Making our electric system more efficient

Imagine what it would be like if we couldn’t store the things we buy.  If coffee beans needed to brewed immediately after harvest, or milk had to be drunk straight from the cow.  Sounds crazy, right?  The fact is,  you are already using a product like this right now: electricity!

Because we do not yet have significant electricity storage installed, all of our electricity must be generated at the same time as it’s consumed.  As a result, we use the electric grid very inefficiently, which costs consumers billions of dollars every year.

Electricity use varies throughout the year

To see just how inefficient our electricity system is, let’s look at an example from the Midwest.  The Midcontinent Independent System Operator (MISO), coordinates electricity generation and transmission across a huge swath of the middle of the country.

In 2017, the average electricity consumption in MISO was about 75,000 megawatts (the equivalent of 1.25 billion 60-watt lightbulbs!).  But on July 20—a hot, humid day across much of the region—electricity use in MISO topped out at over 120,000 megawatts!  Since electricity has to be generated exactly as it’s consumed, the entire electric grid must be sized to be able to generate and transmit enough electricity to meet these “peak hours,” even though they only happen a few times a year.

The load duration curve

Just how rare are these peak hours?  The chart below shows electricity usage in MISO for every hour in 2017.  Instead of being organized chronologically from January to December, they are organized from highest to lowest electricity usage: the highest-use hour (from 2 to 3 PM on July 20) is in the top left corner, and the lowest-use hour (from 3 to 4 AM on April 9) is in the bottom right corner.  This is known as a “load duration curve.”

What’s important in this graph is the top left corner: electricity usage is extremely high for a very small number of hours.  Over 6,600 megawatts worth of generation ran for less than 20 hours total in 2017, and nearly 13,000 megawatts ran for 100 hours or less.   In other words, roughly 10 percent of the generation capacity in MISO used in 2017 sat idle 99 percent of the time.  And it’s not just power plants: the whole electric grid must be sized to meet these peak demand hours, even though they happen very rarely.

Five opportunities for improvement

The bright side is that this inefficiency creates opportunities, both to save money for customers and to reduce carbon emissions.  Here are some of the things Fresh Energy is working on to make the grid more efficient and flexible enough to function on mostly or all renewable generation:

  • Time-varying rates. Though the cost of producing electricity varies dramatically throughout the day and across the year, most people pay the same electric rate all day, every day. Charging more for electricity when it costs more to produce gives customers the incentive to shift consumption to less expensive hours, which help flatten out the load duration curve.
  • Demand Response. From the grid’s perspective, reducing electricity consumption is the same as generating more electricity. Paying customers to use less electricity during high-demand hours—e.g. by giving residential customers a bill credit for turning their thermostat up a couple of degrees during high-stress times—can reduce the need for peaking power plants that only run a few hours a year.
  • Battery storage. Battery storage costs have been falling at a breakneck pace. Moreover, battery storage can provide a wide variety of grid services beyond just shifting electricity use from high-cost hours.  If costs keep declining and state policy and market rules allow battery storage to compete on a level playing field, installed battery capacity could grow exponentially over the next decade.
  • Electric Vehicles. Electric vehicles are the ultimate in flexible load; as long as their car is charged when they need to leave in the morning, most people couldn’t care less whether their car began charging at 5 PM or 3 AM. Managing electric vehicle charging can turn this new load into a grid resource, helping lower costs for all customers and integrate variable renewables.
  • Energy Efficiency. Energy efficiency is great for both consumers and the environment, but the benefit of energy efficiency to the grid depends on when electricity consumption is being reduced. Targeting energy efficiency investments to high-value times will turn this win-win into a win-win-win.

How do we make these changes? Fresh Energy is working at the Public Utilities Commission and other arenas to shape state policy, market rules, and utility programs that will help us improve our electric system. Stay tuned for updates on these five important opportunity areas!


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