The Economics of Demand Flexibility Business models to deliver customer value in an integrated grid ACEEE Intelligent Efficiency Conference, December 7, 2015 Mark Dyson, Manager – Rocky Mountain Institute [email protected] | @mehdyson | www.rmi.org/electricity_demand_flexibility
2000 2500 3000 3500 4000 4500 5000 5500 6000
1980
1985
1990
1995
2000
2005
2010
2015
2020
2025
2030
2035
2040
electricity
sales T
Wh
Year
EIA electricity consump7on projec7ons
Context: rising costs, flat demand 2
Utilities plan to invest $1.4 trillion in infrastructure upgrades through 2030, but sales have declined 5 out of the last 7 years, and growth forecasts have been systematically lowered.
$505
$300
$580
$1,385
$-‐ $200 $400 $600 $800
$1,000 $1,200 $1,400 $1,600
$ billion
Grid investment forecast, 2015-‐2030
Source: DOE QER 2015; EEI; EIA EPM and AEO
Actual
Forecasts
2002
2015
RO
CKY MOUNTAIN
INSTIT UTE
THE ECONOMICS OF DEMAND FLEXIBILITY | 6
EXECUTIVE SUMMARY
THE EMERGING VALUE OF FLEXIWATTS: THE BROADER OPPORTUNITY FOR DERs TO LOWER GRID COSTS
Electric loads that demand flexibility shifts in time can be called flexiwatts—watts of demand that can be moved across the hours of a day or night according to economic or other signals. Importantly, flexiwatts can be used to provide a variety of grid services (see Table ES1). Customers have an increasing range of
choices to meet their demand for electrical services beyond simply purchasing kilowatt-hours from the grid at the moment of consumption. Now they can also choose to generate their own electricity through distributed generation, use less electricity more productively (more-efficient end-use or negawatts), or shift the timing of consumption through demand flexibility (see Figure ES1). All four of these options need to be evaluated holistically to minimize cost and maximize value for both customers and the grid.
TABLE ES1FUNDAMENTAL VALUE DRIVERS OF DEMAND FLEXIBILITY
CATEGORY DEMAND FLEXIBILITY CAPABILITY GRID VALUE CUSTOMER VALUE
CapacityCan reduce the grid’s peak load and flatten the aggregate demand profile of customers
Avoided generation, transmission, and distribution investment; grid losses; and equipment degradation
Under rates that price peak demand (e.g., demand charges), lowers customer bills
Energy Can shift load from high-price to low-price times
Avoided production from high-marginal-cost resources
Under rates that provide time-varying pricing (e.g., time-of-use or real-time pricing), lowers customer bills
Renewable energy integration
Can reshape load profiles to match renewable energy production profiles better (e.g., rooftop solar PV)
Mitigated renewable integration challenges (e.g., ramping, minimum load)
Under rates that incentivize onsite consumption (e.g., reduced PV export compensation), lowers customer bills
kW
Reduce demand whenever load is operated, thus lowering the daily load curve.
0 4 8 12 16 20 24
1
2
3
Normal Load Efficient Load
hour
Energy Efficiency
Generate electricity, changing the profile of net grid demand while reducing total grid demand.
0 4 8 12 16 20 24
1
2
3
Normal Load PV Net Load
hour
Distributed Generation
Buy kWh from the grid as and when needed.
0 4 8 12 16 20 24
1
2
3
Normal Load
hour
Grid Purchases
Shift eligible loads across the hours of a day to lower-cost times, reshaping the daily load curve.
0 4 8 12 16 20 24
1
2
3
Normal Load Flexible Load
hour
Demand Flexibility
FIGURE ES1GRID PURCHASES, DISTRIBUTED GENERATION, ENERGY EFFICIENCY, AND DEMAND FLEXIBILITY COMPARED
Consumers have expanding options 3
To meet demand for electricity, utility customers used to buy it, but it is increasingly easy and cost-effective to make it, avoid it, or shift it.
Source: RMI The Economics of Demand Flexibility
Harnessing DER: demand response vs. demand flexibility 4
Underlying technology is the same, but demand flexibility business models build on and complement the traditional demand response paradigm.
Grid focused Customer focused
Wholesale drivers: price, reliability
Retail drivers: tariffs, DER integration
Infrequent / emergency Frequent / always on
Demand Response Demand Flexibility
Consumer value increases scalability Slow to scale
Trends in rate design value demand flexibility 5
Nationwide, 65 million customers are already eligible to opt in to time-of-use pricing rates, and an increasing number of utilities are proposing non-volumetric default rates.
