The power of flex

Direct consumer benefits of demand-side flexibility compared to a no DSF scenario

Instead, capacity auctions have tended to be biased against demand exibility, for example, with larger bid size thresholds that are easy for generators to meet but which create additional cost and risk for aggregators. Long lead times before contracts go into e ect also make it di cult for aggregators to sell participation in a capacity mechanism to businesses and households.

Overriding The Market

From a regulatory point of view, Erlinghagen of Siemens stresses the importance of establishing the conditions under which a distribution system operator (DSO) would be able to override the functioning of the market in order to ensure grid stability.

“The use of a heat pump or the charging of an EV can be made dependent on the price level, but it’s also important to know when a DSO would interfere with this,” says Erlinghagen. With the establishment of clear conditions, she notes that consumers would also bene t because system operators would be able to allow more electric vehicle charging stations, rooftop solar and other DER to connect to the grid.

Aligning Incentives

Although demand exibility can reduce the need for grid investments, utilities have long been incentivised to make capital expenditures, passing on costs and an agreed rate of return to end users in their electricity bills. Regulators are looking at how to change this.

Incentives for investments in non-wires alternatives like demand exibility are “already in EU leg- islation but have not been implemented”, says Villa. Article 32 of the EU’s Electricity Directive states that DSOs should be “adequately remunerated” for the procurement of exibility services.

The National Association of Regulatory Utility Commissioners (NARUC) in the US has examined how performance-based rate-making can be used to enable greater use of demand exibility to better align a utility’s business decisions with policy goals.

Performance-based rate-making approaches “can include moving nancial motivations away from investing in capital expenditures to exploring demand-side opportunities that reduce or shift electricity consumption,” says NARUC. It points out that this can be achieved through nancial incentives for achieving various demand exibility-related goals with rewards tied to metrics other than the utility’s volumetric electricity sales.

As Hawaii aims for 100% renewables by 2045, the state's Public Utilities Commission moved from a costof-service mechanism to adopt a performance-based rate system in June 2021.

“The performance mechanisms… include various metrics related to the advancement of demand exibility, including grid investment, transportation electri cation, asset e ectiveness, customer engagement and interconnection experience,” said Leo Asuncion of the Hawaiian commission.

“By collecting a robust data set and establishing transparent and well-de ned metrics, our regulatory framework creates clear expectations for the utility,” he added. •

Decoupling the cost of clean energy from expensive gas prices is a difficult but achievable task, if there are enough green electrons in the right place. Storage has a substantial role to play in order for that to happen