Contrary to a commonly-held belief that greater investment in energy efficiency (EE) reduces the value of demand response (DR), a new report from the Lawrence Berkeley National Laboratory (LBNL) finds that EE and DR largely complement each other to reduce power system costs and emissions. The four-part, multi-year study, titled “Assessing the Interactive Impacts of Energy Efficiency and Demand Response on Power System Costs and Emissions,” looks at the interactive effects of EE and DR. Furthermore, the study suggests that utilities and grid operators can successfully deploy these resources in virtually any pairing.

“Demand flexibility is growing in importance to the electricity grid, as more states and regions ramp up renewable energy deployments and retire some traditional power plants due to old age,” said the report. “With EE and DR poised to play an increasingly key role in the power system, consumers, utility planners, and regulators want to know what types of EE and DR should be prioritized, as well as how to avoid unintended competition.”

In specific, the study quantifies how EE and DR, both in isolation, and in combination, impact power system costs and carbon emissions across three future grid scenarios with varying amounts of new renewable energy generation and new transmission lines. (The report noted that, because the Texas grid is comparatively isolated and therefore advantageous for studying EE and DR interactions, the study focuses on Texas, while also approximating findings for the contiguous U.S.)

The study considers EE packages that improve building controls, envelopes, and equipment, as well as DR technologies that reduce peak load or shift it from peak to off-peak times. The study finds that, in all cases, adding DR technologies to EE measures lowered costs on the Texas grid. It also finds that adding DR to EE enabled greater emissions reductions as compared to EE alone.

“As our electricity grid becomes more complex with the addition of new resources, we need to better understand the interactions between all of them – on both the supply and demand sides,” said Dr. Tina Jayaweera, power planning resources manager at the Northwest Power and Conservation Council. “The term ‘integrated demand side management’ recognizes that energy efficiency and demand response programs are best delivered within a single organizational unit, but it does not always capture their combined benefits properly. LBNL’s research in this area shines a light on how EE and DR interact with each other to help provide for a more adequate and reliable grid.”

For utilities and regulators that want to put the report’s findings into practice, the authors suggest a joint approach to EE and DR goal-setting and program planning, as opposed to carving out targets for each resource. “In addition, while valuation frameworks must evolve to fully capture how EE and DR interact to deliver system benefits, in the near term, simply ascertaining whether proposed EE and/or DR programs offer services the grid needs can often be enough to justify green-lighting them,” said the report.

“The transition to a more dynamic, flexible grid has only accelerated, and utilities and regulators have asked what types of investments to prioritize on the demand side as well as the supply side,” said Andrew Satchwell, research scientist and deputy leader in the Berkeley Lab’s Electricity Markets and Policy Department, who led the study. “This research shows is that you basically can’t go wrong with energy efficiency and demand response in any combination.”