California targets low-income communities for grid flexibility tools and rewards

Lower-income California residents spend a higher proportion of their monthly income on energy bills. They also tend to live in communities facing the worst health impacts of emissions from the natural-gas-fired power plants used to meet the state’s peaks in electricity demand.

On Thursday, the California Energy Commission approved a $3 million grant aimed at finding ways to help solve both of these problems from behind the meter.

The money will go to OhmConnect, which has enabled about 150 megawatts of flexible demand-reduction capacity from California residential customers willing to shave energy consumption during critical peak hours in return for direct payments.

The CEC grant seeks to add 25 MW of additional load flexibility from low-income residents by giving them smart thermostats and internet-controllable ​“smart plugs” to automatically reduce load, as well as text and email messages with tips on steps to cut power use.

That could not only help defray energy costs but also mitigate the need to call on gas-fired peaker plants during hot summer afternoons. That’s a benefit both for those who live closest to those plants and their polluting emissions, and the state’s grid reliability as a whole.

“We had two days of rolling blackouts” during last August’s heat wave, OhmConnect CEO Cisco DeVries said in an interview. ​“In one case, a blackout was caused by a shortfall of just a few hundred megawatts.”

California regulators, utilities and demand response providers like OhmConnect have been working feverishly to avoid a repeat of last summer’s heat-wave-induced grid blackouts. The California Public Utilities Commission has asked utilities to consider keeping gas-fired peaker plants running longer than planned as an emergency backstop to avoid future grid emergencies.

At the same time, California is under pressure to reduce its reliance on fossil-fueled generators as it seeks to reach its goal of getting to 60 percent renewables by 2030 and carbon-free electricity by 2045. That will require massive growth in renewable energy and energy storage to replace its gas-fired power plant fleet. Giving customers the ability to shape and shift their consumption to match the state’s shifting electricity generation patterns will also play an important role.

A major focus of the grant will be distributing devices to low- and moderate-income families, DeVries said. That’s because smart thermostats and smart plugs for refrigerators, washing machines, dryers and other big loads can automate the process OhmConnect uses to obtain the load reductions it and other demand response providers pledge to provide to the California Independent System Operator during times of grid stress.

OhmConnect is aiming to bring 550 MW of load flexibility to California over the coming years, armed with a $100 million investment from Sidewalk Infrastructure Partners, a firm backed by Google parent company Alphabet and the Ontario Teachers’ Pension Plan. It’s gearing up to launch its service in Texas and in several East Coast regional markets as well.

Lower-income communities can be a challenging market for demand response providers to tackle. While energy bills make up a larger portion of low-income residents’ household budget, wealthier homeowners tend to use more energy overall, making them more natural targets for load reduction. Low-income communities also tend not to be early adopters of smart thermostats and other technologies.

DeVries said the CEC grant will help OhmConnect understand how to reach these communities cost-effectively.

“We want to be able to learn from this grant and lean into what works,” he said.

A support signal for demand response 

“This [grant] is a great…poster child story of the Energy Commission,” CEC chair David Hochschild said. The CEC also disbursed a 2016 grant that helped OhmConnect get its business started and ramp up, he noted. ​“We want to see [demand response] develop and evolve and really turn into a real force for grid reliability and our climate goals.”

For the demand response industry, the CEC’s grant signals a level of support that it has found lacking from recent actions from the California Public Utilities Commission. The CPUC’s plan to prevent a repeat of last summer’s rolling blackouts has been criticized by demand-response providers for prioritizing supply-side solutions.

“Without large-scale demand response, we cannot solve the problems that we are having on the U.S. electricity grid,” DeVries said.

Grid stress is not just a problem in California, he added. The massive blackouts suffered by millions of Texans during a February cold snap highlighted the role that distributed energy, behind-the-meter flexibility and energy efficiency could play in managing weather-driven grid challenges. This week, Texas faced another potential grid power shortfall, although state grid operator ERCOT was able to avoid instituting emergency measures.

The aging grid infrastructure in the U.S. has been hobbled by underinvestment; extreme weather conditions linked to climate change pose additional risks. As for California, the National Oceanic and Atmospheric Association’s Climate Prediction Center is predicting a 50 to 60 percent chance of above-average temperatures between June and August, and CAISO and CPUC are rushing to ensure that the grid is ready to handle them.

(Article image courtesy of Neal E. Johnson)