Determining Utility System Value of Demand Flexibility From Grid-interactive Efficient Buildings

This report focuses on ways current methods and practices that establish the value to electric utility systems of distributed energy resource (DER) investments can be enhanced to determine the value of demand flexibility in grid-interactive efficient buildings that can provide grid services. The report introduces key valuation concepts that are applicable to demand flexibility that these buildings can provide and links to other documents that describe these concepts and their implementation in more detail.

The scope of this report is limited to the valuation of economic benefits to the utility system. These are the foundational values on which other benefits (and costs) can be built. Establishing the economic value to the grid of demand flexibility provides the information needed to design programs, market rules, and rates that align the economic interest of utility customers with building owners and occupants. By nature, DERs directly impact customers and provide societal benefits external to the utility system. Jurisdictions can use utility system benefits and costs as the foundation of their economic analysis but align their primary cost-effectiveness metric with all applicable policy objectives, which may include customer and societal (non-utility system) impacts.

This report suggests enhancements to current methods and practices that state and local policymakers, public utility commissions, state energy offices, utilities, state utility consumer representatives, and other stakeholders might support. These enhancements can improve the consistency and robustness of economic valuation of demand flexibility for grid services. The report concludes with a discussion of considerations for prioritizing implementation of these improvements.