Dive Brief:

• A set of seven residential energy efficiency and demand response programs deployed "aggressively" to Texas electric customers over five years could lower summer peaks by 7,650 MW and winter peaks by 11,400 MW, according to a new report from the American Council for an Energy-Efficient Economy (ACEEE).
• Those peak load reductions could eliminate the need for new gas generation that was proposed after February's freeze and Texas grid failures. Berkshire Hathaway Energy and Starwood Energy Group have each proposed building about $8 billion in new generation.
• “Electric demand is always going to go up when there’s hot or cold weather, but it’s a manageable problem if you have efficient houses,” ACEEE Executive Director Steven Nadel, the lead author of the report, said in a statement.

Dive Insight:

Winter Storm Uri knocked about half of Texas' generation offline, leading grid officials to consider a range of solutions including weatherizing power plants and the construction of new generation. But those system upgrades would raise customer bills while only being relied on in the most extreme situations, ACEEE's report points out.

"An alternate way to address these problems is to expand Texas’s currently limited energy efficiency and demand response programs," the report finds, particularly those which reduce summer and winter peak demands.

ACEEE's analysis concludes that a set of seven residential efficiency and demand response retrofit measures could serve about 9 million Texas households and offset most of the capability of new proposed gas combined-cycle generators. And those residential programs would have a five-year total programmatic cost of about $4.9 billion, or 39% less than the $8 billion capital investment required for new gas plants.

Further, improving residential efficiency rather than building new gas plants would "fully avoid additional costs for generator fuel, maintenance, and transmission infrastructure," the report adds. The efficiency measures, on the other hand, would deliver "around-the-clock comfort, energy and energy bill savings, and peak load reduction for 10- to 20-year measure lives."

Efficiency programs ACEEE identifies include incentives for attic insulation, electric furnace upgrades, smart thermostats, and heat pumps and electric water heaters. Demand response programs include those targeting the flexibility of water heating, air conditioning and electric vehicle charging.

"Aggressive deployment" of those seven programs almost matches the total generation capacity of 10 new gas-fired, combined-cycle power plants of 800 MW each, ACEEE estimates. Summer demand reductions resulting from the proposed suite of programs would amount to about 10% of Texas’s all-time summer peak — and about 15% of what the peak would have been in February 2021 had power been provided without shutoffs, according to the report.

“Wasting electricity in Texas when power demand is peaking just doesn't make sense," Nadel said. "Home efficiency upgrades and technology that shifts when electricity is used simply costs less than building new plants."

Replacing electric furnaces with heat pumps would create the largest winter peak savings, ACEEE said. The largest summer peak reductions are from central air conditioner demand response.

Attic insulation and sealing constitute about 60% of the total cost of the seven-program package, the report notes, but aren"foundational to make heating and cooling measures more effective." Adding attic insulation generates the largest energy savings, and the smart thermostat program has the best benefit-cost ratio.

The seven programs would cost about $700 million in the first year of deployment and roughly $1 billion per year for the next four years, according to ACEEE. The group recommends fast action by the Public Utility Commission of Texas: Next year could be used for program planning and launch, "with 2023 being the first full year of expanded programs."

Stakeholders and officials have proposed a variety of solutions to Texas' grid issues. In July, the Electric Reliability Council of Texas, which operates most of the state's grid, released a 60-point road map that included new market rules, spot checks for power plant readiness and improvements to weather analysis.

The Federal Energy Regulatory Commission and North American Electric Reliability Corp. have called for stronger weatherization, and FERC Chairman Richard Glick has promised action on new standards. A joint report by the two agencies laid most of the blame for Texas' grid failure on the state's natural gas system, from producers to power plants.

The February cold snap affected more than 1,000 generating units, and almost 60% were gas-fired, their analysis concluded.