There is a stark disparity between the falling costs for renewable energy solutions for electricity customers and the rising $1 trillion budget that U.S. utilities will spend on new infrastructure over the next 15 years. The potential for utility over-investment on its side of the meter, and the potential for over-capacity on both sides of the meter, suggest that demand flexibility must be embraced by both parties, according to analysts at Rocky Mountain Institute (RMI), in Boulder, Co.
“Residential demand flexibility can avoid $9 billion per year of forecast U.S. grid investment costs – more than 10 percent of total national forecast needs – and avoid another $4 billion per year in annual energy production and ancillary service costs,” authors James Mandel and Mark Dyson said in “The economics of Demand Flexibility: How ‘Flexiwatts’ Create Quantifiable Value for Customers and the Grid,” a recently released report from RMI. The research conducted by Mandel and Dyson was based on actual conditions at Alabama Power, Commonwealth Edison, Hawaiian Electric and Salt River Project.
“This feels like a market ripe to happen; its big,” comments Mandel. “We’d like the market to develop in a way that helps customers control their demands. On the other hand, we’d like to see the grid looked at more holistically; perhaps the way the IT industry does with combinations of land lines and cell phones,” he said.
The researchers define electric loads that demand flexibility shifts in time as flexiwatts – watts of demand that can be moved across the hours of a day or night according to economic or other signals.
“Demand flexibility uses communication and control technology to shift electricity use across hours of the day while delivering end-use services at the same or better quality but lower cost,” they said. “Flexible watts do this by applying automatic control to reshape a customer’s demand profile continuously in ways that either are invisible to or minimally affect the customer, and by leveraging more-granular rate structures that monetize demand flexibility’s capability to reduce costs for both customers and the grid.”
Key consumer power usage areas studied were: air conditioning, domestic hot water, electric vehicle charging, electric dryer cycle timing and battery energy storage.
“In the residential sector alone, widespread implementation of demand flexibility can save 10 percent to 15 percent of potential grid costs, and customers can cut their electric bills 10 percent to 40 percent with rates and technologies that exist today,” the authors said.
The aggregate market size for flexiwatts in terms of net bill savings for each of the five consumer uses above is $110 million to $250 million per year, Dyson and Mandel estimated.
“Roughly 65 million customers already have potentially appropriate opt-in rates available, so the aggregate market is large and will only grow with further rollout of granular retail pricing,” they added.
Perhaps more importantly, the residential use of a smart thermostat and a water heater timer for flexiwatt consumption is calculated to save U.S. utilities 8 percent of their heat-oriented generation, worth about $13.3 billion per year, spread over generation, transmission and distribution, energy arbitrage, regulation and spinning costs, the authors said.
“The $13.3 billion in utility savings was the eye-popping discovery for us,” Mandel said.