Leveraging Advanced Energy Technologies to Improve Grid Utilization and Manage Peak Demand

Bringing down the cost of energy is a top priority for nearly every decisionmaker across the country right now. At the same time, the grid is in dire need of more investment to replace aging assets, to prepare for an electrified future, and to shore up reliability and resilience as extreme weather and natural disaster threats become more commonplace.

These two competing realities present a major challenge for our leaders–governors, legislators, and utility regulators. While no one simple policy exists that will meet all of our critical electric sector objectives at once, there are some powerful policy tools available that are being embraced by legislatures and public service commissions. Two of these policy ideas are to improve grid utilization and peak load management. In combination, these two policy frameworks are essential for helping address load growth while delivering ratepayer benefits.

The powerful combination of improving grid utilization and peak load management

We know several things to be true about our grid and electricity costs:

• Serving peak electricity demand is extremely expensive. This is both because peak supply is the most expensive supply and because transmission and distribution system infrastructure is sized to serve peaks, meaning the system may only be used to near its full capacity for a few tens or perhaps 100-200 hours per year. The peakier the system, the more expensive it is, which pushes up average rates.

• The more load growth contributes to the peak, the more utilities will have to invest in building more delivery infrastructure on the transmission and distribution systems just to serve those handful of high load hours.

• Because our grid is built to serve the highest demand on a given day of the year on a given part of the system, by definition, the grid has spare capacity at all other hours of the year.

• When setting electric utility rates, the cost of grid infrastructure is spread over the total number of kilowatt-hours (kWh) sold (in simplified terms). Increasing off-peak electricity consumption can put downward pressure on average rates if you limit spending on infrastructure, because costs are spread over a larger amount of electricity sales.

• The ability of additional electricity sales to put downward pressure on rates may not materialize if we must continue to build out the grid to meet ever-higher peaks.

Our best bet, then, is to work towards two complementary goals: (i) get more out of our existing resources and infrastructure (“improved grid utilization”), and (ii) constrain peaks in order to minimize investments in new infrastructure to meet growing peak demand (“peak management”).

Many of the same technologies and programs achieve both ends.

Advanced energy technologies can improve both grid utilization and peak management

Flexible building electrification

Imagine that a Massachusetts family has lived for years without air conditioning–a point of pride given their hardy New England roots. But summers have gotten hotter, and fans are not cutting it anymore. Installing a high-efficiency heat pump offers new comfort and increases the electrons flowing through the system throughout the cooling season. The added load from this form of building electrification is beneficial on all off-peak hours–representing an increase in grid utilization that can put downward pressure on the average per-kWh rate for all customers.

But if that heat pump works at full capacity during system peak, it will drive the need for more peak supply and, potentially, new delivery infrastructure. A smart thermostat responding to a time-of-use rate (a peak management tool) minimizes its electricity draw when the grid is already strained, avoiding the need to increase capacity on the system. (A home battery, or a battery integrated into the heat pump itself, that dispatches during peak hours to power the appliance, would also work to increase grid utilization without impacting peak).

Flexible transportation electrification

A local trucking company is ready to go all-electric. Their drivers love the noise-free vehicles, and the company loves the idea of getting off the gasoline price roller coaster that is making it hard to budget. The trucks are on order, and the fleet owner has applied to their local electric utility to increase their connection capacity to support a few Level 2 and fast chargers. To their surprise, the utility comes back with a massive quote–the necessary upgrade will tip the local electricity network over its capacity limit and the trucking company is the one on the hook to pay for the upgrade if they want their chargers.

The cost of the grid upgrade makes the switch to EVs uneconomic, and would deprive the utility’s customers of the benefits of having more kWhs flowing through the system. Flexible interconnection and automated load management, via smart chargers, electric panels, and meters, can manage peak and save the day! By ensuring that the company’s charging load stays within system limits at all times, including during peak periods, on that segment of the distribution system, the company can proceed with electrification without triggering any new infrastructure spending. Grid utilization is thus increased, and costly peaks are contained.

Distributed energy resources and virtual power plants

A school district has recently bought some electric school buses to capitalize on their total cost of ownership savings and provide healthier air for their students. The buses consume a lot of electricity, but since their utility is summer-peaking, this additional load (improved grid utilization) is readily accommodated during the school year and helping to put downward pressure on rates for everyone.

But the grid’s supply resources are nearing capacity during summer heatwaves, and utility planners are considering a major (and expensive) new gas power plant to serve just those top 200 hours (about 2.3% of hours). Fortunately, electric school buses, which are quite literally big mobile batteries, often sit idle during the July and August peaks before kids go back to the classroom. By participating in a battery export virtual power plant program, the electric school buses can contribute to managing peaks, helping the utility avoid building the new peaker plant and associated transmission. This is great news for ratepayers, who experience a slightly lower rate all year round from EV-driven load growth and who avoid paying for a big new investment. The school district also gets paid for participating in the programs, which helps it reduce its overall energy spend, allowing it to put more resources into education.

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At the end of the day, deployment of technologies like these can save both individual consumers and all utility customers money. But to achieve scale and speed of deployment, we must realign utility financial incentives with the outcomes we seek–namely, increasing grid utilization, capital expenditure cost containment, and customer affordability outcomes–rather than “the more you build, the more you make” 20th century utility business model. In this era of load growth and grid modernization, peak demand reduction targets and grid utilization metrics and incentives are emerging as particularly relevant ways to measure, manage, and reward utility performance that has an impact on rates.

Setting the right targets is a complex exercise that requires segmenting out different parts of our electric delivery system (e.g., the transmission system, distribution system feeders, at the distribution-transmission interface, at power generation facilities), describing our ideal state, and balancing competing objectives (such as purposeful redundancies for resilience, the desire to build the distribution system ahead of need to avoid energization delays, or engineering tradeoffs between equipment usage versus longevity).

This year, the CHARGED Initiative—a joint project of Advanced Energy United, GridLab, and RMI—will release materials digging into the details around grid utilization metrics and metrics for proactive investment, which can help guide decisionmakers as they explore turning these complex policies into reality. And in the meantime, the more we accelerate deployment of advanced energy technologies and programs, the sooner we can all reap the financial benefits of a more flexible, better utilized, and less peaky grid.