Demand Flexibility Valuation Report
A dynamically built digital report by the Active Efficiency Collaborative
Demand flexibility, also sometimes referred to as load flexibility, is the capability to reduce, shed, shift, or modulate electricity consumption in real time in a way that is beneficial to both consumers and the power system.
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. But demand flexibility also more broadly includes new opportunities for managing load to provide a wider range of grid services, following the rapid emergence of consumer-oriented energy technologies such as advanced metering infrastructure (AMI), smart appliances, electric vehicles, behind-the-meter battery storage, behavioral tools, and automated load control for large buildings.
Build Your Report
This tool provides a concise overview of considerations when assessing the value of demand flexibility. To use the tool, indicate the general nature of your interest in demand flexibility, and you will be provided with guidance tailored to your interest.
Choose at least one option from each of the four categories and let the tool create a customized report, including case studies relevant to your selections.
Step 1
Audience Type
choose one
Hover or select to learn more about each option.
Program Implementer
Responsible for recruiting participants into demand flexibility programs, incentivizing those customers to participate, and/or operationalizing the program in a way that provides power system benefits.
State Regulatory Commission
Responsible for ensuring there is a competitive and level playing field for providing demand flexibility services, ensuring that participants are treated fairly, and/or ensuring that demand flexibility is considered by utilities when providing cost-effective service to their customers.
Policymaker
Responsible for designing policies that facilitate the development of demand flexibility programs, create opportunities to reduce costs, and/or improve the level of service offered to consumers of electricity.
System Operator
Responsible for power system reliability and for designing and operating wholesale electricity markets that allow demand flexibility to compete fairly with supply-side resources.
Step 2
Market Type
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Vertically Integrated
Vertically integrated utilities own electricity generation, transmission, and distribution. Utility integrated resource planning (IRP) activities drive resource investment decisions, and the incumbent utility is the only provider of electricity.
Restructured
In restructured markets, incumbent utilities own transmission and distribution, but electricity generation is provided by competing power generation companies within a market operated by an independent organization. When there is no retail competition, the incumbent utility is still the customers’ only option for buying electricity (although the source of the electricity is the wholesale market). When there is retail competition, customers can buy their electricity from competitive retail suppliers.
Step 3
Program Type
choose one or both
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Time-varying rate
Retail rate designs with prices that vary by time of day. This provides an incentive for customers to modify their electricity consumption patterns in a way that reduces their electricity bill and, if the rate is well designed, power system costs as well. Customer response could be enabled by technology or be entirely behavioral. Examples of time-varying rates include time-of-use (TOU) rates, critical peak pricing (CPP), peak-time rebates (PTR), and hourly (or sub-hourly) real-time pricing (RTP).
Direct control of end-use
Programs that provide participants with a financial incentive to allow a third party to manage the consumption of enrolled electric end-uses subject to pre-defined operational constraints. Common examples include air-conditioning and heating load control (e.g., via a smart thermostat), grid-interactive electric water heating, electric vehicle (EV) managed charging, or battery demand response programs.
Step 4
Objective
choose from one to five
Hover or select to learn more about each option.
Reduce energy costs
Demand flexibility can shift load from high-cost hours to low-cost hours.
Environmental benefits
If load is curtailed during hours with high rates of harmful emissions or shifted from hours with higher emissions rates to hours with lower emissions rates (e.g., when renewable generation output is being curtailed), environmental benefits can be realized. Load can also be managed in real time to respond to fluctuations in output from intermittent renewable generation.
Defer transmission & distribution investment
Load reductions in targeted locations of the transmission or distribution system that are facing capacity constraints can defer the need for capacity upgrades in those locations of the grid.
Equity/inclusion
Demand flexibility can be used as a tool for providing electricity bill savings to disadvantaged communities. But there also is a risk that technology-based demand flexibility benefits will only accrue to a subset of customers with the means to own those technologies.
Reduce capacity needs
Demand flexibility can be used to selectively reduce electricity demand during the highest load hours of the year, which tend to be the costliest to serve.
Demand Flexibility Valuation Report
Based on your selections, the following are important considerations when measuring the value of demand flexibility. Please visit this site regularly, as it is a dynamic source of information on demand flexibility that will continue to be updated.
Further Reading
The following resources provide more detail on the issues addressed in this report:
- U.S. Department of Energy, “A National Roadmap for Grid-Interactive Efficient Buildings,” May 2021.
- The Brattle Group, “Valuing Demand Response: International Best Practices, Case Studies, and Applications,” prepared for EnerNOC, January 2015.
- Alliance to Save Energy, “Improving Equity and Inclusion in Energy Efficiency and Demand Flexibility Programs,” 2021.
- SEEAction, “Determining Utility System Value of Demand Flexibility from Grid-Interactive Efficient Buildings,” prepared by Tom Eckman, Lisa Schwartz, and Greg Leventis, Lawrence Berkeley National Laboratory, April 2020.
- The Brattle Group, “The National Potential for Load Flexibility: Value and Market Potential Through 2030,” June 2019.
- Rocky Mountain Institute, “The Economics of Demand Flexibility: How ‘Flexiwatts’ Create Quantifiable Value for Customers and the Grid,” August 2015.
- Lawrence Berkeley National Laboratory, “2025 California Demand Response Potential Study – Charting California’s Demand Response Future,” March 2017.
- Alliance to Save Energy, “Why Demand Flexibility is Essential for Decarbonization,” August 2021.
- Alliance to Save Energy, “Guiding Principles to Enhance Efficiency and Demand Flexibility Through Performance-Based Utility Programs,” October 2020.
- Alliance to Save Energy, “Innovative Partnerships Can Unleash the Full Potential of Distributed Energy Resources,” June 2020.
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This focus area project was done in collaboration with the Brattle Group.
