Demand Flexibility Programs: How To Meet Too Much Demand With Too Little Grid

Last week, the National Electrical Manufacturers Association (NEMA) announced that U.S. load growth will grow by 2% annually every year until 2050. This annual growth is driven in part by the increased demand required to meet the rising number of AI and data centers around the country and challenged by potential cuts to initiatives like the Inflation Reduction Act, which NEMA CEO Debra Philips states led to a decrease in reliance on foreign exports by 20%. As of this writing, analysts estimate a cost of over $2.5t by 2035 to fully and properly upgrade the U.S. electrical grid, a figure that promises to fluctuate as increased electrification efforts add further demand incumbrance, as well as in response to increasingly steep annual damage costs attributable to climate change. Fortunately, as behind-the-meter distributed energy resources (DERs) become increasingly common, utilities have an opportunity to employ demand flexibility programs like demand response, EV managed charging, or virtual power plant initiatives to decrease demand during peak periods of usage while mitigating extremely costly grid upgrades and expensive peak energy market purchases.

Grid Bottlenecks

Modernizing the U.S. power grid will take an extraordinary amount of capital investments and work to achieve, a problem with numerous logistical challenges to further confound these efforts. For example, global supply chain shortages have led to a dearth of transformers for use on the electrical grid. Likewise, the U.S. interconnection queue for new projects is hobbled by an inordinately long wait before projects are accepted, further slowing progress in providing much-needed relief to grid managers. Ultimately, grid bottlenecks pose serious obstacles to grid stability while also demonstrating the fragility of the U.S. grid, which is susceptible to supply chain disruptions, spikes in energy consumption, and the physical damages imposed by climate change.

Demand flexibility can circumvent these challenges by addressing grid pain points like this in real time. For example, if grid operators know that specific transformers may pose a challenge during peak periods of demand, Grid-Edge distributed energy resource management systems (DERMS) can shift load to where and when it’s needed, specifically away from potentially compromised or susceptible equipment. Localized dispatch was designed to address these grouping and bottleneck concerns, allowing grid operators and program managers to circumvent these exact types of grid-related obstacles.

Demand on the Rise

In addition to grid bottlenecks and other physical elements of grid security, demand is on the rise, driven in part by an increased reliance on and interest in artificial intelligence and data centers. In the newest International Energy Agency (IEA) report, global energy consumption is projected to rise by nearly 4% annually through 2027, the fastest pace for increasing electricity demand in years. According to the IEA, this increase is driven in part by global electrification efforts, including the industrial efforts necessary to increase renewable energy production.

Conservation

Demand flexibility programs primarily exist in two categories: conservation or distribution. In terms of conservation, both demand response and EV charging represent two time-tested demand flexibility programs that minimize usage by shifting load to off-peak periods of demand. For demand response, this works by aggregating the devices in your program through a Grid-Edge DERMS and decreasing usage to off-peak hours of electricity, when need is decreased.

In the case of thermostat or water heater programs, these demand response programs mitigate demand by lowering temperature thresholds or shifting charging needs to off-peak hours. EV charging operates similarly, shifting charging times to off-peak periods of demand. In doing so, costly peak energy market purchases are avoided by decreasing the overall electric need for the grid while simultaneously boosting grid resiliency.

Renewable Energy Generation & Distribution

Ultimately, Grid-Edge DERMS are designed to manage multiple devices and device types, meaning that they serve as a multi-function solution. While demand response remains a common tactic to mitigate usage during peak demand, virtual power plants can also pull available energy from devices like photovoltaic solar or battery energy storage systems, redirecting that energy to meet demand.

Examples of this include community solar programs, which aggregate communally-owned solar assets, redistributing that energy when and where it’s most needed. Likewise, functionality like vehicle-to-grid (V2G) charging allows grid operators to access the stored energy in EV batteries for use during peak periods of demand, providing yet another option to meet demand without incurring high energy market costs and while strengthening grid resiliency.

How To Meet Too Much Demand With Too Little Grid Conclusion

Irrespective of policy changes or economics, upgrading the U.S. electrical grid is unlikely to happen any time soon, with much-needed upgrades instituted ad hoc to address real-time needs rather than a holistic solution that uniformly upgrades the grid en mass. No matter when or how the grid—locally or nationally—is upgraded, grid operators and program managers will remain committed to the day-to-day task of keeping the grid in balance. To do that, utilities will need not only a diversified portfolio of energy assets but as many demand flexibility initiatives as possible to shift load to off-peak periods of usage, defraying high peak energy costs and enhancing energy security.

About The Author

Syd is a senior content specialist and all-around word nerd for Virtual Peaker. Syd believes in the inevitability of renewable energies and in implementing a diverse energy portfolio and is excited to use his skills to help spread that message far and wide. In his scant free time, Syd is a father of two, husband of an awesome wife, a musician, and a lover of comic books, and all things sci-fi.

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