The most counterintuitive argument made these days about data centers is that they might actually result in lower bills for regular energy users. The reason why has to do with grid utilization. Electricity bills are a combination of the cost of generating electricity plus the cost of moving it to end customers. The first cost is more or less only incurred to the extent that we use electricity. That cost goes down the less we use. The second cost is based on the maximum amount of electricity that we might have to use at any one point in time (think the hottest day of the year). We have to build enough transmission lines, substations, and local distribution systems to carry enough electricity at one time to avoid a brownout or worse. This cost is fixed by the amount of capital required to build T&D infrastructure, and typically recovered through the sale of electricity. The more electricity is sold, the lower per kWh cost for infrastructure.
You might have noticed that this creates a bit of a dilemma. If we save energy, more T&D costs have to get recovered on fewer kWh sold, which means that we might end up paying more on our bill to cover these fixed costs. HOWEVER, if we use more and don’t have to build any new infrastructure, the average cost per kWh would go down. So if a data center showed up and increased the total kWh that flowed through the system, but did so in a way that used existing T&D infrastructure, the net result for customers would be a lower bill, even if they didn’t actually reduce any of their own energy use.
Now, there are complications to this line of thinking. Most important, if we all of a sudden need more kWh, we might end up spending more on energy, so the energy portion of the bill might go up by more than the infrastructure portion goes down. And if the grid is already stressed, some new infrastructure will be needed. Making sure this doesn’t hit the wallets of regular users will require complicated accounting. All in all, though, there’s a good argument to be made that better grid utilization is a net benefit.
Measuring Grid Utilization
These other considerations notwithstanding, how would we know how well a grid was being utilized? This is a question being tackled by a host of policymakers and think tanks. In fact, an entire industry trade group - the Utilize Coalition - has sprung up to bring attention to this concept. Virginia’s two major utilities released grid utilization studies in response to state legislation. Connecticut has requested the same of its utilities. But across the country, there is only a smattering of studies, with no consistent metrics for how to measure utilization, and no standardization around the data required for this purpose.
Consider the following questions: should utilization only count what’s behind a distribution substation? If so, what counts as a distribution substation? What about backup equipment that’s never used? Should the metric include the space between operational capacity and theoretical capacity? Do you add up each individual substation’s utilization rate or do you take an average across the entire utility? How do we think about transmission utilization if it’s a network and not a defined territory? How do we know what peak load is? What do we do when systems are down for maintenance? Do those times count against utilization?
An OpenEAC Alliance Methodology
We started the OpenEAC Alliance a few years ago to tackle the problem of DER valuation. Many of the existing paradigms for measurement and verification were designed for regulatory reporting (annual, deemed savings) and virtually none had taken into account questions like how to account for carbon emission reductions. We’ve been slowly but surely tackling these challenges to create a full suite of methodologies that are appropriate for valuing DERs for the energy savings, carbon savings, and grid benefits.
Earlier this year we took a stab at a concept we called GridScore. This measured the savings happening in the top 10% of net demand hours on a grid. The more that a DER saved energy when the grid needed it, the higher the GridScore.
Utilization is a similar concept, but spans both load reductions as well as added load. If you are also adding load (say by charging a car), when you add load to a grid might be just as important as when you might reduce load. In effect, utilization gives you a GridScore for all hours of the day.
On Thursday, November 12th, the OpenEAC Alliance Quarterly Meeting will be diving into grid utilization methodologies and we will unveil what we believe is the first hourly methodology for grid utilization. We’ll look at how different utilities across the country stack up and what the implications are for deploying different types of DERs in different grids.
The topic is pretty dense and we wanted to put together an explainer that captures the essence of the challenge of measuring grid utilization. Fair warning, we used our favorite AI tools to put the video together, so it’s slightly cringy, but if this is something that you’re interested in learning more about, this is going to be a good place to start getting acquainted with the topic.
We are also looking for volunteers to review the draft methodology. Please reach out and we’ll add you to the invite to the meeting and share the draft methodology with you.