Originally published on RMI Outlet.
By Titiaan Palazzi and Sam Ramirez
We are accustomed to buying our electricity from utilities: they provide us with power; we pay for it. To reduce our utility bill, we can reduce our electricity demand with efficiency (these negawatts have considerable value), or install distributed generation such as rooftop solar PV panels to make our own electricity. Alternatively, we can switch to a retail energy provider that offers better pricing, if we live in deregulated electricity markets like Texas that allow us to do so. And now, due in part to the rise of distributed energy resources, there is a new way to lower our electric bills: demand flexibility.
Demand flexibility offers tremendous value to those who live in markets with compatible rate structures, such as where utilities charge less when market demand is lower. As we show in our report The Economics of Demand Flexibility, it is now possible to shift your electricity use to times of day when the same watt comes at a cheaper price. We call this resource “flexiwatts”—power consumption that is moved to times when power costs less, without sacrificing on the end-use service the electricity is meant to provide.
Flexiwatts are the new kid in town. They save you money in simple ways that are often invisible to the end user and without compromising on quality, choice, or value. Companies like Nest, Whirlpool, and ChargePoint can inexpensively and unobtrusively shift when your air conditioner turns on, your water is heated, or your electric vehicle is charged. How do these companies extract value from controlling the timing of electricity demand? They rely on emerging rate structures from utilities around the country.
Rate Structures Unlock Flexiwatt Savings
Shifting your electricity use makes economic sense only if electricity costs are not equal at all times (or for all sources, such as grid-supplied electricity, behind-the-meter solar PV compensated for grid export, and self-consumed solar PV). Today, according to U.S. EIA data, 65 million U.S. customers are served by utilities that offer time-varying rates such as time-of-use (TOU) rates (where the utility provides a discounted rate outside of peak times), real-time pricing rates (where rates vary as often as hourly based on wholesale prices), or peak pricing rates (where electricity is more expensive during critical peak times). In many utility territories, this requires you to actively opt-in. Traditionally, electricity rates did not vary over time and many people to whom time-varying rates are available don’t know of their existence, or value.
4 Common Home Loads Can Deliver 10–40% Bill Savings
Just a few electricity-using devices determine the majority of your electricity bill, and there are big savings opportunities if you can take advantage of the flexibility of these devices’ energy use schedules. Fortunately, many new businesses provide products and services to make it easy for you to take advantage of this flexibility.
The biggest electricity use in U.S. homes is heating, ventilation, and air conditioning (HVAC). On a hot summer afternoon in Texas, AC units send electricity demand jumping up, causing wholesale electricity prices to jump up to 300 times their typical value. But you don’t need to suffer this price spike: by running your AC unit an hour or two before prices start to skyrocket, you can pre-cool your house, so that it’s at the right temperature when you come home. This allows you to switch your AC off during peak-price hours. Nest offers this service to their users through , but only engages it in a handful of cases per year.
Domestic hot water follows HVAC as the second-largest residential electricity use and, more importantly, can have a huge power draw. Around two-fifths of all water heaters in the U.S. are electric. A typical, 55-gallon water heater costs about $500, has a 4.5-kW heating element, and can store around 8 kWh of hot water. In comparison, a $3,000 Tesla Powerwall with a 7-kWh daily cycle and a 3.3-kW peak charge can cause a demand fluctuation of 6.6 kW by switching from charging at full power to discharging at full power. The humble water heater thus has about the same energy storage capacity as a Powerwall, but at one-sixth the cost. Adding inexpensive smart controls gives you a high-performance storage asset at a fantastic price. In fact, making electric water heaters controllable is such a good deal for both the customer and the overloaded grid that some utilities are now offering new water heaters for free, provided the utility can control when the heating element switches on, and all with no impact on your ability to take a hot shower.
A third opportunity to save money by shifting electricity use is by keeping your clothes dryer from switching on during periods of peak electricity prices. You can do this either by buying a “smart dryer” that costs $500 more than a regular dryer, or simply by starting your dryer when time-of-use electricity prices are low. The marginal cost of making a dryer smart is likely only a few dollars for a wireless control module and a microchip, so this extravagant price for smart clothes dryers will likely come down over time.
A fourth opportunity for electricity bill reduction through flexiwatts lies in electric vehicles (EVs). A typical level-2 charger has a maximum power draw of 6.6 kW—twice the average power demand of a U.S. household. Sometimes, your EV needs to be charged as quickly as possible. Often, though, electric cars are parked at the office for the full day, or at home during the evening. When this happens, controlling charging to achieve minimum electricity costs is ideal. eMotorWerks offers a free electric-vehicle charger to California residents (otherwise you’ll pay $500–$1,000), providing they can control the charging of the vehicle.
What Does This Mean For You?
In our report The Economics of Demand Flexibility, we calculate how much electricity bills can go down by using flexiwatts in four different U.S. states. Our findings are impressive: in utility Salt River Project’s service area in Arizona, for example, flexiwatts can reduce peak demand by 48 percent, and save customers with solar photovoltaics (PV) 41 percent of their electric bill. In Hawaii, customers with solar PV can save 33 percent of their electric bill by controlling their AC, EV charger, water heater, and clothes dryer.
What can you do to seize these cost savings? You don’t need to become an energy trader, and you have many more options than utility-sponsored efficiency programs. First, research the different electricity rates your utility offers you. Second, if you consider buying a new air conditioner, clothes dryer, or pool pump, look into products that can be controlled through Wi-Fi, so that you can unlock the value of the flexiwatt.
Image courtesy of Shutterstock.