Impact of Electricity Pricing Mechanisms on Grid-Interactive Buildings

Buildings offer a unique opportunity for cost-effective demand-side management because they are the nation’s primary users of electricity. Around 75% of all U.S. electricity is consumed within buildings, and perhaps more importantly, building energy use drives a comparable share of peak power demand. Building energy management systems (BEMS) often aim to respond to utility prices by shifting loads and/or optimizing the use of local generation and storage capacity to minimize electricity costs without affecting the comfort of the occupants. This paper explores the potential effects of widespread use of these systems while reacting to two existing utility rate structures: Time of Use (TOU) and Real-Time Pricing (RTP). We found that while TOU and RTP produce individual savings for customers, there are shortcomings of current state-of-the-art demand response and pricing approaches in the face of grid resiliency, variable generation, and unpredictable weather patterns. This creates challenges for grid operators, sometimes violating the purpose of grid interactive buildings for grid flexibility and requiring curtailment of local solar generation. We conclude that that more granular, dynamic, transactive price signals are an innovative means to reduce deployment effort for utilities while solving a variety of transmission, distribution, and market constraints.