Energy efficiencyis referred to the use minimal energy to create equal and improved levels ofproductivity to the consumer of energy in a more economically efficient andless capitally demanding manner. It incorporates the use of lesser energy at anytime, including peak hours. 1Energy efficiencyin Smart grids includes efforts to make efforts to supply affordable, reliable,secure, and clean electric power. 1 Demand response, discussed earlier isbecoming a valuable tool in for smart grids to achieve better efficiency especiallyin utility and regional resource plans.

The capability and potential for energy efficiency and demand responseat a customer’s facility arederived from a combination and interaction of four distinct elements: thebuilding infrastructure, buildingelectro-mechanical systems, appliances, and customer behaviour. New technology and systems integration are keybuilding blocks to enable greater coordination of efficiency and demand response (CPUC, 2008)4.The expansivecapabilities and potential for energy efficiency for customer facility (demandside) are propagated from different combinations and interactions of fourdistinct elements: the infrastructure ofthe building, electro-mechanicalsystems present, the list of appliances and customer usage of the appliances. The achievementof better efficiency in the residential market is a three-step process which encompassesdemand side to facilitate in the waste minimalization and better output utilization:·        Control Switches:Traditional switches are manually operated and usedirect load control to control the switching dynamics inside a system. Retrofittingthe current switches with control operated switches adds greater accessibilityand a new demand response capacity to the system.·        Replacement transition devices:Replacing a customer’s existing appliance or controlwith one that has more utility in operation as a controller for energy efficiency,PCTs (smart thermostats) are an example of a replacement transition device thatwhen accurately configured to match occupants’ daily schedules, provide efficiencyand conservation benefits through ensuring that the heating and cooling systemsoperate only as much as is needed to maintain the desired temperature. They reduceexcess uptime and provide response capabilities by allowing a customer toadjust the temperature setting a few degrees to curtail load.Some Devices now include functionality to act as a bridge device or repeaterand pass price, reliability, and event signals on to other appliances and loads.

This allows the devices to actlike small-scale, limited-purpose versions of a building automation system (BAS), controlling individualcomponents to reduce wastage and maximize efficiency.·        Embedded controls: Appliance vendors have begun incorporating demandresponse functional and engineering logic developed for smart thermostats intoother major residential appliances. For example, General Electric (GE) 2 andWhirlpool 3 have announced their intentions to provide their most efficientwashing machines, dryers, dishwashers, refrigerators, water heaters, rangetops, and other selected appliances with integrated electronics which willprovide customers with the capability for Energy Efficiency to let them monitorand respond automatically to price, reliability, and other demand responseevent signals.Combinations ofthe above control technologies with adequate customer information about energy costsand usage is expected to enable customers to adopt towards energy-efficientbehaviors and invest in more energy-efficient end-use devices while participatingin price or event based demand response programs.Apart from Householdefficiency of smart grids, the commercial and institutional market has immense useof smart grids to achieve greater efficiency and ultimately lower costs. Automationacts as the key to commercial and industrial sector energy efficiency anddemand response by incorporating monitoring, communications, and controltechnologies.

Many mediums to largecommercial and institutional buildings have installed enabling technology thathas the potential capability to support both energy efficiency and demandresponse (see requirements of ASHRAE 90.1 Energy Code). Facility managerstypically use EMCS to manage and control their HVAC and lighting loads. EMCScan provide efficiency and reduce energy costs by monitoring equipment andenabling ongoing device control, turning equipment on or off at appropriatetimes or modulating equipment operation 

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