Flexible Demand Program Framework - FREE Power
The Flex Coalition is pleased to announce our new flexible demand program framework, affectionately known as the “Flexible Reduction in Electric Energy and Power” (FREE Power). This framework advances technology-neutral, flexible demand programs that fully compensate all elements of grid flexibility provided by DERs. The key steps in deploying the FREE Power program include:
1. Establish avoided cost values for generation capacity, transmission, distribution, energy, and other societal impacts; to the maximum extent possible, these values should be localized to specific portions of the distribution and transmission grid.
2. Allocate avoided costs to hours of the year which drive those costs.
3. Publish the localized hourly avoided cost values; where possible, the utility should publish location-specific values for different segments of the grid.
4. Customer enrolls in the program (through an aggregator or as a self-aggregator). The customer’s energy use baseline is established at time of enrollment, based upon a weather-normalized baseline of the prior 24 months (ideally) of energy usage data, consistent with OpenDSM energy prediction methodologies. The customer’s compensation rate is established based on the published hourly values at time of enrollment, and is valid for a period of five years.
5. Calculate the value of each aggregator portfolio’s, for each customer in the portfolio, of the weather-normalized energy savings multiplied by the difference between the FREE Power avoided cost value and the customer’s electric rate.
6. Aggregators (or self-aggregating customers) receive payment based on actual measured, ongoing reductions in energy use against the baseline.
We hope these resources will be useful for utilities and stakeholders in proposing pilots, non-wires alternatives, and scalable programs to offset load growth, and to regulators and policymakers as they consider various proposals for deploying flexible demand at scale. The program framework and structure will undoubtedly need to be tailored to each specific utility and regulatory context – we have endeavored to preserve flexibility and highlight options to tailor the program wherever possible. Where data or procedures are not currently in place to meet all elements of the framework, we encourage an incremental approach to deploy some elements of the program and then add in additional value streams as data allows.
- Flexible demand resources such as virtual power plants (VPPs) and demand response (DR) offer the fastest and lowest-cost option to meet load growth from data centers and preserve affordability for households and ratepayers. Yet many current VPP and DR programs focus on generation capacity, and frequently do not address the value of flexible demand for the electric grid distribution system. This results in lower compensation for distributed energy resources (DERs) and flexible demand, and leaves ratepayers on the hook for more expensive utility infrastructure upgrades that could have been deferred or avoided by flexible resources.
- These benefits vary significantly based on where they occur on the distribution system — a DER at one location could provide thousands of dollars in grid value, while the same upgrade at another location may currently offer limited distribution relief. These locational differences make distribution avoided costs harder to quantify — which too often leads utilities and policymakers to skip over these benefits in designing programs simply because they are more complex to calculate.
- The Flex Coalition's new whitepaper (and associated decision support tool) identifies best practices for quantifying the value of avoided infrastructure spending at specific locations on the distribution system. We offer these concepts to help policymakers and stakeholders better understand how DERs can benefit the distribution system through avoided and deferred costs, looking individually at specific circuits with the greatest load and load growth.