Untangling the complexity of our electricity grids is no mean feat. Markets across the world are grappling with the challenge of connecting rising numbers of DERs onto aging networks, all while keeping the lights on. A patchwork of different regulations, financial constraints, energy mixes and customer archetypes makes the US a fascinating market to solve for. But is looking at the UK’s ‘flexibility first’ approach to load management a case of comparing apples and oranges in the context of the US grid? This blog will see what learnings can be uncovered.
US utility angst
Three quarters of utilities consider the adoption of behind-the-meter energy resources to be creating operational challenges for the network. The cost to mitigate these challenges is expected to be enormous – for example, by 2030, US utilities may need to spend between $1,700 and $5,800 on network upgrades per additional electric vehicle wanting to charge on the distribution network. This problem is compounded by the fact that there is a shortage across the US of distribution transformers – the crucial part of distribution networks that will likely need upgrading (along with other components) as electricity load on the low-voltage network increases. This shortage is leading to wait times for the new equipment of over two years, significantly slowing down the process of freeing up new capacity for low-carbon technologies.
Grid operators are facing rises in voltage issues including localized under-voltage and over-voltage events, some causing damage to consumer electronic devices leading to customer complaints and reduced satisfaction scores. More than half of US utility leaders cite voltage visibility and control issues as a concern for increasing levels of behind-the-meter DERs.
The fork in the road
Grid volatility and congestion is a trend we’re seeing play out globally and will only intensify as homes and businesses are weaned off fossil fuels and are instead powered by a myriad of intermittent renewable energy sources.
So how are distribution utilities and network operators rising to this challenge? Broadly there are two ways of managing this problem. The first is to immediately invest time and (considerable) money into upgrading all of the transformers, circuits and wires to free up capacity on the low voltage network – consequently slowing significant increases in load and the connection of low-carbon technologies. The second is to change how demand is managed on the network today, giving utilities more time to plan and reinforce the grid further into the future, while freeing up capacity for new load to connect.
What is the UK doing?
In the UK, many of the distribution utilities are choosing the second pathway. For example, UKPN, the distribution utility for London and the wider region, is taking a ‘flexibility first’ approach and committing to save customers more than £400m in the next five years. Their plan? To transparently evaluate traditional network reinforcement against flexible alternatives and procure this flexibility to manage demand where it is more cost effective. In late 2023, this saw the network operator procure a groundbreaking 850MW of turn up/down capacity across its network.
Flexibility providers, such as Kaluza, bid to provide their capacity to network providers such as UKPN years in advance via a marketplace, enabling grid operators to find the local flexibility they need to defer investment while flexibility providers derive value from making capacity available over the long term. Further deployment of flexibility in this way could save the UK between 4 and 13 billion pounds in network reinforcement costs by 2050. UKPN has also recently moved to procuring flexibility in the day ahead timeframe – running mini-tenders daily to procure localized capacity for the following day.
This dynamic procurement process means network utilities are gradually shifting towards a world where they are able to buy flexibility at the lowest price offered on and within any given day, from any available energy asset type, minimizing the cost of this flexibility to the utility via highly-liquid markets with competitive pricing. At the same time, flexibility providers can harness further opportunities to create value from the flexibility in the low-carbon technologies they control.
Kaluza has first-hand experience of the UK’s flexibility system having optimized energy across a mixed portfolio of residential assets in multiple programs. For example, in the IntraFlex project, Kaluza orchestrated EVs (both V1G and V2G), home batteries and smart HVAC to deliver localized flexibility in near real time for the local network utility while creating a seamless experience for end customers. Kaluza was one of a small number of providers that helped generate more than 50MW of capacity to mitigate local network constraints.
Could ‘flex first’ work in the US?
Following a similar ‘flexibility first’ approach in the US will require distribution utilities and flexibility providers to take a very different approach. ‘Static’ time of use rates are rapidly gaining popularity in the US as a tool to mitigate peak demand pressures. However, such ‘single signal’ optimizations will likely cause the US grid far greater problems than the UK and wider Europe due to its unique makeup. London alone has 100,000+ distribution transformers, ranging from small, single-phase pole-mounted transformers supplying individual dwellings to ground-mounted transformers with larger capacities of 100kVA to 500kVA+ serving hundreds of homes.
Networks across the US have larger numbers of lower-rated, mainly pole-mounted, transformers – so much so that it’s common for there to be only three to five customers per transformer with instances of eight homes being served by 25kVA pole mounted transformers. For US networks, this means there is a higher chance of customers charging at the same time and overloading these transformers or causing other issues for the local network, especially when one introduces, say, a single optimization signal around which these customer devices are managed.
Flexibility providers can help to aggregate customer assets into highly localized groups and manage these in accordance with near real-time information regarding the network conditions serving these customers. There will therefore be a need for US utilities to work closely with these providers who can control and group customer loads to help identify areas with the most network congestion. Kaluza has shown how this can work in previous programs – integrating against grid SCADA systems to monitor and optimize according to real-time generation or demand signals and managing devices in response to these signals.
To facilitate this, US utilities will also need to be able to identify, recruit and retain enough customers creating new load peaks and connected to areas of key grid constraint, onto more dynamic and automated demand response programs. Kaluza has utilized probabilistic modeling to detect EV or other high-load customers based on consumption and other demographic data which can be applied to a US utility’s territory. With the right incentive structure, Kaluza has also shown that rapid recruitment and long-term retention of customers within a managed charging program with large scale is possible.
Kaluza has scaled Charge Anytime, OVO’s EV charging plan in the UK, to tens of thousands of EVs in under 18 months and created savings of over £10 million (nearly $13 million). These incentives can be adjusted to drive localized recruitment e.g. via incentive bonuses for ‘recruiting your neighbor’ and, with the help of the utility, this recruitment can be targeted to hyper-localized areas of the network that most need flexible grid management solutions.
The time is now for US utilities to consider embracing ‘flexibility first’ approaches of their own. The need to leverage flexibility ‘at the grid edge’ in a way that benefits the distribution grid appears much more critical for many US utilities due to rapid uptake of DERs, the proliferation of ‘single signal’ time-of-use rates and the nature of the distribution grids they manage. Although progress in the US is relatively slow compared to international counterparts, proven technology and cooperation between utilities and flexibility providers can help the US achieve a ‘flexibility first’ approach and ultimately enable a quicker, less expensive energy transition for all customers.
