Blog Post

To Electrify Industry at Scale, Flexible Demand Is Essential

February 22, 2024

Powering fast-expanding industries will require companies to modulate their energy use when the grid is strained or when there is excess renewable energy. Manufacturers—with utility support—will need to invest in technologies to enable this future.

U.S. industry has begun growing rapidly in recent years and is electrifying many processes that once relied on the combustion of fossil fuels—good news for our economy and the climate. Some projections have industrial electricity demand increasing tenfold by 2050. Meeting this demand could require doubling the nation’s total electricity generation over the next 25 years just to serve the industrial sector. 

For these industries transitioning from fossil fuels to electricity, it is critical that there be enough electricity on the grid and that the electricity be carbon free. Powering electrified industries without spiking greenhouse gas emissions from new fossil-fuel-powered generation plants will require using electricity at strategic times when renewable electricity generation is available, enabled by operational flexibility and electric and thermal energy storage.  

Read the White Paper

A new ACEEE white paper calls on industry, utilities, and states to prepare for increasing loads by investing in strategies and technologies that enable demand flexibility, the ability of industrial facilities to adjust their energy consumption in response to grid conditions. 

Industrial demand flexibility is an essential tool for addressing the challenges of our transitioning energy system

The surge in industrial demand for electricity is already creating pressure on the grid. For example, in Georgia, utilities are developing new grid resource plans ahead of schedule to keep up with new industrial facilities. In Kansas, the energy needs of a new semiconductor fab are forcing expensive grid upgrades. With an increasing share of the grid’s generation mix coming from renewables with intermittent generation, balancing electricity supply and demand is set to become even more challenging for grid operators. The demand side of the grid, particularly large industrial customers, will have a substantial role in adjusting their operations to match available electricity supply and preserve grid reliability.  

Demand flexibility is generally a more cost-effective approach to managing these challenges than upgrading grid infrastructure or adding generation, which require significant investment and lengthy permitting processes. Industrial customers have been central to utility demand-side management for many years, especially for peak demand reduction. Facilities occasionally reduce their energy use for a set period in response to significant weather and other events. Industry needs to go further. Instead of responding to individual events of high grid demand, facilities should optimize their energy consumption patterns to maximize grid benefits such as reliability and low emissions—and be compensated for doing so. 

States and utilities should lay the groundwork now 

Given the right market signal from utilities or regulators, many industries could adjust their energy consumption to support grid function with minimal infrastructure investment or retooling. For instance, wastewater facilities or agricultural operations could pump water at times when demand on the grid is low or supply from renewables is high. Particularly in grids with a high proportion of solar power, there are hours of the day when energy supply outweighs grid demand. Electric vehicle fleets for drayage or logistics could be scheduled to charge during off-peak hours, consuming excess renewable energy that would otherwise be curtailed

As domestic manufacturing investments accelerate, states and utilities should work to advance demand flexibility programs. At the state level, public utility commissions can establish standards and create incentives for demand flexibility with improved rate structures for industry. Utility program managers should work to educate their industrial customers about potential savings and benefits of flexible operations, including providing technical assistance to customers interested in advanced information and communication technologies (ICT) to improve site efficiency and optimize facility and grid benefits. 

Advanced controls and storage technologies can position industry to participate in demand flexibility programs  

Industrial companies, especially those constructing new facilities, can prepare for demand flexibility programs, and potentially significant savings, by installing ICT, powerful tools that enable the collection, storage, and use of data to optimize complex systems. Examples include:

  • Smart manufacturing technologies to allow automation, monitoring, and optimization of production processes
  • Computer systems that manage behind-the-meter energy resources, such as solar generation or energy storage systems
  • Advanced metering infrastructure to allow two-way communication between utilities and customers

ICT can provide the kind of advanced, bi-directional communication and controls needed to respond to grid signals and energy user needs and to optimize and automate more-complex facility energy management patterns. Shifting large energy consumer demand peaks away from system peaks—for example, charging EV fleets at low-demand hours—can allow the grid to defer interconnection upgrades, by avoiding an increase in peak demand, even if overall energy demand increases. Energy management and automation companies that implement these ICT solutions, like Schneider Electric, are seeing significant growth in the North American market as decarbonization targets become more important for industry. 

For industrial processes that require constant power, investments in behind-the-meter storage resources (like electrical or thermal batteries) can enable demand flexibility by allowing facilities to charge these batteries at off-peak times and draw the batteries down during periods of high demand.

Between increasing electricity demand and the growth of renewable energy, the power grid is in the early stages of a significant transformation. The actions to support demand flexibility that we lay out here, and in more detail in our white paper, will be essential to help the grid supply needed electricity reliably and cost effectively during this transition.

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Utility Business Models Industrial Programs Electrification and Decarbonization
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