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Global spending on automated demand response (ADR) will grow from $13 million this year to more than $185 million in 2023, according to a new report by Navigant Research.

In addition, Navigant says that the number of ADR-equipped sites worldwide will increase from 217,000 to 1.9 million during the same time frame.

The research firm reports that as the power grid moves away from traditional central power plants and toward more distributed energy resources to address future energy needs, DR is becoming a growing part of the resource base that electric system operators use to maintain reliability on the grid. Advanced technologies, such as ADR, which automates the DR dispatch process without any manual intervention, are helping to speed this transition and enhance reliability along the way, Navigant adds.

In typical emergency DR programs, Navigant says ADR can help penetrate smaller facilities that may not have advanced internal controls. Furthermore, new market types, including ancillary services such as reserve and regulation, are opening up to DR. According to Navigant, these fast-response, high-risk programs strongly encourage - if not require - automation for participation.

The changing resource mix in electric grids around the world is creating more potential for DR to play a pivotal role, the research firm notes. As coal and nuclear plants retire, clean replacements are needed that can be built in short time frames. Large-scale intermittent renewable resources, such as wind and solar power, that are filling this gap require backup solutions when the wind is not blowing and the sun is not shining. Navigant reports that both these situations call for flexible resources, and ADR has great promise to meet these needs.

Customer resistance, Navigant says, is a key barrier to further ADR adoption. Some customers, in both commercial and industrial (C&I) and residential markets, are reluctant to give up control of energy usage. According to the research firm, this reluctance is related to security concerns, production concerns in the case of an industrial facility and comfort concerns for commercial buildings or households.

Moreover, ADR does drive its own set of costs, Navigant notes. Depending on the level of existing energy management systems in a facility, these costs could be relatively small and involve little to no hardware installation, or they could require extensive control installations and lots of integration with existing systems. The research firm adds that a cost/benefit analysis is always associated with an ADR decision.

Navigant reports that much of the basic technology to perform ADR exists today. To some extent, Navigant says ADR adoption will depend more on market forces than technical advances. New market opportunities have to develop to extract the full value of ADR, and standards need to be agreed upon so that various systems can communicate with each other.

However, some technical accomplishments may show the door to the future. The research firm notes that on the C&I side, at least one ADR product requires no hardware to be installed at the customer's site. This strategy can help break down barriers in terms of cost and intrusiveness and requires less of a commitment from customers, making it easier for them to try it.

Similarly, in the residential space, both start-up companies and established corporations are offering software-as-a-service offerings for DR management systems for utilities and grid operators, Navigant adds. This solution means less investment from utilities, fewer internal systems to try to integrate and quicker deployment times. Combined with OpenADR 2.0 standards adopted in 2013, a more straightforward business case exists than did with the old systems and proprietary software, says Navigant.

According to the research firm, almost all ADR activity currently takes place in the U.S. This is bound to change over the next 10 years as all international regions continue or start the pilot phase of ADR and then build out full-scale markets or programs.

Navigant reports that the largest growth will occur in Asia Pacific, which may overtake North America in terms of ADR capacity and spending after 2020. There are many distinct markets in Asia Pacific, such as Australia/New Zealand, Southeast Asia, China and Japan, all of which have distinct drivers of ADR growth. Europe, meanwhile, will see moderate, methodical advancement based on a combination of opening market opportunities and renewable resource integration. As such, ADR in Europe will not experience the rapid expansion that will occur in Asia Pacific, but it will have a faster growth pace than in North America as new market opportunities open.

"As more intermittent renewable energy is added to power grids worldwide, more flexible and faster responding resources will be required to help balance loads," comments Brett Feldman, senior research analyst with Navigant. "Automated demand response will play a primary role in enabling the demand side to participate in these market opportunities."

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