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Oct 1, 2015

4 Ways Demand Flexibility Can Enable a Low-Carbon Grid


Earlier this week the seventh annual Climate Week NYC concluded. Late last week the U.S. and China announced bold new climate commitments. And the world at large is optimistically looking ahead to COP 21 in Paris in December. Climate is undoubtedly center stage, and reducing the carbon intensity of our grid paramount.

Much of the discussion around reducing the grid's emissions focuses on existing power plants powered by coal and gas, versus new renewables, such as wind and solar. It’s true that to realize large-scale emissions reductions, we need to re-imagine the supply side of the electricity equation. But it’s important we don’t forget about the demand side, which is a powerful lever in our toolkit to reduce emissions.

The emissions benefits of reducing demand through energy efficiency have been long recognized. The less total energy we need to run our lights, refrigerators, and TVs, the less coal and gas are burned at the power plant. But almost as important as reducing the amount of demand is controlling the timing, because the emissions impact of electricity generation changes dramatically by time of day and by the peak magnitude of the demand. Different power plants run at different times of day depending on demand levels, and they have very different emissions profiles. For example, a modern natural gas plant emits about a pound of CO2 per kWh of electricity generated, while an old coal plant emits nearly twice that much for the same generation.

As we showed in our recent report The Economics of Demand Flexibility, it’s getting easier and cheaper than ever to manage the timing of electricity demand in order to reduce electricity costs for both customers and utilities. But by extension, demand flexibility can also reduce the carbon intensity of our grid … without even changing the generation mix of that grid, but rather by influencing which supply-side resources are called upon when. Here are four ways how:

1. Demand flexibility enables higher utilization of cleaner, more-efficient power plants

In today’s system, peak demand is often met by the dirtiest, least-efficient power plants. By shifting load away from peak periods, we can save money and fuel. For example, it takes over 50 percent more natural gas to run inefficient, gas turbine “peaker” plants than it does to run more-efficient and cleaner combined cycle plants. By shifting load to be powered by these more-efficient power plants instead of peakers, demand flexibility can reduce the fuel needed to generate electricity significantly.

Historically, there has been a risk that shifting load to off-peak hours would increase coal generation and decrease gas generation, leading to higher CO2 emissions. However, that is becoming less of an issue every day, with low gas prices ensuring that relatively clean combined-cycle units are now running as so-called “baseload,” and dirty coal units are being run less frequently or even retired.

2. Demand flexibility reduces system losses

When electricity is moved from generators, sent across transmission and distribution lines, and then delivered to end customers, a significant amount is lost along the way. A typical average loss rate for the whole year is about 6 percent, but on peak, the marginal loss rate is much higher—up to 20 percent—because these losses are roughly proportional to the square of demand. That means for an on-peak energy demand, up to 20 percent of the energy used to meet that load is lost as heat before it ever reaches the customer.

Using demand flexibility to shift load to off-peak hours, when marginal loss rates are much lower, can reduce generated emissions to meet that load by more than 10 percent. Alternatively, using flexibility to shift load to be coincident with rooftop PV generation means that total energy generation, and emissions, can be reduced up to 20 percent.

3. Demand flexibility can reduce renewable energy curtailment

Because wind and solar power have predictably variable output, grid operators have sometimes had to “curtail” their output during some hours in order to keep the system running smoothly. Surplus renewables generation has to go somewhere, even if that means curtailing and thus not using it. But even as the level of wind and solar power on the grid has soared in recent years, this curtailment has decreased as system operators have gotten better at integrating these resources. Even so, NREL still estimates about two percent of wind generation is curtailed each year.

Demand flexibility can address many of the causes that lead to this curtailment. An oversupply of wind power coupled with low demand can be mitigated by increasing load (through shifting it from other times) during high-wind hours; utilities in the Pacific Northwest have successfully piloted this method by storing heat in water heaters and ceramic bricks. Other issues caused by the variability of the output can be addressed by balancing in real-time the output of wind generation with customer loads.

In short, demand flexibility can make demand follow supply, not the other way around as the grid has been run for 100 years, and that means that we can use more of the renewable energy that we build.

4. Demand flexibility can help clean up the supply side in the long run

Starting today, we can start realizing the three carbon benefits of demand flexibility explored above, but they also have important long-run implications. By letting demand follow supply, demand flexibility can increase the use of clean, efficient power plants and renewables, and thus send a market signal to build more of these resources in the future. In the long run, that means that it will be even more cost-effective to build more renewables and clean, efficient power plants, and less economical to build or maintain inefficient peaking plants and old coal plants

Scaling the flexibility resource: more than just economics

In our recent report, we focused on dollars: how demand flexibility can save customers 10–40 pecent on their monthly bills while saving the grid $13 billion per year. But equally as important are tons of carbon: flexibility can also lead to dramatic emissions reductions, starting today and increasing as the grid’s generation mix continues to evolve.

Demand flexibility is already attractive on an economic basis, and its emissions reduction potential is an important co-benefit that could help drive it to scale. Companies like WattTime are already integrating software into everyday appliances like thermostats and electric vehicle chargers, seamlessly shifting load directly in response to the emissions profile of the power grid.  Solar developers are investing in home energy management platforms to enable their customers to use more rooftop PV energy within their homes, in order to ensure that customers get the zero-emissions energy that they want.

These and other companies are demonstrating an important lesson for the industry: many customers want more than just bill savings. As the electricity industry and its ever-expanding cast of players race to provide customer solutions, keeping this lesson in mind may help to scale demand flexibility even faster than the core economic business case would suggest.

Image courtesy of Shutterstock. 

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