Should Texas focus on demand-side resources to stabilize the grid?

Energy experts and policymakers are asking questions about the Texas electricity grid. In February, customers experienced several days of power outages due to the winter storm. In April and June, the Electric Reliability Council of Texas (ERCOT) appealed to customers to conserve energy as reserves ran low. Deciding how to stabilize the grid for the years to come is, therefore, a key question. It’s made even more urgent because energy demand is expected to grow with a rising population and more extreme weather events.

Alison Silverstein is a former staffer with the Public Utility Commission of Texas. She believes the answer lies in reducing energy demand. She argues that more investment in energy efficiency, demand response, and energy storage could cut peak energy demand in Texas. One term commonly used to describe these policies is demand-side response.

According to Silverstein, insulating Texas homes to make them more energy efficient could cut electricity usage by 11 to 14 percent. Currently, overall energy demand goes up by about 44 percent when the weather gets cold. A large reason for this spike is that many Texas homes lack insulation. Insulating homes would help keep them warm in the winter and stop them from warming up so rapidly on hot days.

“The Houston Advanced Research Council estimates that we could weatherize 250,000 Texas homes for $802 million per year,” Silverstein writes in a recent article for Utility Dive. This action would save 672 megawatts and 1,133 gigawatt-hours of energy. In addition, it would reduce customer electric bills by $159 million.

The frequency of extreme weather produced by climate change will push up energy demand. Still, Silverstein and her supporters believe that expanding energy generation is the wrong approach.

“We cannot build enough transmission, generation, and battery storage fast enough to solve this challenge with supply solutions alone. Texas cannot keep the lights on in the years ahead unless we permanently reduce demand levels and energy usage in both summer and winter,” she writes.

In a report Silverstein authored with the Environmental Defense Fund (EDF) in 2020, she argued that reducing energy demand would be well suited to Texas’ competitive energy market. The report called for regulatory barriers for demand response initiatives to be eliminated. It also proposed allowing local governments to set stricter energy-efficiency standards.

The report identified two main types of demand reduction. The first is “(d)istributed energy resources, such as photovoltaic solar and storage.” The second category is “demand-side measures, such as energy efficiency and automated and price responsive demand.” Both types of demand reduction “can respond to prices as well as to grid management signals,” noted the report. “In a time of rapid demand growth and uncertain supply, these assets should be used to de-risk the electric system…”

John Hall, director of regulatory and legislative affairs for EDF, explained that a failure to promote demand-side measures could harm low-income consumers. That’s because they would increasingly find their energy bills unaffordable. “Demand-side solutions are the cheapest sources of new electricity,” said Hall. “They’re certainly cheaper than building new power plants, and they are often more cost effective than utility-scale wind and solar.”

Silverstein’s contributions add to an ongoing debate about demand-side measures. Since the winter storm, Texas legislators have focused on strengthening the energy supply. They have passed bills requiring energy companies to winterize power plants and transmission lines. They’ve also restricted the offering of real-time variable electricity prices to customers. Lawmakers didn’t adopt any bills concerning demand reduction.

However, the debate could encourage some energy providers to adopt initiatives to manage energy demand. For example, several Texas retail electricity providers offer customers the option of adjusting their thermostats during periods of high energy demand. This step helps reduce the burden on the electricity grid. Others offer smart thermostats so you can decide how much energy you want to use at certain times of the day. Industry experts expect these programs to become widespread as more renewable energy enters the grid. That’s because they can help offset the impact of variable solar and wind power generation.

What would happen if energy-efficiency measures like insulation programs and air conditioning upgrades were rolled out? You would probably notice additional charges on your utility bill. However, advocates point out that you’d also be charged more as a ratepayer for building new power plants to increase energy supply. New power plants would be necessary for the absence of measures to cut demand over the years to come.

Jordan Smith is a writer and researcher with expertise in renewable energy and deregulated energy markets. Jordan has written extensively on the deregulated energy market in Texas and the challenges confronted in the clean energy transition, and conducted research projects within the energy industry. Further articles by Jordan can be found at SaveOnEnergy.com.

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