Incorporating efficiency into demand management portfolios can introduce equity risk: analysts

Diving Brief:

  • Integrating energy efficiency programs into a utility’s broader demand-side management (DSM) portfolio can maximize their benefits to the grid, but experts warn that integration also introduces equity issues and the potential that low- and middle-income customers may not fully benefit.
  • Efficiency programs for low-income customers are often among the least profitable utility programs and may not provide the same grid benefits as load management approaches like managed electric vehicle charging or heating controllable, experts told the National Association of Regulatory Utility Commissioners on Tuesday. (NARUC) Winter Political Summit.
  • Energy efficiency should be integrated into DSM’s portfolios “as much as possible,” said Steve Schiller, senior adviser affiliated with Lawrence Berkeley National Laboratory. But, he added, “there may be times when we really need to make sure we are benefiting those who need it most.”

Overview of the dive:

Continued growth in variable generation is changing the cost structure of maintaining a reliable and resilient grid, making the location and timing of energy savings more important than ever, Schiller said. In practice, this means that energy savings from an energy efficiency program may not provide the same grid benefits as Controllable Distributed Energy Resources (DER).

“So we see a growing need for a more flexible and resilient energy system. And that changes the value of efficiency and other DERs that reduce demand on the power system,” he said.

In an integrated portfolio, experts warn that these changes could mean that utilities favor programs that rely on more expensive technologies, steering investments away from traditional efficiency and weatherization.

There are benefits to integrating efficiency into demand response and storage, said Mike Specian, utility manager for the American Council for an Energy-Efficient Economy. Currently, these resources are siled into different utility programs with different budgets, he said, citing network-interactive heat pump water heaters as an example that can save energy and provide demand flexibility to reduce peaks.

“You often have this lack of interactions, a lack of holistic pairing optimizations that can happen because we’re dealing with them separately,” Specian said.

Public services must strike a balance, agreed the NARUC panelists.

“I’m a little worried that if you’re not thoughtful enough from the start, you could suddenly have your a**[what?]** program to be an electric vehicle adoption program. Which can have some benefits, no doubt, but it depends on what you’re looking for,” said Emily Levin, senior consultant for Vermont Energy Investment Corporation, which administers the state’s energy efficiency programs.

Some states are taking steps to ensure efficiency programs reach low- and middle-income customers, but efforts are patchy, Levin said.

In states that don’t have a strong focus on greenhouse gas reductions and energy equity, “we’re seeing a lot of interest in integrating energy efficiency and demand response… simply because of the opportunity to deliver much more value to the network through a coordinated approach,” Lévin said.

But if you’re looking for fairness, direct benefits to customers and households, and assistance with energy load, “energy efficiency is an incredible resource for those,” she said.

Utilities need to remember to reach the customers who need it the most, Schiller said. “And that could start with a weatherization program.”

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