I spent time in the US in 2023 on behalf of Electron, learning where network utilities are on the journey to flexibility. Unsurprisingly, we’re seeing some of the same energy challenges and themes that the UK and Europe have faced. Energy flexibility is starting to provide the solution.
1. An increase in grid congestion is enhancing the need for energy flexibility in the US
EV adoption rates are accelerating and solar power is becoming more popular. That means more and more assets are coming into play. It’s therefore getting harder to connect new Low Carbon Technologies (LCTs) to the grid.
This is leading to congestion on the grid, with longer connection queues – and that’s slowing down the energy transition for the US.
However, a big difference between the US and the UK and Europe is that there hasn’t been any dynamic pricing structures or markets for flexibility.
If you’re a flexibility provider, that means your options revolve around tariffs, which tend to be fixed and static. It’s therefore difficult to get the maximum value out of your resources. But that’s changing as energy flexibility in the US starts to become more widespread.
2. The introduction of the Inflation Reduction Act is incentivising investments
The behaviours of network utilities are changing, thanks to the Inflation Reduction Act. This act will fund investment into clean energy, among other areas. The use of electric vehicles and energy storage is therefore becoming more incentivised, with the capacity for other non-dispatchable renewables growing.
This will naturally put more strain on the existing grid. Network utilities are therefore increasingly investing into system reliability and resilience – where flexibility plays a key part.
3. The rise of Virtual Power Plants (VPPs) is helping utilities see more value
VPPs are emerging as one of the key tools that the US is using to enhance grid resilience and relevant reliability. These can play a variety of functions, but they essentially control a number of distributed assets. Those assets are traded or the VPP acts like a power plant. That means playing the assets into existing markets or offsetting other wholesale costs.
To use VPPs at scale, network utilities need to integrate a number of operational systems across network monitoring, resource management, and dispatch. There’s still a lot of work to be done in the US – and the UK and Europe – to make that happen.
However, in the US, the vertically integrated utilities own the generation, the wires and the end customer relationship. That means more value on the table for those utilities who are able to use VPPs to create bundled propositions for grid and energy services. I think we’re going to see quite a lot of progress over the next year or two as the US starts to catch up. It may even leapfrog some of the UK and Europe in that respect.
4. Updated regulation to support the energy transition is empowering flexible resources
To enable this transition – and to empower flexible resources and clean technologies – new regulation is being introduced.
First, California is one of the most progressive states in the US for clean energy and the energy transition. The state has launched its Net Energy Metering 3.0 initiative. This will allow for more granular metering of export in the home. It will also encourage and incentivise self-consumption before exporting to the grid.
Tailored time-of-use tariffs for consumers will also help provide better price signals for aggregators and distributed energy resources.
Second, FERC 2222 is a federal order that will apply nationally. This is similar to P415 in the UK. It will allow aggregated resources and aggregators to play into existing markets – like utilities and suppliers can already do.
This simply creates more opportunities and options for providers of flexibility and will encourage the adoption of low carbon technologies.
