An inherent flaw in any electrical grid lies in the inevitable truth that the entire grid system—from the generators to the transmission lines to the substations to the power lines and transformers outside of homes and businesses—must be sized to serve peak use.
For many grids in the US, peak energy use happens over just a few hours on hot summer days. In Massachusetts, for example, it has been estimated that the top 10% of high load hours during the year account for about 40% of the cost of operating the grid 1. Shaving electric use during these key hours of high usage can therefore have a significant benefit in reducing long-term electric rates.
The goal of utility demand response programs is to strategically reduce energy use at those peak times which, in turn, keeps overall costs (and rates) down by reducing the need for expensive and dirty peaker plants while also reducing the required size of grid infrastructure.
Demand response and traditional energy efficiency are viable tools through which utilities across the US plan to reduce peak usage and realize those savings for our customers.
The Road to Tomorrow: Possibilities and Challenges
There is still some debate over what the best path to the future may be and how quickly we can get there, but the end goal for many US electric utilities is clear. To address climate change and other environmental and equity issues, we need an environmentally sustainable power system.
For the Northeast, as for much of the country, this will mean integrating into our grids a lot more solar and wind power to complement existing hydro resources and hopefully (for those of us in the US Northeast) access to even more hydro resources from our Canadian friends.
Solar and wind are valuable and popular resources that should be encouraged during the grid’s transition from the way it was structured and operated for most of the 20th century to a tomorrow lush with sustainable possibilities.
The sun is not always shining, and the wind is not always blowing. For the grid to overcome the inherent intermittency of these clean renewable energy sources and evolve to a cleaner more efficient future, demand response will play a crucial role in balancing the use of electricity with its supply.
The Increasingly Important Role of Demand Response
Today, many demand response programs at the utility level are simple in design, yet effective in achieving results. Most utilities execute their DR programs on peak days in order to reduce peak usage. To attain the future we all desire, however, utilities will need to add new demand response programs to help balance the grid every day of the year.
Battery storage will also play a critical role in this transition to the future. At National Grid in the Northeast US, for example, battery storage is already an important part of the suite of demand response programs we use to manage peak usage on our electric grid.
Relying on storage alone to solve every peak issue, however, would be more expensive than if we were to also include other types of tried-and-true demand response strategies such as turning down HVAC, lighting, or process equipment during times of demand response participation.
This challenge will be best solved with each utility offering a diverse portfolio of DERs in diverse demand response programs to serve the needs of its evolving grid.
Creating a More Cost-Effective Grid at the Utility Level
Much has been made about the benefits to all customers for addressing climate change and other environmental problems. What hasn’t been shouted from the rooftops is the very real possibility that the grid of the future will also be cheaper and more equitable than what we’ve known in recent decades.
The cost of solar, wind, and batteries has dropped considerably in the last five years. These once cost-prohibitive resources are now among the cheapest resources available and have been seized upon by suppliers on the supply side of electricity’s exchange and consumers on the demand side.
Now more than ever, electric utilities across the US need demand response programs to better integrate these key resources into the grid so everyone can benefit from the reduced costs and lowered emissions they enable.
National Grid, like many utilities across the US in deregulated energy markets, is not allowed to own or operate power plants. The regulations that govern us and other utilities involve revenue decoupling mechanisms that ensure our utility’s profits are not tied to increasing electricity sales. Instead, our regulators have put other performance-based incentives in place for us to make sure that our interests always align with our customer’s interests.
Demand response and the rest of our energy efficiency portfolio are great examples of these incentives. As the saying goes, the cleanest kilowatt of electricity is the one you do NOT use. For decades, we and other utilities across the country have offered energy efficiency programs to our customers, because it is a lot cheaper to save energy than it is to build new power plants and grid infrastructure.
Financial Incentives as a Driver of Change
How do we get that to a lofty goal of having 100% of our electricity generated from renewables? It’s a complex answer which requires efforts on both the supply and demand sides.
The opportunities for both commercial and residential consumers to serve their clean and renewable loads back to the grid will likely thrive if the right incentives are in place.
For starters, utilities will need to introduce incentives to encourage more households and businesses to install behind-the-meter solar and storage while simultaneously incentivizing the acceleration of front-of-the-meter solar and wind farms.
That being said, there is a lot more electric utilities need to do to get the word out to our customers about existing incentives to adopt renewables. Many customers would likely move on this today if they knew how lucrative renewables can be and how much they help the environment.
Of course, the grid needs to be ready to accept all that new renewable generation. The challenge then for utilities is to develop customer-friendly programs that incentivize customers if they allow their utility to discharge and charge their batteries at the right times and tweak their inverter settings to improve power quality.
Utilities will also need to further develop the system used to manage distributed energy resources so that the right signals are sent at the right time to the right places on the grid in order to unlock the maximum benefit and reduce emissions and overall costs.
It’s an exciting time for electric utilities. The grid is evolving and we, along with our customers, are evolving with it, poised to do our part to help keep the power flowing, rates affordable, and the Earth plentiful during this important transition to energy’s sustainable future.