Electricity Markets

Report sees major potential for flexible demand response

Demand response programs in the United States have the cost-effective potential to grow to 198 gigawatts by 2030, up from 59 GW today, largely through programs that can provide around the clock grid flexibility, according to the Brattle Group.

“The potential for load flexibility to facilitate the transition to a decarbonized power system is remarkable and currently overlooked,” said Ryan Hledik, a Brattle Group principal.

The consulting firm estimated that the benefits of load flexibility could exceed $15 billion a year, partly by avoiding power plant investments, avoided energy costs, delays in transmission and distribution upgrades and the provision of ancillary services.

Current demand response programs largely focus on reducing peak load during a few hours of the year, the Brattle Group said in a report released June 27.

Once a rapidly growing resource, conventional demand response is reaching a saturation point in markets where peak capacity needs are no longer growing, the Brattle Group said.

Stagnation in the market is also driven by increasingly stringent wholesale market rules, low capacity prices and five or more years of excess peak capacity by many utilities, the consulting firm said.

However, demand response can be “repurposed” to address key utility sector trends like renewable energy growth, grid modernization and electrification, according to the Brattle Group.

Flexible demand response, for example, can shift electric use to periods of low net load, the Brattle Group said.

Electric water heaters, for example, can provide load flexibility. “While water heaters have been used to reduce peak capacity for decades, recent technological developments now allow for more flexibility in load control, including the provision of frequency regulation,” the Brattle Group said.

Grid-connected water heating programs have recently been introduced in Arizona, California, Hawaii, Minnesota, Oregon, Vermont and across the PJM Interconnection, the Brattle Group noted.

A surge in various technologies — behind-the-meter energy storage, smart meters, electric vehicles and smart appliances — can facilitate increased flexible demand response, according to the Brattle Group.

The consulting firm pointed to data showing BTM storage capacity is expected to jump to 8.5 GW in 2024 from 100 megawatts in 2017. Also, the number of smart meters is set to grow to 90 million from 70 million in the same years and annual EV sales are forecast to hit 1.4 million compared with 250,000 in those years, according to the Brattle Group. The number of homes with smart appliances is expected to reach 50 million, up from 14 million, in the same period, the consulting firm said.

There are three main avenues for expanding demand response capacity to reach nearly 200 GW, according to the Brattle Group.

Expanding existing conventional demand response programs could add 16 GW of capacity by 2030, according to the Brattle Group.

“Existing conventional programs often have untapped potential that can be harnessed through revamped customer marketing and outreach, modified program rules, and redesigned incentive structures,” the consulting firm said.

There is the potential to add another 40 GW of new load flexibility programs that capture additional value streams, the Brattle Group found, noting that under current national average market conditions, the most significant cost-effective potential is in smart thermostat programs for residential customers and dynamic pricing for all customer segments.

Finally, the growth in renewable energy and technologies like smart meters facilitates another 83 GW of flexible demand response, according to the report.

Looking ahead, the Brattle Group said utility load flexibility programs will likely “get smarter” before they get bigger. “There is low-hanging fruit in simply modernizing these programs to serve the growing need for system flexibility,” the consulting firm said.

Also, residential load flexibility additions will likely be larger than those for the commercial and industrial sector, according to the report.

New regulations will likely drive growth in load flexibility, according to the Brattle Group. “There is a renewed industry-wide interest in regulatory models that provide utilities with incentives to pursue demand-side options rather than infrastructure investments,” the consulting firm said.

The report is available here.