Trend Overview Examples
Time-‐varying energy pricing
Prices for energy change, as oQen as hourly, depending on Rme of day.
ComEd, Ameren (IL), California, MassachuseXs, >600 others
Demand charges Customers pay a fee corresponding to maximum demand during a given period (e.g. monthly)
Salt River Project, Arizona Public Service, PG&E*, SDG&E*, Westar Energy, OG&E*, 10+ others
Reduced export compensaRon for PV
Exported PV is compensated at less than the retail rate
HECO, Alabama Power, Xcel*, Tucson Electric*, SCE*, SDG&E*
*proposal
0"
5"
10"
kW#
Uncontrolled#load#profile#
"%""""
"5""
"10""
kW#
Flexible#load#profile#
Demand flexibility supports on-site PV use 6
Load can be scheduled to coincide with PV generation in the absence of net energy metering.
Move load into PV producRon hours
!"!!!!
!2!!
!4!!
!6!!
!8!!
!10!!
!12!!kW
#Flexible#load#profile#
Ba+ery!
EV!
Dryer!
DHW!
AC!
Other!load!
Source: RMI The Economics of Demand Flexibility
Customers save 10-40% net with DF 7
Under rates that exist today, residential customers can achieve 10-40% annual bill savings. Across just four markets, there is an $800 million/y savings potential for eligible customers.
RO
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INSTIT UTE
THE ECONOMICS OF DEMAND FLEXIBILITY | 8
EXECUTIVE SUMMARY
FIGURE ES2ESTIMATED AVOIDED U.S. GRID COSTS FROM RESIDENTIAL DEMAND FLEXIBILITY
FIGURE ES3DEMAND FLEXIBILITY ANNUAL POTENTIAL BY SCENARIODF GENERATES SIGNIFICANT PER-CUSTOMER BILL SAVINGS (%) WITH LARGE AGGREGATE MARKET SIZES ($ FOR EACH ANALYZED UTILITY TERRITORY)
$16
$10
$12
$14
$4
$6
$8
$2
$0
$6.9
$2.1
$3.3$0.7 $0.4 $13.3
$bill
ion/
year
Generation
*Individual components do not add to total because of rounding
Transmission &Distribution
Energy Arbitrage Regulation Spinning Reserve Total
Capacity Ancillary Services
80%
90%
100%
50%
60%
70%
20%
30%
40%
10%
0%Real-Time Pricing
(ComEd)
$250 mil/year
12%
Residential DemandCharges
(SRP)
$240 mil/year
41%
Rooftop Solarwith No Export Compensation
(HECO)
$110 mil/year
33%
Avoided CostCompensation for
Exported PV(APC)
$210 mil/year
11%
Per-Customer Net Bill Savingsby Scenario
Market Size in Each Utility Territory
Source: RMI The Economics of Demand Flexibility
Case details: Salt River Project 8
• DF reduces peak demand by 48% • PV customer saves 41% net on bills • A new customer breaks even, including
cost of PV at today’s prices
• >350,000 eligible customers • $240 m/y savings for eligible customers • Unlocks $6 billion rooftop PV market
$-‐ $1,000 $2,000 $3,000 $4,000 $5,000
Default rate
PV + Demand Charge
DF
$/year
Annual supply costs: SRP customer
Fixed
Demand
DF tech PV tech
Energy
Source: RMI The Economics of Demand Flexibility
New business models can scale this resource 9
Utility tariffs and programs can line up incentives for new business models to deliver what the customer values, while also lowering bills and reducing grid costs with demand flexibility.
v Lower bills v Increased comfort v More control v Self-‐genera7on v Green a9ributes v Shiny objects v Social engagement v Security v ...
Customers want many things... ... and companies are innova7ng to deliver it
Developers and utilities have a role to play 10
Good retail pricing and new business models can unlock massive value from demand flexibility, and reduce customer bills while lowering grid costs.
DER developers Utilities & regulators v Capture the grid value of
flexibility + PV with rate design that aligns incen7ves by lining up customer prices with uRlity costs
v Seek partnerships to unlock innova7on and drive the scale of the flexibility resource
v Take advantage of business opportuni7es that exist today across the US and abroad
v Focus on delivering what the customer wants, but seek to moneRze addiRonal grid values of demand flexibility
