Energy efficiency provides a near-immediately deployable solution in the drive for electrification

The electrification transformation continues to gain steam as all customer segments adopt electric technologies to lower their utility bills, engage with newly developed and efficient technologies, access plug-and-play ease of use, and reduce negative environmental impacts, writes Jessie Mehrhoff, a research analyst contributing to Guidehouse Insights’ DER Solutions service on the Smart Energy International website.


Electrification drives the need for energy efficiency

A reduction in greenhouse gas (GHG) emissions can be achieved by seizing electrification opportunities, particularly where clean, renewable energy technologies have reached a higher penetration level. Touted as beneficial or strategic electrification, the movement toward an electrified grid is gaining steam, particularly as municipalities begin to prohibit new natural gas hookups. Still, the move away from pipelines does not come without challenges to grid operators.

As more distributed energy resources (DER) interconnect with the grid, operators face growing capacity constraints on their aging infrastructure. Fortunately, energy efficiency provides a near-immediately deployable solution. There is a seemingly self-evident chasm between beneficial electrification (which calls for using more electricity) and energy efficiency (which calls for using less electricity); however, many utilities do not view the two concepts as mutually exclusive. The efficiency strategies of 2020 are not your mother’s light bulb replacement.

Targeted Energy Efficiency to Improve Cost-Effectiveness and Locational Value

Areas where high levels of electrification are impacting aging traditional infrastructure can benefit from more granular insights provided by advanced metering infrastructure (AMI) and machine learning. Such insights can focus energy efficiency initiatives. Where disaggregation mechanisms exist, programme marketers can better understand what programmes and customer classes to target to secure new energy savings.

Device-based disaggregation uses devices in homes or businesses to understand where efficiency improvements can be made. In large commercial and industrial facilities, the addition of technologies like automated fault detection and diagnostics can alert building and energy managers to areas of potential leakage. Where device-level aggregation is not available, modeled disaggregation based on inputs from engaged customers participating in online or in-person energy audits allows for more targeted programme design and marketing. These insights may lead to improved cost-effectiveness in utility programmes.

Visibility into grid infrastructure and capacity constraints provides utilities with insight into areas of potential strain on the distribution grid. This visibility enables utilities to geographically focus energy efficiency initiatives to the regions where energy savings are of the highest value. AMI may provide utilities insight into the end customers connected to the grid who could provide the most significant value by deepening their energy efficiency savings. Utilities can more likely act advantageously using these insights in jurisdictions with comprehensive cost-effectiveness and benefit-cost measures in place, or if public utility commissions (PUCs) are undertaking value of DER studies. Many non-wires alternatives (NWAs) demonstrated this trend through targeted demand side management programmes in 2019.

Energy efficiency is a commonly used tool in NWA programmes deployed to date. NWAs seek to defer traditional pole and wire upgrades to a specific location on the energy grid. Thus, where energy efficiency can be used as a tool to defer infrastructure upgrades, it can be of greater value to the utility as it can support the avoidance of transmission and distribution (T&D) spending.

As most states and global regions are not expected to mandate the exploration of NWA in the first few months of 2020, AMI already deployed by utilities helps determine where energy efficiency projects are most beneficial. If paired with device-level disaggregation, this data could allow grid operators to provide specific technology-centric programmes (such as rebates for highly efficient equipment) to customers residing within explicit geographic bounds.

Efficiency to Improve Customer Engagement

As more customers electrify, energy efficiency becomes an immediately deployable tool to help utilities relieve the associated grid pressures from higher levels of interconnection. Energy efficiency programmes can be used to engage customers and bring them into the effort to maintain grid reliability in the face of electrification.

Customers who interact with their utility through programme participation or the utility-suggested purchase of an efficient product are more likely to develop a sense of customer loyalty, which can be of value in deregulated energy markets. Utilities are encouraging customers to improve their demand side efficiency through the marketing of programmes and efficient products through a variety of channels, including the customer portal, emails, calls, or text messages. Where customer data allows for added personalisation, the utility can provide customers with timely suggestions (e.g., seasonally appropriate recommendations) relevant to the technologies customers’ already have or might want to add to their energy management ecosystem.

Through AMI and machine learning, energy efficiency programmes will target regions where local grids feel increasing strain due to electrification and act at critical times of the day. Learning thermostats and water heaters that continuously cycle to reduce electricity demand without disrupting end-customer comfort will serve as valuable resources in beneficial electrification programmes. Further, engaged customers are more likely to continue taking actions (particularly low or no cost actions) to support improving energy efficiency. While not always directly related to a given customers’ electrification strategy, these actions can support local needs for efficiency in the wake of increasing electrification.

Efficiency as a Tool to Support Climate Targets

Many utilities recognise the sustainability merits of electrifying a grid and moving toward low or no emissions, particularly where grid operators have committed to zero carbon or other low emission targets. According to the International Energy Agency (IEA), buildings and building construction sectors are responsible for nearly 40% of total direct and indirect CO2 emissions. Beyond this, according to Architecture 2030, 72% of those emissions come from daily building operations, while 28% of the emissions represent embodied carbon inherent in building construction.

Utility and implementer new construction programmes may address embodied carbon. Implementing efficiency programmes to address ongoing building operations emissions remains critical to achieving mandated climate targets. To date, some utility integrated resource plans consider energy efficiency a source of clean capacity that supports utility decarbonisation or other climate-related targets. Using zero carbon efficiency capacity can help utilities meet mandated PUC targets and can bolster utilities in ratemaking processes and when seeking program approval.

Energy Efficiency will Remain a Critical Tool for Electrification

Guidehouse Insights forecasts that energy efficiency spending by utilities and governments will reach nearly $60 billion by 2028. Despite a slow programme growth rate compared to more nascent behind-the-meter initiatives, like those fuel by integrated DER programmes, efficiency will remain a staple tool used in demand side management.

A slow growth rate should not be conflated with diminished savings from energy efficiency programmes. While broad-based efficiency programmes may not grow at the same speed as they did a decade ago, efficiency’s growth is now more targeted and drives deeper levels of energy savings, sometimes from fewer program participants.

The use of AMI, machine learning, and other customer data inputs will allow utilities and programme providers to engage only the most relevant customers in energy efficiency. Where electrification is resulting in grid strain, customer demands for electric technologies are on the rise. Beyond demand, regulations and pending policies in California, New York, Washington, DC, and other states and cities stress electrification’s role in decarbonising the built environment.

Grid operators of the future will manage a more distributed electric utility grid. Fortunately, energy efficiency serves as a readily available tool to address the challenges associated with more demand on the electric grid. By implementing strategic energy efficiency programmes alongside strategic electrification, utilities can help maintain grid reliability and work to reduce T&D expenditure, engage their customers, and reduce their GHG emissions.

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