Demand growth is coming, and with it a perfect storm of constraints and uncertainties affecting both the bulk power, transmission and local distribution grids.
According to ICF’s modeling, by 2028, U.S. electricity demand could increase by an average of 8.3% while peak demand for electricity could increase by an average of 5.1%. By 2050, electricity demand could rise by 57% or more. We also found that the cost many utilities pay for electricity could increase by an average of 19% by 2028 due to the demand increase, with much of the additional costs getting passed on to utility customers.
The stakes are high for utilities, as planning, designing and in some cases, receiving regulatory approval for new tariffs, customer programs and cap ex investments all require years. Utilities and regulators must act now to plan for growth across the entire ecosystem as a whole to maximize the benefits of system investments — and avoid risks to reliability, higher prices, and customer discontent.
New electric generation facilities — including utility-scale solar and wind power — could theoretically meet this expected demand growth. But significant constraints to building and delivering new generation resources exist for the foreseeable future.
In the nearer-term, then, utilities need to consider solutions that start with the customer. The ways that power companies partner with their customers and make use of resources on the distribution grid has the potential to lower rates and maintain high reliability. But for now, this remains a largely untapped resource as antiquated demand-side management policies struggle to keep pace with aspirational third-party business models.
Planning for demand growth is no longer a business-as-usual requirement. It’s now essential to expand the planning purview to an integrated system-wide view to secure a resilient, customer-centered, cost effective, and sustainable grid.
Understand the changing use and value of DERs
Significant load growth, and the simultaneous shift to distributed and utility scale renewables, will change how the grid uses demand-side resources.
This changing resource mix will require a robust and integrated planning approach that starts with forecasting DER (including electric vehicle) adoption at the local level and considers the costs and benefits across all asset classes, including generation, transmission, distribution, DERs, and energy efficiency.
And this shift is already happening. Utilities are beginning to adapt their distribution planning to better integrate DERs and assess the physical and economic impacts of electrification on the distribution grid.
That said, additional, bottom-up studies that focus on the distribution impacts will be necessary. To fully embrace the changing resource mix, utilities will need granular information on where and when distributed resources can be deployed and orchestrated to complement the need for grid enhancements so they can weigh the costs relative to the need for reliability, customer value and the ability to achieve decarbonization goals.
Policy and regulatory changes will also be key. Encouraging demand flexibility requires intentional DER incentives based on benefits or avoided costs and tariff-on-bill solutions to reduce the first cost barrier for customers to own and deploy clean energy technologies.
Utilities are central to mobilizing this value in a way that benefits all customers — and the system itself — not just participating customers or more affluent early adopters. For example, when utilities incentivize the adoption and use of grid-edge assets, the utility (rather than a third-party aggregator) retains the rights to the associated grid services that can be used for operational efficiency. That has the potential to benefit all customers by reducing the utilities’ cost of service.
Customer engagement matters
For the last 10 years, efforts by OEMs and DER providers to motivate customers to adopt clean energy technologies like smart thermostats or residential solar and storage have been a gateway for aspirational business models, aiming to monetize these relationships. The growing number of products, services, and service providers now offers customers more choices, and allows them to improve their own resiliency or save on their energy bills.
However, when coupled with the need to manage flexible resources at the edge, this diversifying ecosystem is becoming fragmented. Multiple service providers with various business models vie for revenue and customers, and utilities are in the middle.
Given the prevalence of these third-party intermediaries seeking compensation for distribution grid services, determining how to most efficiently transfer any potential grid value directly to customers will be key. Whether customers participate through time-of-use rates, enrollment and participation incentives, autonomous control or price responsive technology, utilities need visibility to and trust that customer assets will perform.
If they can engage customers effectively, they’ll be better able to shape load at the edge to enable operational efficiency, reliability, and affordability.
AI enabled participation, performance and value
When properly incentivized, customers can help unlock T&D grid value that benefits everyone. However, managing distributed resources at the edge to align with T&D needs will require more localized, targeted and automated approaches to ensure the predictability and performance of aggregated DERs.
A new generation of bring-your-own customer programs that are already emerging will leverage and orchestrate grid-edge technology — including rooftop solar, electric vehicle charging stations, battery energy storage, and VPPs.
And there’s a slew of new data as well. Emerging AI and machine learning tools can help manage, for instance, anonymized advanced meter infrastructure (AMI) data to improve the performance and predictability of demand side resources.
These platforms offer new capabilities that are tailor-made for planning, measuring, and optimizing customer programs — and ultimately provide predictable and geo-targeted load reduction, shedding and shifting. With these advanced capabilities, demand response and other load management programs can overcome lingering trust and performance issues, and play a bigger role in managing demand growth.
To promote participation, utilities can encourage customers to enroll in innovative tariffs that offer enrollment rebates and on-going participation incentives for shared dual use of clean energy technology. For example, customer-owned assets can be dispatched via a “light touch” dispatch strategy with minimal or no disruption to customer comfort and safety. This approach will not only drive customer engagement, but also enhance grid stability, affordability and resilience — and help avoid T&D system costs.
The industry is at a critical juncture in balancing demand growth, affordability, sustainability, and reliability, and potential tradeoffs between these priorities won’t be popular. Today, utilities, with their holistic view of the electric ecosystem, have a unique opportunity to frame and lead with innovative and comprehensive solutions — or let their role and relevance be defined by others.
Patty Cook is the senior vice president for market development and utility initiatives at ICF, and Maria Scheller is the vice president of energy power markets at ICF. The opinions represented in this contributed article are solely those of the authors, and do not reflect the views of Latitude Media or any of its staff.
