Steve Fine and Patty Cook, ICF
Today, utilities have more responsibility than keeping the lights on. They’re on the front lines of an evolving energy and climate landscape, tasked with ensuring grid resilience, meeting decarbonization goals, and supporting economy-wide electrification. New legislation, like the Inflation Reduction Act (IRA), will help finance clean energy projects, complete with incentives for clean energy technologies like electric vehicles, solar and storage. All the while, customers are looking for more control over their energy usage and bringing more distributed energy resources (DERs) onto the grid.
Luckily, utilities have a tool up their sleeves to simultaneously help deliver customer benefits and support clean energy policy goals: utility-hosted flexible load management (FLM), or automated programs that alter customer energy consumption in near-real time. Adopting an FLM strategy will be essential to manage load as utilities work to meet decarbonization, resilience, and electrification goals, alongside the potential influx of customer-owned DERs onto the grid.
FLM for resiliency
FLM enables automated, coordinated, and aggregated real-time changes to grid-edge assets and devices without significantly impacting customers’ energy consumption habits. For example, FLM can minimally reduce the temperature of a hot water heater to accommodate load, while leaving it high enough to ensure everyone in the home gets a warm shower.
FLM can be optimized to maximize the use of low-carbon energy on the grid, reducing total energy use and helping the utility meet its decarbonization goals. Existing demand response programs are incapable of shifting loads to periods of high renewable generation, making them inadequate for supporting the carbon-free grid of the future.
Not only can FLM help utilize low-carbon energy, it can also aid utilities with another of their important objectives: grid resilience. Extreme weather events are projected to increase in frequency, threatening grid reliability. Currently, utilities sign up customers for demand response programs to reduce stress on the grid. However, the more utilities ask customers to take these actions, the more “demand response fatigue” they will encounter in the form of customer opt-outs and overrides. With FLM, utilities (or program aggregators acting on behalf of the utility) can automate imperceptible changes that provide meaningful and measurable load reductions. This can enhance grid reliability in more frequent extreme weather events, such as freezing temperatures seen in the Midwest in December of 2022.
Electrification, particularly in the building and transportation sectors, continues to be a priority. However, this can lead to more peak demand or significantly different load shapes. Unless these new and increased loads are actively managed through tools such as FLM to mitigate peaks automatically, costly grid upgrades may be needed to support significant new levels of electrification. These investments in turn may impact rates, much to the detriment of customers.
FLM will be a key piece of the puzzle for utilities attempting to address decarbonization, resilience, and electrification. It can reduce utilities system wide peak loads by about 19% from the expected peak in 2032, according to an ICF analysis. Furthermore, the combination of FLM and energy efficiency could reduce peak load in 2050 by 25% and reduce the average annual load growth so that, instead of increasing by 0.5% each year, load decreased by 2.3% per year. Simply put, FLM reduces pressure on the grid by balancing supply and demand locally with minimal impact on the customer.
FLM manages DERs
Many utility customers today are conscious of their carbon impact or look for more control over their energy use. In turn, some are installing behind the meter (BTM) DERs for their own use. DERs like rooftop solar systems can add destabilizing stress to the grid where constraints exist by creating voltage or hosting capacity issues. This can spike costs and test grid resilience, often leading to long interconnection delays that frustrate customers.
Utilities must first consider the value proposition for the customer, as some may not approve of the utility deciding how they use their clean energy resources. One way to show value is to illustrate how combining consumer choice with FLM is beneficial to them, such as through dual use of their owned assets. Utilities can incentivize dual use by offering to support financing and launching customer test programs, demonstrating how customers can get full energy savings and value from their DERs. By leveraging smart controls like distributed energy resource management systems (DERMS), FLM can turn DERs from a grid weakness to a grid strength, by harnessing the full value of customer DERs and balancing the points of supply and demand.
How to develop an FLM strategy
A successful FLM program requires a system-wide load management strategy at the distribution level to balance local supply and demand. It also demands a modernized, two-way grid that provides increased visibility and management of customer DERs.
When considering their FLM strategy, utilities should prioritize the objectives that FLM can help achieve. This includes mitigating the impacts of aggressive building and transportation electrification, supporting GHG emission reduction goals, and integrating new renewable resources.
On top of determining goals, utilities should also research and identify the retail tariffs or incentives that will enable benefits for both the customer and the grid. Utilities must first thoroughly understand the jurisdictional policy and customer trends. Why do your customers make their energy choices? How willing would they be to share dual use of their DERs? These are important questions to ask. Additionally, utilities should evaluate the investment needed to support increased electrification on their grid, reviewing costs and benefits of addressing their locational and temporal grid needs and consider FLM as a way to mitigate those costs.
Once the utility has developed a load management strategy, it should begin deploying FLM through customer pilots and programs. During these programs, utilities should use data and analytics to learn how their customers are likely to use load management. Which customers or groups will turn up a smart thermostat manually? Do they charge their EVs at a certain time? This measured data will give utilities a clear look at their real achievable load management capacity that can inform on-going program implementation, as well as future iterations of the program.
Utilities can begin the work now to realize the full value of FLM for their business. Harnessing this approach will not only stabilize the grid of the future, but help achieve clean energy goals and meet the demands of electrification. In tandem, FLM enables customers to participate in a clean energy future in a way that supports their comfort and convenience, with minimal disruption to their energy usage. FLM reconciles many challenges utilities face today and effectively prepares systems for a clean-energy future.
About the Authors
Steve Fine has over 30 years of experience evaluating the economics of conventional and renewable energy resources— both central station and distributed generation—within the context of developing technologies, market design, and environmental regulations. Working with major U.S. power companies and developers, he helps evaluate the impact of distributed resources on their systems and the implications for business models and distribution system planning and operations.
Steve publishes numerous whitepapers on the value of solar and distributed resources. Steve is the lead author of multiple analyses that evaluate the impact of carbon and other environmental policies on the future generation fleet at national and regional levels.
As a strategic leader with over 25 years of experience in energy, environmental policy, and management consulting, Patty Cook leads our distributed energy resources (DER) flexibility services product and market development activities in North America. Working at the intersection of customer preferences, emerging technology, and evolving regulatory policy, she is redefining integrated demand-management programs to help clients navigate the transformation to a decarbonized, affordable, customer-centric grid.
Patty’s previous leadership roles include vice president for market development and strategy for our U.S. Commercial Accounts and vice president for Jones & Stokes, where she was responsible for western regional operations, including oversight of energy and environmental infrastructure projects and programs in six states.
