Anticipating 88 GW of residential flexibility in the US

There are nearly 30 million distributed generation and grid-connected devices installed in homes across the United States, with millions more anticipated by 2023. These devices have the potential to offer flexibility to both customers and the electric grid.

Our latest grid edge report forecasts 88 gigawatts of residential flexibility potential in the United States by 2023.

Flexibility (or “demand flexibility”) describes the ability of hardware and software to come together to create load shapes that are desired by utilities and market operators. Flexibility makes it possible to shift demand and harness distributed resources for the benefit of the grid, while also creating market opportunities for new types of companies.

Two national trends continue to drive the growth of residential flexibility. First, there is growing customer interest in smart home devices, home energy storage and electric vehicle charging, all of which can contribute significantly to flexibility. Second, regulation is evolving to enable flexibility beyond traditional demand response programs, and new policy frameworks are poised to emerge as grid-connected devices become widespread.

If you can achieve reliability and affordability using behind-the-meter resources, that’s a success. But we've found that the right incentive framework needs to be there so that utilities can get a return.

Customer-sited assets to watch

The number of customer-sited assets is poised to grow quickly over the next five years. Residential energy storage systems and electric vehicle chargers currently make up the smallest percentage but are positioned for the most rapid growth. These assets have significant potential to alter customer load shapes, if the regulatory environment enables it.

Different types of devices have varying capacities for grid impact. For example, residential energy storage can ease intermittency and mitigate peak demand for short durations. Residential solar can be paired with distributed energy resource management systems and smart inverters to respond to events on the grid. Grid-connected smart thermostats can be used to adjust HVAC energy consumption. The list goes on.

Adding new devices: Incentives and regulations

Regulation can affect how many customer-sited devices appear on the grid and how well suited those devices are to offer grid benefits.

Policy impacts the number of devices that are installed in homes. Most regions and entities are encouraging the purchase of behind-the-meter devices with rebates and discounts. For example, Wood Mackenzie has found that dozens of utilities around the U.S. are developing pilot programs that include consumer incentives for investment in residential charging infrastructure. There are also many incentives encouraging solar and smart thermostat adoption.

Other policies affect whether grid assets are technologically equipped to operate in a controlled manner. For example, we see that only two states (California and Hawaii) currently require solar systems to be equipped with advanced inverter technology, which allows power production to be adjusted in real time. States that do require smart inverters are ensuring that residential solar can contribute grid services like voltage control and frequency stability.

Access and control

Many devices currently installed in homes have the potential to contribute to flexibility but are not yet used as grid resources. Regulation is playing a key role in opening up the 88-gigawatt flexibility potential in the residential sector.

Utilities are beginning to explore the “how" of flexibility, with policies that allow them to harness customer-sited resources. New software and business models are integral to this change.

Behavioral programs enabled by smart meters and other devices, wherein utilities automatically enroll customers in load control or demand response programs, are becoming more common.

Other utilities are exploring new approaches to tap into flexibility behind the meter dynamically and automatically. These approaches often involve changing the rate structure for customers, such as exploring higher fixed charges or demand charges for solar customers. These questions about equity and rate design continue to evolve and mature.