The Benefits and Costs of Smart Grid Enabled Demand Side Management

This paper discusses the Demand Response and Energy Efficiency results from the U.S. Pacific Northwest Smart Grid Regional Business Case (RBC). Demand side management (DSM) is becoming a more accepted and important component of integrated resource planning across international regulatory jurisdictions. At the same time new, smart technologies are increasing the effectiveness and flexibility of DSM, and enabling demand side resources to provide new capabilities, such as helping balance intermittent renewables and provide ancillary services in international markets. The increasing importance of DSM in electricity systems globally has been evidenced in Europe, where regional and national policy has incentivized the introduction of demand side measures to enhance system reliability and flexibility. This has become even more visible in the last few years, with the high levels of penetration of intermittent renewable energy sources in several parts of the European power grid creating instabilities that could be addressed in-part with the use of DSM. However, because of the greater level of initial investment and capital cost for these new approaches, there is rightly some concern that these “smart grid enabled DSM programs” will fail to cost effectively deliver the promised benefits. To date, there hasn’t been a widely available and comprehensive effort to estimate costs and benefits of these new approaches to DSM. This session addresses these questions, summarizing the results of the “bottom-up” modeling analysis performed on the Pacific Northwest Region in the US. It describes key elements of the analysis approach to facilitate understanding, and tries to draw lessons that apply to other geographical regions. The analysis demonstrates that there is a significant and substantial benefits case for smart grid enabled demand response (DR); but, that the benefit case for smart grid enabled energy efficiency is less clear.