Demand flexibility—allowing household devices like HVAC systems and smart appliances to interact with the electric grid in response to real-time price changes—can save customers money and lower the overall cost of electricity. In our recent paper, The Economics of Demand Flexibility, we analyzed the economics of making common household loads controllable and responsive to electricity price signals. We found that making just two devices flexible, smart thermostats that could flex an HVAC system’s output up or down by 2 degrees and smart water heaters that could change the timing of water heating, could lower system-wide peak demand by 8 percent and save $10–15 billion in costs to the grid annually.
But these potential savings, as large as they are, are only a hint of what demand flexibility ultimately can provide. When considering how large an opportunity demand flexibility can be, there are three areas to consider:
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