Dive Brief:

• Buildings account for 75% of U.S. electricity consumption and up to 80% of peak demand, according to new research from Lawrence Berkeley National Laboratory (LBNL), supported by the U.S. Department of Energy's Grid-interactive Efficient Buildings (GEB) Initiative.
• Their electricity demand means buildings also represent the largest source of load flexibility on the electric grid, though researchers say utilities need to properly value that flexibility in order to fully engage them as energy resources.
• The first step is to account for all electric utility system economic impacts resulting from demand flexibility, according to report lead author Tom Eckman, a consultant to LBNL. That includes the value of energy efficiency, demand response, and distributed energy resources' (DERs) abilities to generate power, shed and shift load, and modulate their electricity demand.

Dive Insight:

While buildings have the potential to act as flexible grid resources, LBNL's report highlights the complexity of the value proposition because "there is no single economic value of demand flexibility for utility systems."

"Because they have so many adjustable loads, buildings represent the largest source of demand flexibility, so they can be part of the solution to peak demand issues and offer a broader range of grid services to help meet other electricity system requirements," according to Lisa Schwartz, LBNL's deputy leader of the electricity markets and policy group.

The Brattle Group last year estimated that in 2030 cost-effective load flexibility potential in the United States could reach 198 GW, much of it coming from buildings, and capable of delivering more than $16 billion in annual savings.

Schwartz and Eckman hosted an April 6 webinar to discuss the report's findings, in advance of its full release. The analysis aims to provide guidance to state and local policymakers, utility regulators, power companies and other stakeholders on how to improve "consistency and robustness of economic valuation of grid services provided by demand flexibility in grid-interactive efficient buildings."

The full report, "Determining Utility System Value of Demand Flexibility from Grid-Interactive Efficient Buildings," was published by LBNL on April 30. It concludes there are more than half a dozen methods of enhancing the valuation of GEB flexibility.

First and foremost, for purposes of utility system valuation, the report concludes demand flexibility "should be treated on a par with supply-side options so that all grid impacts, costs, and benefits to the utility system can be quantified and monetized."

That means the economic value of demand flexibility must reflect "the impacts of demand flexibility across all asset types," including generation, transmission and distribution, and must include the value of risk reduction and improved reliability and resilience.

The report says valuing GEB flexibility must also account for: variations in value based on when demand flexibility occurs; distribution system savings on transmission and generation system value; variations in value at specific locations on the grid; and how DERs interact with one another.

A primary concern will be how to determine the number of resources on the grid, said Eckman.

"The first thing we're trying to do is include demand side resources, distributed energy resources, as a solution set to the issues that utilities have to provide capacity and ancillary services. It's basically a Goldilocks problem," Eckman said. "You don't want to have too many resources, or too few."

GEBs can include a variety of resources, including energy-efficient HVAC systems, interactive electric water heaters, battery storage, or managed electric vehicle charging.

"These features enable buildings to provide load flexibility to the grid — primarily by shedding or shifting load in response to price or other signals," according to the report. "Demand flexibility, coupled with efficient building design and equipment, can provide persistent low energy use and minimize demand on electricity resources and grid infrastructure."

"You have to compare risk with cost," Eckman continued. "If you add too much resource, you add cost and if you have too little you increase risk. ... So you're basically trying, as a utility manager, to look for a resource mix that minimizes both cost and risk at some happy point."​

In terms of utilities getting the most value from resources, energy efficiency investments for buildings may be best, said Eckman.

"Energy efficiency has an energy value in addition to its peak capacity value," Eckman said. "So, in terms of least-cost deployment, energy efficiency is getting some of its returns, particularly for the low-cost measures, out of being able to avoid market development or market purchases. That subsidizes its peak capacity benefits. As a consequence, you're getting double the bang for the buck."