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Developing a Smart Grid that Customers can Afford: The Impact of Deferrable Demand

With more electricity generated from renewable sources, the importance of effective storage capacity is increasing due to its capability to mitigate the inherent variability of these sources, such as wind and solar power. However, the cost of dedicated storage is high and all customers eventually have to pay. Deferrable demand offers an alternative form of storage that is potentially less expensive because the capital cost is shared between providing an energy service and supporting the grid. This paper presents an empirical analysis to illustrate the beneficial effects of Plug-in Hybrid Electric Vehicles (PHEV) and thermal storage on the total system cost using data for a hot summer day in New York City. The analysis shows how customers can reduce total system costs and their bills by 1) shifting load from expensive peak periods to less expensive off-peak periods, 2) reducing the amount of installed conventional generating capacity needed to maintain System Adequacy, and 3) providing ramping services to mitigate the variability of generation from renewable sources. Moreover, this paper demonstrates economic benefits of different types of customers with different deferrable demand capabilities under two bill payment policies, flat price payment and optimum price payment, and it finally shows how long it takes for customers to fully pay back their initial capital costs of PHEV or thermal storage under two different policies.

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JEL Codes: Q41: Energy: Demand and Supply; Prices, Q40: Energy: General

Keywords: Deferrable demand, Electric vehicles, Thermal storage, System costs

DOI: 10.5547/01956574.36.4.wjeo

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Published in Volume 36, Number 4 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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