Do solar energy and battery storage pose a major threat to the utility business model, or do they create opportunities for change and growth? Industry experts have been asking themselves this very question for some time now, and the answer revolves entirely around demand flexibility. This is because studies have revealed that the “when” of customer electricity usage is just as important to utilities as if they produce it themselves.
Principal James Mandel of the Rocky Mountain Institute has been making efforts to truly drive this point home. According to Mandel, the ability of customers to control both when and how they make use of electricity is an essential link in balancing the power between utilities and consumers. Such control is reliant upon demand flexibility.
Historically, however, demand flexibility has been seen as somewhat of a pain, creating complications in customer energy usage. Enter: Flexiwatts. Flexiwatts use “communication and control technology to shift electricity use across hours of the day.” (From the report “The Economics of Demand Flexibility: How Flexiwatts Create Quantifiable Value for Customers and the Grid.” To put it simply, smart technology is used to shift climate control, water heating, electric vehicle charging, etc. to being used during intervals where the load is lower and electricity is less costly. The smart devices are capable of completely taking control of these functions and can actually be programmed to recognize when the optimal price periods are.
Why would utilities be interested in ensuring that customers are capable of taking advantage of the cheapest electricity, though? Consider the fact that a growing number of consumers are discovering the environmental and economic benefits of switching to solar and PV batteries, with that number increasing each year. These customers then contribute to grid load defection. Studies have even considered the possibility of customers reaching the ability to rely completely upon 100% self-supply by as early as the 2020s and 2030s. Ultimately this will lead to the total demise of the grid - unless utilities adjust.
Utility adjustment, however, means a lot more than simply raising the costs of electricity in an attempt to compensate for monetary losses. Demanding more money from those who remain dependent upon the grid will only push them towards total self-sufficiency, further taking away from the utilities’ bottom line. Instead, utilities must evolve in ways that benefit both customers and themselves.
This means that utilities must create business models that place value upon renewable energy sources and distributed energy sources (DERs). In this way, systemwide costs can potentially be lowered while simultaneously contributing the the establishment of a reliable, affordable, and low-carbon grid for future generations. Utilities, then, must send positive price signals that motivate customers to invest in ways that serve the system-level rather than solely their own interests.
Consistent and reliable pricing models are a must in order to appeal to customers and make good sense. Some utilities might lean towards time-of-use pricing which raises electricity costs during peak demand hours, whereas others may prefer real-time pricing which is based upon set hourly rates. When customers know what to expect, they can take steps to make a minimal investment in technologies like smart thermostats and programmable timers that will enable them to harness maximum savings while still having the ability to rely upon the grid.
The key takeaway here is that demand flexibility can breathe new life into the utilities industry. While the widespread usage of solar and battery storage is still years off, demand flexibility can be harnessed right here, right now, and can change the relationships that consumers have with their utility providers. Demand flexibility, then, should be a priority for both utilities and consumers who which to scale back their expenses.
To learn more about demand flexibility and what it can mean to your business, contact NuEnergen and speak with one of our knowledgeable professionals.