The Flexiwatt: how demand flexibility can save you money

What if the next breakthrough in dramatically shrinking American energy use came not from a new invention, but from getting smarter about the technology that exists today?

Enter the Flexiwatt: the latest breakthrough in energy efficiency?

According to the energy think-tank Rocky Mountain Institute, changing how we use and pay for energy at home is a large but still untapped opportunity. 

Historically, we've had two main options for meeting our energy needs: to purchase energy from our utility or supplier, or reduce our need for energy by improving energy efficiency in our homes. Recent developments in solar technologies have also made going off the grid an increasingly viable possibility, giving many of us a third option.

But going off the grid isn't realistic for everyone. Enter a fourth option: demand flexibility, also known as "flexiwatts". Now, with communication and control technologies (think smart meters and the like), we can shift our electricity use across hours of the day and night when prices are lower, seamlessly and without impacting service quality. Combine this ability to determine precisely when we use power-hungry appliances such as air conditioners and water heaters with increasingly sophisticated time-of-use pricing systems (in which your utility or supplier charges higher rates during periods of peak demand), and the possibilities for saving for customers are considerable: by taking advantage of lower rates we could cut our electric bills by 10 to 40 percent.

The term "flexiwatts" refers to watts of demand that can be moved across the hours of a day or night according to economic or other signals

Utilities could benefit from taking a look at flexiwatts too. If customer demand is spread out throughout the day, the amount of power capacity required during peak demand times is smaller, meaning less need for investment into generation capacity, and less strain on the grid overall. The Rocky Mountain Institute estimates that implementing demand flexibility could save utilities 10 to 15 percent of potential grid costs.

What's more, according to the Rocky Mountain Institute, flexiwatts could help make solar more accessible. With demand flexibility, customers are encouraged to use more of the electricity they generate onsite, making their solar installations more cost-effective.

The best part about this is that it doesn't involve waiting for new technological innovations. Demand flexibility isn't about dramatic changes, but more about using the technologies that exist today to be smarter about your energy use.

So how is demand flexibility possible? The first enabling technology was the smart meter, which tracks electricity use in real time, so that utilities is able to determine not only how much electricity their customers use, but also when that electricity was used. This technology allowed for a new electricity pricing system, known as "time of use pricing", in which prices change based on the hour of the day when electricity is used.

Did You Know?There are now over 50 million smart meters deployed throughout homes and businesses across the United States.

Next came the development of in-home "smart devices", such as programmable timers for hot water heaters, dryers, and other large energy users, or smart thermostats. These devices allow us to program them (or are already automatically programmed) to run at certain periods of the day, or according to time of use pricing, without considerably compromising comfort. For example, the Nest thermostat can be programmed to cool your home in the early afternoon, so that it stays cool until after the peak late-afternoon period is over. Similarly, it is now possible to program appliances such as washers, dryers, and dishwashers, to start and finish at anytime at night, when prices are lowest.

Demand flexibility is about using existing technologies to be smarter about your energy use, without significantly sacrificing comfort

So if it turns out that much of our electricity demand is flexible, why haven't we already started taking more advantage of flexiwatts? One of the main obstacles at this point is that relatively few Americans are on time of use rates. In most states, time of use pricing is optional, but the opt-in rate is pretty low: according to the Rocky Mountain Institute, while 65 million Americans have access to it, only about 4 million have opted in to time of use pricing. In order to take greater advantage of the savings offered by flexiwatts, utilities could offer a wider selection of time of use rates, perhaps even offering prices that change hourly (which is already available to power customers in Illinois, by ComEd and Ameren).

Another issue is customer awareness. While we all tend to track the price of gas and may adjust our driving habits accordingly, we aren't used to paying similar amounts of attention to our electricity bills. This may partly be because so few people are currently on time of use pricing - when you pay a fixed rate for your electricity, you don't have to think about the implications of when you use power. Getting these devices programmed and set up correctly might seem like a big headache for some people. But as the Rocky Mountain Institute points out, this could be a good opportunity for businesses to create smart control systems that make strategic energy consumption easier.

Then there's the question of convenience. Right now we're used using electricity when we want. While shifting some of our activities might save money, sometimes we don't want to wait to do our laundry, or if we're cold we won't want to wait to turn our heaters on. But with the right rate design, changing our habits might be easier than we thought.

Finally, there's also the issue of whether flexiwatts fit into our current electricity system. The Rocky Mountain Institute largely ignores the role of competitive energy providers in providing customer choice and savings on their electricity rates. So does this mean that flexiwatts don't apply in a competitive electricity market? Not necessarily. Many competitive energy suppliers already offer plans with a time of use option, such as free evenings and weekends, or free Saturdays. Some utilities, such as PPL Electric Utilities in Pennsylvania, have partnered with competitive suppliers in providing time of use rates, allowing them to fulfill their requirement of offering this type of pricing while encouraging wider consumer choice.

One thing's for certain: with saving money and energy efficiency on everybody's mind, the flexiwatt is here to stay.