ZigBee-enabled smart meters—and this is just the beginning. The analyst group ON World projects that utilities will spend $1.6 billion on wireless sensor network technologies—predominantly ZigBee—for smart metering and demand response applications by 2011.

Where is this all headed long-term? Omar Siddiqui, Progam Manager for Energy Efficiency for the Electric Power Research Institute, sees demand response as "a preview of coming attractions." The reason: demand response focuses on limiting consumption during peak demand periods, and that's just a subset of a greater goal—optimizing energy consumption 24/7. This is the goal of dynamic energy management—and this, Siddiqui believes, is where we are headed.

If Siddiqui is correct, demand response could turn out to be a transitional strategy that fades out as more comprehensive approaches become technologically viable. That would make it like the steamboat—a great idea while it lasted, until something better came along.

For now, though, Tabloid Graphics' Stephen Brosious is smiling.

[Flickr photo courtesy of flee the cities]