Integrating Demand-Side Resources into the Electric Grid: Economic and Environmental Considerations

Demand-side resources are taking an increasingly prominent role in providing essential grid services once provided by thermal power plants. This thesis considers the economic feasibility and environmental effects of integrating demand-side resources into the electric grid with consideration given to the diversity of market and environmental conditions that can affect their behavior. Chapter 2 explores the private economics and system-level carbon dioxide reduction when using demand response for spinning reserve. Steady end uses like lighting are more than twice as profitable as seasonal end uses because spinning reserve is needed year-round. Avoided carbon emission damages from using demand response instead of fossil fuel generation for spinning reserve are sufficient to justify incentives for demand response resources. Chapter 3 quantifies the system-level net emissions rate and private economics of behind-the-meter energy storage. Net emission rates are lower than marginal emission rates for power plants and in-line with estimates of net emission rates from grid-level storage. The economics are favorable for many buildings in regions with high demand charges like California and New York, even without subsidies. Future penetration into regions with average charges like Pennsylvania will depend greatly on installation cost reductions and wholesale prices for ancillary services. Chapter 4 outlines a novel econometric model to quantify potential revenues from energy storage that reduces demand charges. The model is based on a novel predictive metric that is derived from the building’s load profile. Normalized revenue estimates are independent of the power capacity of the battery holding other performance characteristics equal, which can be used to calculate the profit-maximizing storage size. Chapter 5 analyzes the economic feasibility of flow batteries in the commercial and industrial market. Flow batteries at a 4-hour duration must be less expensive on a dollar per installed kWh basis, often by 20-30%, to break even with shorter duration li-ion or lead-acid despite allowing for deeper depth of discharge and superior cycle life. These results are robust to assumptions of tariff rates, battery round-trip efficiencies, amount of solar generation and whether the battery can participate in the wholesale energy and ancillary services markets.