Clean, Flexible and Efficient: A Recipe for Energy Optimization

The United States is the second-highest emitter of greenhouse gases on the planet — but we are also a leader in technological and economic strength. We have the capability to lead the world in finding solutions to the urgent challenge of climate change — while rapidly and thoroughly decarbonizing ourselves.

To move our energy use to a cleaner and more cost-effective footing, we need carbon-free electric generation technologies and wide-scale electrification of energy end uses that currently run on fossil fuels. The carbon-free generation technologies we need have already been invented, are commercially available, are increasingly cheaper to install and provide electricity every day. Technology options that enable the power grid to become more flexible, such as energy storage, also continue to become cheaper and more available.

In short, the challenge of decarbonizing the economy is no longer primarily one of developing technologies. To decarbonize affordably and quickly — while always maintaining reliability — we must now make it possible for these technologies to deploy and operate as cost-effectively and efficiently as possible. In short, we need to optimize our use of energy through greater efficiency and flexibility, in service of an undaunted will and determination to decarbonize. Such optimization can make the challenge of running our economy entirely on clean energy a smaller problem to solve. And by greatly increasing the flexibility of our energy-consuming devices, as well as our own behavior, we can make the most of clean energy resources when and where they are available.

Earlier this year, the Regulatory Assistance Project (RAP) was invited to tackle the complex topic of energy optimization by guest-editing a special issue of The Electricity Journal. This issue, available now, includes nine articles focused on strategies for increasing efficiency and flexibility in the U.S. power sector — essential but often-overlooked ingredients in a recipe for reliable, affordable decarbonization. To explore these strategies, we’ve paired RAP’s thinking on energy optimization with perspectives from the leading voices in our industry.

To kick things off, Joni Sliger and Ken Colburn offer a new and expanded vision for energy efficiency — EE 2.0 — that relies on optimizing our use of low-cost, emissions-free energy sources, when and where they are available. They argue that energy efficiency policies that narrowly equate efficiency with efforts to reduce consumption of a single energy source — like electricity — are outdated and need to evolve. Efficiency programs need to encompass beneficial electrification of fossil-fueled end uses and recognize the time-varying value of saved energy. This article serves as an introduction to the key concepts discussed in greater detail in the articles that follow.

Expanding our thinking about energy efficiency does not mean throwing out traditional strategies that have proven hugely successful. In fact, the U.S. economy is twice as efficient today as it was in 1973, according to Steven Nadel. He explains that five “traditional” energy efficiency policies have been largely responsible: corporate average fuel economy standards for vehicles, appliance and equipment efficiency standards, the Energy Star labeling program, utility-funded energy efficiency programs, and building energy codes. He also explains how further specific improvements to these traditional efficiency policies could reduce projected U.S. energy consumption in 2050 by about 25%.

Matt Golden, Adam Scheer and Carmen Best offer a decidedly non-traditional view on promoting greater efficiency and flexibility. They explain how the growing availability of smart meter data, combined with open source software, now allows utilities to procure energy efficiency and demand flexibility from consumers and aggregators in the same way they procure other resources: by offering prices or soliciting bids, and paying those who deliver efficiency and flexibility based on actual, measured performance, rather than deemed (assumed) values.

Demand response (DR) programs have historically been used almost entirely for emergency load-shedding to address capacity constraints. Max Dupuy and Carl Linvill explain the need for a broader approach — DR 2.0 — that captures the potential for flexible loads, storage resources and inverter-based generating technologies to provide a wide range of capacity and ancillary services at both the wholesale and distribution system level.

In recent years, the transportation sector overtook the electric power sector as the largest source of U.S. greenhouse gas emissions. Karen Glitman, David Farnsworth and Julia Hildermeier explain how accommodating and correctly managing the expected growth in electric transportation will be critical to the development of a low-carbon future. If electric vehicle charging is managed correctly, EVs can reduce consumer costs and emissions and serve as a useful asset for grid managers; without managed charging, this new load could strain the power system and increase consumer costs. Policies and regulations will shape which future becomes our reality.

Dave Hewitt and Susan Coakley focus their attention on decarbonizing buildings, taking maximum advantage of new electrification technologies, thermal efficiency measures and smart controls. They offer five strategies that can help to overcome market barriers and unlock the economic, environmental and health benefits of replacing fossil fuel heating with electric alternatives powered by zero-emissions generating technologies.

Travis Kavulla and Gürcan Gülen present a compelling argument that today’s capacity markets are poorly matched to customers’ real needs and the operational realities of a renewable-heavy world. They propose to replace forward capacity markets with an Operating Reserve Demand Curve that pays capacity only when and where it is available, as a complement to real-time energy pricing.

The special issue concludes with two articles looking at power sector regulation. Janine Migden-Ostrander, a member of The Electricity Journal’s editorial advisory board, starts by offering a suite of options that state utility regulators can use to align utility incentives with decarbonization goals and other public policies at the retail level. These options, which include revenue decoupling, performance-based regulation, and smart rate design, can be adapted to the market and economic circumstances of each state. Jon Wellinghoff caps things off by suggesting obstacles that arise from federal regulation of wholesale power transactions and several practical actions that could increase overall system efficiency while also enabling greater carbon emissions reductions.

Smart policies and regulations, in and of themselves, will not lead to reliable and affordable decarbonization of the electric power sector. However, they are essential ingredients in the recipe. We trust that the special issue of The Electricity Journal will whet your appetite and create a hunger for more debate about energy optimization and the effective actions we can take to decarbonize the U.S. economy.