THE ECONOMICS OF DEMAND FLEXIBILITY

The report analyzes 'demand flexibility' (DF)—the use of technology to shift electricity loads like air conditioning and EV charging to lower-cost times. It finds that widespread residential DF could avoid $13 billion annually in U.S. grid costs and reduce customer bills by 10–40%. Through four case studies (ComEd, SRP, HECO, and Alabama Power), the report demonstrates how DF can mitigate peak demand, integrate rooftop solar PV, and provide a lower-cost alternative to traditional grid infrastructure investments.

• Residential demand flexibility has the potential to avoid approximately $13 billion per year in total U.S. grid costs. This includes $9 billion in avoided investments for generation, transmission, and distribution, $3 billion in avoided production costs from high-marginal-cost resources, and $1 billion from providing ancillary services such as frequency regulation and spinning reserves.
• Depending on the utility rate structure, demand flexibility can reduce residential customer electricity bills by 10% to 40% annually. The aggregate market size for net bill savings across the four analyzed utility territories ranges from $110 million to $250 million per year.
• In a real-time pricing scenario (Commonwealth Edison), cost-effective demand flexibility can shift nearly 20% of total annual electricity consumption to lower-cost hours, potentially reducing a customer's total bill by 12% net of technology costs.
• Under residential demand charge structures (Salt River Project), demand flexibility can reduce a customer's average monthly peak demand by 48%, which can lower net bills by 41% and make rooftop solar PV cost-effective even under mandatory demand charges.
• In scenarios where export compensation for rooftop solar is zero or reduced (Hawaiian Electric Company and Alabama Power), demand flexibility significantly increases on-site consumption of solar energy. In Hawaii, on-site consumption can increase from 53% to 89%, while in Alabama, it can rise from 64% to 93%.
• Demand flexibility can accelerate the timeline for rooftop solar PV to reach grid parity in regions with unfavorable rates. In Alabama Power territory, adding DF could accelerate parity to 2020, compared to 2023 for solar alone.
• In the Northeast United States, if export compensation for solar PV is reduced to avoided cost, demand flexibility could increase the total PV market by 60% through 2030 and increase the cost-effective load defection potential from 20% to nearly 40% of residential load.
• The most cost-effective residential loads for demand flexibility are air conditioning (via smart thermostats), electric vehicle charging, and domestic hot water heating. Electric dryers and dedicated battery storage are generally less cost-effective under most analyzed rate structures.

APA

Bronski, P., Dyson, M., Lehrman, M., Mandel, J., Morris, J., Palazzi, T., Ramirez, S., & Touati, H. (2015). THE ECONOMICS OF DEMAND FLEXIBILITY. RMI. https://rmi.org/app/uploads/2017/03/RMI-TheEconomicsofDemandFlexibilityFullReport.pdf

Chicago

Bronski, Peter, Mark Dyson, Matt Lehrman, James Mandel, Jesse Morris, Titian Palazzi, Sam Ramirez, and Hervé Touati. THE ECONOMICS OF DEMAND FLEXIBILITY. RMI, 2015. https://rmi.org/app/uploads/2017/03/RMI-TheEconomicsofDemandFlexibilityFullReport.pdf.

Wikipedia

{{cite report |last1=Bronski |first1=Peter |last2=Dyson |first2=Mark |last3=Lehrman |first3=Matt |last4=Mandel |first4=James |last5=Morris |first5=Jesse |last6=Palazzi |first6=Titian |last7=Ramirez |first7=Sam |last8=Touati |first8=Hervé |title=THE ECONOMICS OF DEMAND FLEXIBILITY |publisher=RMI |date=August 2015 |url=https://rmi.org/app/uploads/2017/03/RMI-TheEconomicsofDemandFlexibilityFullReport.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{bronski2015economics, author = {Bronski, Peter and Dyson, Mark and Lehrman, Matt and Mandel, James and Morris, Jesse and Palazzi, Titian and Ramirez, Sam and Touati, Hervé}, title = {{THE ECONOMICS OF DEMAND FLEXIBILITY}}, institution = {RMI}, year = {2015}, month = aug, url = {https://rmi.org/app/uploads/2017/03/RMI-TheEconomicsofDemandFlexibilityFullReport.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }