Breaking Down the Barriers to Residential Demand Flexibility Programs

Between global decarbonization efforts, the increased adoption of distributed energy resources (DER) such as solar PV, and The Inflation Reduction Act of 2022, utilities are challenged more than ever to adapt the way in which they do business. Whether through legislative changes to national electric infrastructure or through the pressures of tech disruption, utilities must rise to meet an evolving electric need; demand flexibility programs offer a strategic energy conservation solution. As such, utilities are increasingly proposing alternative approaches that aim to preserve grid reliability and customer equity in ways that are less financially taxing, from community solar projects to opportunities to include all customers—no matter their level of income—in their demand side management objectives.

Fortunately, new opportunities are available for the underserved communities who can benefit from the cultural shifts in energy priorities that include improved reliability, low-cost climate change mitigation, improved health outcomes, resilience in times of natural disaster, energy democracy, and customer choice. Some regulated utilities are now pursuing innovative approaches that aim to enable their greater participation in the DER market while also developing residential demand flexibility programs to provide expanded service offerings.

What is a Low-Moderate Income Household?

Low-to-moderate income households are generally defined as any household which has an income of 80% or less of the Area Median Income (AMI) or below as indicated by the U.S. Department of Housing and Urban Development, according to the Community Reinvestment Act (CRA). LMI households typically have the highest energy burden and historically have not adopted distributed energy resources (DER), as widely as middle-to-high income groups for a variety of reasons, including the lack of access to capital, insufficient tax burden, and distorted price signals. But LMI households offer much potential to utilities invested in increasing their access to renewable, community energy. That’s why many utilities are implementing residential demand flexibility programs aimed at helping LMI populations capitalize on lower energy costs by installing DERs like solar PV and batteries.

Demand Flexibility

In order to fight off the worst effects of the climate crisis, utilities must urgently transition from dirty fossil fuels to emissions-free energy. Demand flexibility — shifting electricity consumption to coincide with times when electricity is cheaper and/or cleaner — is quickly becoming a necessary pillar to achieving this transition alongside renewable energy, energy efficiency, and the electrification of our communities.

How Demand Flexibility Helps The Community

Demand flexibility can deliver significant cost savings to customers by tapping into low-cost available power and by reducing the need to build expensive electricity generation and transmission infrastructure that increases everyone’s utility bills. Demand flexibility includes conventional sources of demand response (DR), such as air-conditioning direct load control, which have been relied upon for decades primarily to reduce system peak demand during a limited number of hours per year.

Another popular residential demand flexibility program option to reduce peak demand is to offer time-of-use (TOU) electricity rates, which charge higher rates during peak usage windows. With electricity demand predicted to approximately double according to National Grid ESO’s Future Energy Scenarios, the opportunities offered by time-of-use tariffs can help manage demand and help balance the grid which will be crucial in delivering a net zero future as affordable as possible.

LMI Communities & Demand Flexibility

With greater engagement and collaboration between utilities and communities, business model innovation, and the adoption of new technologies, utilities can seek to move beyond simply “informing” communities and customers about new programs to expanding their LMI energy programs well beyond bill or heating/cooling assistance. By helping LMI communities realize their access and potential for renewable energies, utilities can provide new value to customers, communities, utilities, and the environment.

Although LMI customers so far have lagged behind other income groups in adopting solar and other clean energy technologies, utilities and communities have begun to create targeted, demand flexibility programs that increase access to clean energy and share its values more equitably. These programs are just the beginning of what is possible, and continued innovation and collaboration in this space can unleash a wave of new programming and partnerships to engage LMI communities more fully in the value of the new clean energy system.

Conclusion: Barriers to Residential Demand Flexibility

The flexible, renewable energy revolution has expanded the range of value that customers and utilities can receive or provide. With demand flexibility, targeted energy efficiency, and battery storage, customers can help utilities manage energy demand and keep the electric system in balance, lowering both capital and operational costs and taking part in producing energy locally. Although the full value of demand flexibility is not yet fully realized, as markets continue to develop and become more integrated, simplified, and stackable, more people will be able to benefit.