California looks for ways to make it easier to deploy demand flexibility

As debate rages about the causes of grid fragility, especially in places like Texas and California, and renewables get caught in the crossfire, a crucial solution is often ignored: demand flexibility.

Instead, politically driven sides call for fewer renewables and more fossil fuels — or more renewables and less fossil fuels. Others point to the need to upgrade the wires, poles and substations, a solution some estimate will cost $2 trillion.

All of these options require building more stuff. Demand flexibility, on the other hand, can make use of what already exists, often on the customer side of the meter. This includes microgrids, distributed energy resources, energy storage, building load, on-site generation, refrigeration, electric vehicles and other customer-side resources that can be ramped up or down based on grid needs.

But it’s not always easy to employ demand flexibility. The grid’s rules and payment structures were conceived before the idea of flexible resources. That’s why it is good to see the California Public Utilities Commission (CPUC) trying to match rules and programs with today’s needs.

Last week the commission opened a proceeding to establish policy and craft rates to enable widespread use of demand flexibility.

“The demand flexibility proceeding is an important step towards designing the advanced future grid in California,” said Darcie Houck, CPUC commissioner. “Demand flexibility has the potential to enhance and accelerate the state’s energy and climate goals, renewable integration and high distributed energy resources adoption. It also plays a critical role in improving grid reliability and resiliency, reducing grid emissions, and making electricity rates more affordable and equitable.”

In particular, the commission wants to use demand flexibility to:

• Enhance the reliability of California’s electric system.
• Make electric bills more affordable and equitable.
• Reduce the curtailment of renewable energy and greenhouse gas emissions associated with meeting the state’s future system load.
• Enable widespread electrification of buildings and transportation to meet the state’s climate goals.
• Reduce long-term system costs through more efficient pricing of electricity.
• Enable participation in demand flexibility by both bundled and unbundled customers.

Demand flexibility treated in piecemeal fashion

The commission acknowledged that its existing approach is “piecemeal” (and it’s not the only jurisdiction that could make this confession.) So it intends to take a close look at updates to its “rate design principles, guidance principles for demand flexibility, and how to streamline the patchwork of niche rates and programs to expand the use of demand flexibility beyond early adopters.”

The commission also wants to find ways to use demand flexibility to better support equitable and affordable rates and advance social justice.

The proceeding emerged, in part, out of a series of hearings the commission held in the spring on limiting energy rate increases (R.18-07-006). 

“Several participants flagged the lack of alignment between peak periods for time-of-use rates and the needs of the electric system, and the potential for dynamic rates to optimize customer demand based on actual costs and grid conditions. Other participants questioned the use of ratepayer subsidies to incentivize customers to invest in electrification and distributed energy resources,” the commission said in opening the proceeding July 14. “Participants also noted that high electric rates will deter customers from transitioning from gas to electricity. Multiple participants proposed income-differentiated fixed charges as an opportunity to recover fixed costs and prevent cost shifts in an equitable way.”

Of likely interest to microgrid owners and operators, the commission will look at how to ensure universal access to dynamic electricity prices by customers, devices, distributed energy resources and third-party service providers — and how to fund, build, operate and maintain systems for universal access.

Commission seeks input

The commission is seeking comment within 30 days of the July 14 announcement and plans to release a scoping memo for the proceeding by the third quarter of 2022, followed by a proposed decision and then a final decision.

Details are available on the commission’s website.