Demand Flexibility Can Fix the California Grid

August 18, 2020

Rolling blackouts are once again demonstrating the fragility of California's power grid. Rebuilding grid infrastructure to handle the most extreme scenarios climate change will throw at us will be extraordinarily expensive. Until the state deploys real, lasting, and affordable solutions, the problem will only get worse. We need all hands on deck on both sides of the meter.

With all the emphasis on grid-scale storage, transmission, and demand response, it seems we have forgotten the simple approaches that can be scaled immediately to reduce peaks, and simultaneously support customers facing untenable electricity bills due to COVID.

Historically, California has led the nation in its efforts to manage demand. Customers who turn up their AC set points, shut off lights, and invest in their buildings to reduce load with tried-and-true technology such as insulation or efficient HVAC don’t just save energy; they shape loads in ways that can reduce demand during critical periods. When it comes to avoiding blackouts and lowering the cost of electrons for everyone during these costly events, these resources are as valuable to the grid as storage or generation capacity--and they have the added benefit of helping end customers directly. 

As Ben Inskeep recently asked on Twitter, why are customers like these asked to donate their grid values to a for-profit utility when everyone else is getting paid? 

The owner of a battery gets paid for discharging during an event; a merchant gas plant gets paid for pumping out dirty electrons. Someone who changes their AC settings can get paid for their grid services. How is it that homeowners who invest in new ducts and attic insulation that cuts their AC load during peak events are asked to make these investments out of pocket or on their credit card?

Companies like OhmConnect have gained market access to demand response values through the Demand Response Auction Mechanism. They are actively proving how vast the demand-side resource is, recently committing to “600MW of carbon-free awesome up and running by next summer” if they could just get some regulatory certainty. 

However, many of the most substantial potential load shaping resources are non-dispatchable and continue to have no outlet for compensation. 

These long-term and predictable load shaping resources include infrastructure investments in our buildings such as high-performance HVAC and heat pumps, insulation, lighting, and other physical investments in our buildings. These solutions, if deployed wisely, can reduce systems peaks while also delivering a host of additional customer, grid, and economic benefits.

For California to engage this plentiful resource and stabilize our grid, we need an integrated approach to demand flexibility that encourages investments in distributed behind the meter infrastructure that can provide deep and predictable load shaping (aka passive demand response) and event-driven active demand response. 

Reducing every summer peak with good insulation and a high-efficiency air conditioner (or better, a heat pump!), can be just as valuable to the grid as a customer who turns the AC to 85 during an event. Upgrading a home’s overall efficiency is even more valuable to the customer. They may not need to sacrifice as much comfort to achieve the same load reduction, and they will see bill savings all year round.

An increasing number of programs, such as PG&E’s Pay-for-Performance and upcoming CCA flexibility marketplace, are putting these ideas into action. However, this progress is hobbled by complex and outdated regulations, and a utility DSM industry hooked on prescriptive rebates that were created through a process designed for a different time.

Our proposal to revolutionize the demand side comes down to these simple steps.

  1. Measure all flexibility at the meter using open-source, revenue-grade calculations.
  2. Value the change in demand based on the marginal hourly avoided cost.
  3. Pay aggregators for the avoided cost value of their delivered flexibility on performance.

We have been trapped in the purgatory of outdated regulations, lack of real data, and centralized programs for too long.  But today, we have the legislation (SB350 / AB802), and regulation (NMEC Rulebook) needed to make this change happen, we just need the will to pivot quickly to this new reality.  

The urgent need to both decarbonize and manage growing grid instability requires a change of approach. Regulators, advocates, market actors, and utilities need to break down barriers and give demand flexibility market access on par with all other resources.  

There is nothing in our way but a lack of vision and a general unwillingness to pivot -- but with the aging grid, climate change, and fire danger, there is no more time to waste. 

To better understand how smart meter interval data, combined with open-source methods and software, can enable the integration of demand flexibility into energy, capacity, and carbon markets, and as a transmission and distribution resource, read our secret plan.

The Secret Plan for Decarbonization: How Demand Flexibility Can Save Our Grid

Read our Electricity Journal article to learn how behind the meter flexibility can work as a true grid and climate resource.

Read the articleRead the article

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