Use of Residential Smart Appliances for Peak-Load Shifting and Spinning Reserves Cost/Benefit Analysis

In this report, we present the results of an analytical cost/benefit study of residential smart appliances from a utility/grid perspective in support of a joint stakeholder petition to the ENERGY STAR program within the Environmental Protection Agency (EPA) and Department of Energy (DOE). The goal of the petition is in part to provide appliance manufacturers incentives to hasten the production of smart appliances. The underlying hypothesis is that smart appliances can play a critical role in addressing some of the societal challenges, such as anthropogenic global warming, associated with increased electricity demand, and facilitate increased penetration of renewable sources of power. The appliances we consider include refrigerator/freezers, clothes washers, clothes dryers, room air-conditioners, and dishwashers. The petition requests the recognition that providing an appliance with smart grid capability, i.e., products that meet the definition of a smart appliance, is at least equivalent to a corresponding five percent in operational machine efficiencies. It is then expected that given sufficient incentives and value propositions, and suitable automation capabilities built into smart appliances, residential consumers will be adopting these smart appliances and will be willing participants in addressing the aforementioned societal challenges by more effectively managing their home electricity consumption. The analytical model we utilize in our cost/benefit analysis consists of a set of user-definable assumptions such as the definition of on-peak (hours of day, days of week, months of year), the expected percentage of normal consumer electricity consumption (also referred to as appliance loads) that can shifted from peak hours to off-peak hours, the average power rating of each appliance, etc. Based on these assumptions, we then formulate what the wholesale grid operating-cost savings, or benefits, would be if the smart capabilities of appliances were invoked, and some percentage of appliance loads were shifted away from peak hours to run during off-peak hours, and appliance loads served power-system balancing needs such as spinning reserves that would otherwise have to be provided by generators. The rationale is that appliance loads can be curtailed for about ten minutes or less in response to a grid contingency without any diminution in the quality of service to the consumer. We then estimate the wholesale grid operating-cost savings based on historical wholesale-market clearing prices (location marginal and spinning reserve) from major wholesale power markets in the United States. The savings derived from the smart grid capabilities of an appliance are then compared to the savings derived from a five percent increase in traditional operational machine efficiencies, referred to as cost in this report, to determine whether the savings in grid operating costs (benefits) are at least as high as or higher than the operational machine efficiency credit (cost)