Demand Flexibility Could Reduce Customers' Utility Bills 10-40%, Save $13 Billion Per Year in Grid Costs, Says New Rocky Mountain Institute Report

SNOWMASS, Colo., Aug. 26, 2015 (GLOBE NEWSWIRE) -- Today, Rocky Mountain Institute released a report, The Economics of Demand Flexibility, detailing how "flexiwatts" can unlock significant value for both customers and the grid.

For decades, ensuring necessary flexibility in the U.S. electricity system has focused on the supply side—having enough generation, transmission, and distribution capacity to meet demand. But demand-side flexibility is proving increasingly important, too, and according to the new report's analysis, a large untapped opportunity.

Residential customers have traditionally had three options for how to meet their electricity needs: a) buy electricity from their utility, b) generate electricity for themselves, such as with rooftop solar PV, or c) eliminate the electricity need through efficiency upgrades such as LED lights and home weatherization. But now customers have a fourth option: demand flexibility.

With the aid of simple automation technologies like smart thermostats to control AC and grid-interactive water heaters, customers can shift their electricity use across time without impacting service quality. In the presence of increasingly common rate structures such as time-varying pricing and residential demand charges, these flexiwatts can reduce peak demand, shift demand to lower-cost times, enhance the value of rooftop solar, and lower grid costs.

"Utilities can potentially avoid $13 billion per year in forecasted grid investment needs by just making simple residential loads flexible and responsive to price signals," explained James Mandel, a principal in RMI's electricity practice and coauthor of the report. "With a projected $50 to $80 billion of investment needed annually for the grid in the next 15 years, demand flexibility takes a big bite out of those numbers."

The consumer opportunity is large too. Demand flexibility can save millions of residential retail customers 10 to 40% on their utility bills, totaling $110 to $250 million per year in each of the four utility territories analyzed in the RMI report alone. "The total nationwide market is even bigger than our four analyzed scenarios," said Mark Dyson, another coauthor of the report.

"Some 65 million customers in the U.S. already have access to time-varying rates today. Many of them could be saving money right away by opting in to these rates and adopting simple intelligent controls to make loads flexible."

With the U.S. Supreme Court considering a demand response case in its upcoming session, the new demand flexibility analysis is especially important and timely.

Demand flexibility is an important complement to, but distinct from, traditional demand response programs. The Supreme Court will be considering FERC Order 745 in its session that begins this fall. "With uncertainty about the Supreme Court's final ruling on FERC Order 745, demand flexibility will either prove an important complement to demand response or emerge as one of the major demand-side grid solutions if SCOTUS strikes down 745," said Mandel.

Plus, with the White House recently announcing greater support to bolster homeowner adoption of rooftop solar PV, demand flexibility plays an important role there as well. Questions about the future of net energy metering in certain markets, changes in rates and export compensation for solar PV customers, and concerns about grid integration of renewable energy all make demand flexibility a low-cost resource that preserves and enhances solar PV's value.

"The grid is rapidly evolving, and with it, many long-held assumptions about electricity supply and demand must be revisited," said Dyson. "In this new, unfolding era, demand flexibility should prove a low-cost, powerful capability that truly benefits both customers and the grid."

About Rocky Mountain Institute

Rocky Mountain Institute (RMI)—an independent nonprofit founded in 1982— transforms global energy use to create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to efficiency and renewables. In 2014, RMI merged with Carbon War Room (CWR), whose business-led market interventions advance a low-carbon economy. 

The combined organization has offices in Snowmass and Boulder, Colorado; New York City; Washington, D.C.; and Beijing.