A smart grid is designed to achieve greater energy savings than existing grid infrastructure, thereby making the smart grid infrastructure more cost-effective. A key aspect of the smart grid is that it relies on two way communication technology to manage energy supply and demand dynamics and at present, an eco-system is evolving from the smart grid and adjacent markets. Buildings are one adjacent market that is part of the smart grid landscape. Based on data from the Energy Information Administration 2009, buildings are responsible for over 70 percent of electricity consumption in the US – approximately 50/50 split between commercial and residential buildings. This is evidence that potential energy savings can be achieved with a focus on building energy efficiency (EE).
The relationship between a building and the smart grid revolves around a developing market called Demand Response (DR), a form of EE. This is a market whereby intermediary companies incentivize building owners or occupiers to enable their properties to be connected and controlled for demand response. One example is EnerNOC, which targets commercial, institutional, and industrial organizations with its energy management offerings. Key among these is DR: in return for reduced energy charges, EnerNOC customers allow the company to remotely manage and control their energy consumption.
Essentially, DR is somewhat a catalyst weaving the fabric in smart energy together, using smart grid as a platform. Fundamentally, the smart grid is a communication network, creating a trading exchange of energy suppliers and consumers, somewhat like what a stock exchange does with stock counters. Buildings have always been seen as net energy consumers, but this mind-set is shifting as buildings could be capable of generating their own power through renewables, making them a net contributor back to the grid with their excess capacity. As such, DR will play a key role, governing the economics or market place for energy flow through dynamic pricing mechanisms.