The energy sector in the US is experiencing unprecedented change and growth, shaped by ambitious net zero goals set at the State level, the largest federal investment in climate and clean energy in history with the Inflation Reduction Act (IRA), and new regulations like the FERC Order 2222 helping to usher in the grid of the future.
For utilities and customers, supply remains at the heart of the energy conversation regarding what that future looks like. More and more, we are seeing Distributed Energy Resources (DERs), such as solar PV, electric vehicles (EVs), and energy storage systems come online to offset our need for traditional centralized power generation and secure local home-grown energy.
Just last year, electric power generation from all types of renewables accounted for nearly one-quarter of total generation nationwide. As the US energy landscape continues to adapt, grid flexibility will be crucial to addressing the variable availability of renewable energy and enhancing the overall resilience of the grid.
An inflection point for grid flexibility
Last month, I attended the 2023 National Association of Regulatory Utility Commissioners (NARUC) Summer Policy Summit in Austin, TX, which gathered utilities, thought leaders, and energy advocates from across the country to discuss how evolving our energy policy can help to strengthen the US’s energy system.
Representing Piclo at the NARUC conference, it was hard not to notice that I was not the only freshman at the party. From emerging energy businesses attending the event like EV charging companies, DER developers, and software providers, to larger established organizations entering the energy flexibility space such as Ford and Google, it was clear to see that the clean energy sector is booming.
Following the passage of the IRA last year, over $40 billion in domestic clean energy investments have been made – an amount equal to the total investment estimated for all clean energy projects installed in 2021. For these new low-carbon technologies to connect to the grid quickly and effectively, grid upgrades to manage the additional impact and variable load and generation patterns are needed.
Yet, new challenges come from this type of massive change. Due to the magnitude of current infrastructure developments, coupled with their costs and lengthy lead times, upgrading the grid alone cannot facilitate the transformation of the energy system with the urgency required to catalyze decarbonization. As a result, there is a vital need to expand and invest in grid flexibility services through DERs, which can be rapidly deployed through marketplaces such as Piclo Flex.
Having the right conversations at the right time
As we inch closer to 2050, we need to make sure that we are having the right conversations, so we can realize the potential of grid flexibility as a solution to energy and climate challenges. Here are four topics coming out of the NARUC conference that we can tackle right now:
Properly valuing DERs will lead to savings in carbon and dollars
When it comes to distribution planning, DERs can create opportunities for savings as another tool in the toolbox for utilities; one that addresses demand response and the enhanced needs of the grid. To fully realize the potential of flexible energy from a deployment and grid services perspective, regulators need to look at properly valuing DERs and ensuring that adequate incentives are in place. The faster we can enter this new stage, the more savings there are to be realized in carbon and in dollars.
Improve regulatory incentive mechanisms to drive growth
Despite the facts showing us that DERs will be the key to unlocking grid resilience in the US, there is still a challenge in adopting low-carbon technologies at the rate that we need.
To drive growth, we need to set effective regulatory incentive mechanisms for utilities that reflect the holistic value of DERs. Currently, CapEx-related costs, such as physical grid reinforcement, are reimbursed at a higher rate in comparison to OpEx-related costs, such as DER flexibility services.
Already, we’re seeing that non-wire alternatives (NWAs) can lead to significant cost-savings for both utilities and consumers, such as Con Edison’s Brooklyn Queens Demand Management Program which included energy efficiency, demand response, and distributed resources strategies that resulted in an estimated net benefit of $94.9 million. We need to build on these learnings and rethink how we incentivize the development of the grid and our energy infrastructure.
Realize the potential of our growing pool of DERs.
DERs have a robust future in the US. Analysts expect that the DER market will nearly double by 2027, much of that expansion will be driven by the growth of EV infrastructure and energy storage. As more states set ambitious goals for EV procurement, clean energy generation, and electrification, our need for strong DER deployment will only increase.
To manage the proliferation of these low-carbon technologies, DER-driven grid flexibility will be crucial as it enables the efficient storage and utilization of renewable energy during peak generation times, which can then be released during periods of high demand or low generation.
Ensure we understand the relationship between generation and demand-side response.
When the United Nations’ Intergovernmental Panel on Climate Change released its Synthesis Report in 2023, there was notable emphasis on the importance of demand-side measures to prevent the catastrophic impact of climate change.
Energy flexibility provides the necessary bridge for renewables, allowing DERs to store power and inject it back to the grid when there are deficiencies. This not only enhances reliability but also creates opportunities for consumers to engage actively in energy management.
Time to make grid flexibility mainstream
Grid flexibility is not a new concept. NWA’s have been a part of the US energy grid for many years but these programs are often inefficient, clunky, and not up to the job. But we can learn from the other countries who have already successfully implemented grid flexibility solutions that are easy-to-administer and open up new revenue streams for businesses.
The UK, for example, has been utilizing grid flexibility for years. According to a recent update from National Grid ESO, participants in its Demand Flexibility Service trials collectively saved enough electricity to power the equivalent of almost 10 million homes by responding to calls for them to reduce energy usage at peak periods of demand. At Piclo, we have so far helped procure over 1GW of flexibility in the UK and that number is set to continue to grow at speed.
We should use the success and learnings of others to decarbonize our grid with the urgency that is required, while ensuring reliability and affordability for customers. Momentum is building for grid flexibility. We need to meet this moment by ensuring we build a flexible, secure, reliable, and environmentally conscious energy system for generations to come.