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ELECTRIFICATION: A Boon For Demand Response & Energy Efficiency



It’s way too early to predict the outcome of the 2024 presidential election, but one thing is certain regardless of the political party in power—the energy transition to lower carbon-intensity through electrification will continue to evolve.


What do I mean by carbon-intensity? Carbon intensity is a measure of the grams of carbon released to produce a kwh of electricity. Our nation’s electricity fuel mix will be a material factor in the carbon intensity of our daily lives given the momentum currently at play to electrify many sectors of our economy including transportation, buildings, manufacturing, and industrial processes, among others.


As more sectors of our economy electrify, our power utilities and generation companies will be continuing to retire existing coal plants while installing zero carbon and lower carbon energy resources like renewables and natural gas. They will also continue experimenting with carbon capture and utilization systems, and hydrogen processes.



Any rational assessment will face high-cost headwinds that complicate and potentially slow the advancement of the energy transition. These headwinds currently include labor cost increases and labor availability, increasing cost of capital due to interest rate upticks, supply chain disruptions, and geo-political dynamics that increase commodity and material prices. While we’ve experienced these headwinds over the last couple of years, they are likely to be transient in nature and short to medium term in duration. On the other hand, more persistent tail winds will propel the energy transition in forward motion—albeit with varying degrees of speed to commercialization—and this will go on for the next the next 25 years and potentially beyond.


These tailwinds include significant federal spending for new clean energy infrastructure and the the outlays may take up to a decade or more. Shareholder and investment sentiment will drive an environmentally friendlier corporate culture, resulting in expanding private sector commitments for the development of clean projects regardless of government support. In fact, one notable example of private sector commitment in the energy transition includes the growth of venture capital investment in carbon capture and utilization start-ups. Venture capital has committed over $800 million in the first half of 2022 across 11 deals representing post-combustion carbon capture technologies. That is almost twice the investment in the last four quarters(1).


Widespread electrification of all U.S. economic sectors—commercial and residential buildings, transportation, and industry—will result in a material impact in our electric consumption growth. From the potential to electrify mining and refining operations, to manufacturing and construction, demand in electricity is forecasted to more than triple in the next thirty years(2).


As electricity demand continues to grow, end-use consumers of energy will be motivated to rely on energy efficiency and demand-response technologies to mitigate their energy costs.


In fact, Department of Energy’s National Renewal Energy Lab (NREL) published a study in 2021 that concluded that demand-side flexibility will be valuable in supporting the new electrification demands. Actions categorized as “demand-side flexibility” can include anything from end-use customers decreasing electricity use during periods of high electricity pricing, to optimizing electric vehicle charging times. It also includes flexibly operating end-use equipment in buildings and industry in response to surge pricing during various times in the day and or during unusual weather events (3).


Photo courtesy of NREL and iStock


The consequence of growing electrification in society will be the evolution of new and creative programs and technologies that will allow the end-use consumer greater opportunity to effectively control and save on energy use. Soon, smart thermostats will go beyond indoor climate control and become the interface to control the entire smart home (lights, locks, windows, security systems, refrigeration, and HVAC systems, etc.). Residential consumers and commercial buildings will more easily and uniformly sell their unneeded electricity requirements to someone else, or back to the grid. Data centers and bitcoin miners, among other large flexible load entities, will become effective at load-following and load shed practices to not only lower their energy costs and price volatility but also, to provide congestion relief on transmission and distribution systems.


Instead of focusing on the number of megawatts of clean energy resources installed, the measure of environmental success will become the carbon intensity output of the entire value chain of energy consumption starting from the production and manufacturing to the processing and eventual consumption of energy, or another commodity product.


Utilities and retail providers must ensure they have smarter and more sophisticated capabilities to measure their customers’ energy use and carbon intensity output. This will require robust tracking, monitoring, auditing/compliance of carbon emission reductions as well as energy efficiency savings, and opportunistic demand response revenue streams. Energy management systems for utilities and large consumers will need to get smarter, provide actionable data, ensure integrity of the system, and be user friendly and economically efficient. Underlying all this change is the critical need, for utilities especially, to communicate and plan across different segments of the enterprise. That means the transmission and distribution operators must coordinate closely and consistently with the planners, IT, generation supply, and even regulatory and communication functions of the business.


The underlying message is Be Prepared! The future growth of energy efficiency and demand response is strong. The driver is electrification, and our society is well on its way. New and upgraded ways to identify, measure, monitor, and report are vital to a meaningful energy transition.

 

Sources:

1 Chemical and Engineering News, “Carbon Capture wins $841.5 Million in Venture Capital” (October 5, 2022); https://cen.acs.org/business/investment/Carbon-capture-wins-8415-million/100/i36


2 McKinsey & Company, Global Energy Perspective 2022 (April 2022): https://www.mckinsey.com/industries/oil-and-gas/our-insights/global-energy-perspective-2022


3 National Renewable Energy Lab, “Flexible Loads and Renewable Energy Work Together in a Highly Electrified Future” (May 25, 2021): https://www.nrel.gov/news/program/2021/flexible-loads-and-renewable-energy-work-together-in-a-highly-electrified-future.html

 

About the Author:

Ms. Klein is Principal of Klein Energy, LLC, an energy consulting company based in Austin, Texas. Over the last 30 years she has worked in Washington, DC and in Texas in the energy, water, telecommunications, and national security arenas. She chaired the Public Utility Commission of Texas, has served as chair of the board of the Lower Colorado River Authority, and serves on the board of directors of Avista Corporation, a utility serving the Pacific Northwest and Alaska; SJW Group a water utility serving California, Texas, Maine and Connecticut; and Diamondback Energy, an oil and gas exploration and production company. She also sits on the boards of venture-backed early stage and fast growth companies. Ms. Klein is also the Founder and Director of the Texas Energy Poverty Research Institute, a research organization focused on mitigating energy poverty.

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