Bloomberg New Energy Finance (BNEF) recently predicted a power system shift from one built around large fuel-based generators to one with variable renewable generators as its backbone. While wind and solar’s growth creates financial opportunity, they also open the door for new investment and customer savings from power use itself—a resource called demand response (DR).
BNEF points to recent drops in wind and solar costs as these technologies rapidly “learn by doing.” Today, wind and solar are our cheapest forms of generation and will likely get even cheaper in the near future. Supporters of the current fossil fuel-based legacy system point to times “the sun doesn’t shine and the wind doesn’t blow” to justify reliance on significant natural gas and storage to meet demand requirements in a high-renewables future. While these are legitimate concerns, their reliance on an old paradigm begs the question: What is the value of shifting demand to follow the sun and wind?
Natural gas and battery storage have grabbed headlines and investor attention, but the cheapest source of flexibility is actually customer demand itself. Achieving a distributed renewable energy future at least cost requires amassing an armada of flexible capacity that complements variable base-cost wind and solar. DR is a key market opportunity to save customers money and offer cost-competitive flexibility.
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