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Grid-Integrated Demand Response for Municipal Water Heating and Cooling

Solution Overview

The City and County of Honolulu has committed to advancing flexible energy demand response programs for municipal operations as part of its climate action strategy.[3] This approach leverages controllable loads—particularly water heaters and air conditioning systems—to provide grid services during periods of high electricity demand, supporting grid stability while reducing reliance on fossil fuel generation.[1] Given that electricity generation creates approximately 35% of O'ahu's total carbon emissions and about 80% of the island's electricity comes from fossil fuels, demand response programs represent a critical tool for managing peak loads and facilitating renewable energy integration.[3]

Technical Components

Hawaiian Electric's EnergyScout program operates through a one-way paging network to control approximately 34,000 water heaters, delivering approximately 10 MW of controllable peak demand.[1] The utility has successfully deployed multiple grid-interactive water heater pilot projects with Shifted Energy over the last five years, demonstrating confidence in the technology's capabilities.[1] In partnership with Open Access Technology International, Inc. (OATI) and Hawaiian Electric, Shifted Energy provided 2.5 MW of grid-interactive water heater capacity through a Grid Services Purchase Agreement starting in August 2019.[1] The Residential Direct Load Control program, active since 2009, cycles participants' central air-conditioning and electric water heaters on and off for brief intervals during high demand periods.[4] The Commercial & Industrial Direct Load Control program, also active since 2009, targets small and medium commercial customers by cycling air-conditioning and other loads during peak periods.[4]

Implementation Details

Hawaiian Electric launched its Grid Services Purchase Agreement in 2018 to competitively procure approximately 16 MW of capacity in response to the Hawaii Public Utilities Commission's request to explore new methods for procuring demand response, regulating reserves, and providing fast frequency response.[1] Hawaiian Electric Company, Maui Electric Company, and Hawai'i Electric Light Company submitted their Integrated Demand Response Portfolio Plan to the Hawai'i Public Utilities Commission on July 28, 2014 under Docket No. 2007-0341.[4] The Fast Demand Response pilot program provided fast-responding grid services including contingency reserve and regulating reserve from aggregated customer loads for large commercial and industrial customers from 2014 to 2015.[4] Savings from demand response implementations are guaranteed by the contractor Johnson Controls and financed through a third party, resulting in zero out of pocket spending by the city or taxpayers.[2] The Time of Use Rates program, active since 2006, offers different rates for electricity used during on-peak, mid-peak, and off-peak periods for residential and small to medium commercial customers.[4]

Benefits and Impacts

The EnergyScout program delivers approximately 10 MW of controllable peak demand through control of approximately 34,000 water heaters, providing significant capacity for grid management.[1] Grid-interactive water heater deployments added 2.5 MW of capacity through the Grid Services Purchase Agreement starting in August 2019.[1] The competitive procurement process launched in 2018 targeted approximately 16 MW of total capacity across demand response, regulating reserves, and fast frequency response services.[1] These programs support operational efficiency by cycling loads during high demand periods while maintaining customer comfort and service quality.[4] The guaranteed savings model ensures financial benefits without requiring upfront municipal or taxpayer expenditure.[2]

Climate Adaptation Relevance

Demand response programs directly address climate adaptation needs by reducing peak electricity demand and associated fossil fuel combustion, which generates approximately 35% of O'ahu's total carbon emissions.[3] By enabling greater grid flexibility and supporting renewable energy integration, these programs advance Hawai'i's mandate to achieve 100% of electricity net sales from renewable sources by 2045.[3] The initiative contributes to Honolulu's goal to reduce emissions 45% from 2015 levels by 2025, addressing the climate impacts of electricity generation while enhancing grid resilience during extreme weather events that drive peak demand.[5]

Business Analysis

Hawaiian Electric's competitive Grid Services Purchase Agreement model, launched in 2018, established a market-based procurement framework for approximately 16 MW of grid services capacity.[1] The financial structure through Johnson Controls guarantees savings while utilizing third-party financing, eliminating capital expenditure requirements for municipal participants.[2] The Hawaii Public Utilities Commission's directive to explore new procurement methods for demand response and grid services created regulatory support for innovative business models and technology deployments.[1] The Critical Peak Pricing pilot program, which ran from 2014 to 2015, tested pricing mechanisms that charge higher rates during critical peak periods for residential customers.[4] Long-term program sustainability is demonstrated through the Residential and Commercial Direct Load Control programs, both active since 2009 and continuing operations, along with the Time of Use Rates program active since 2006.[4]

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