Technological progress and public policy pressures are accelerating decarbonization of electricity supply. Increasingly, states and utilities are announcing 100% renewable, 100% clean or net zero carbon targets and mandates. With intermittent sources as the dominant source of supply, there is concern about the loss of system flexibility. Hence, activating flexible demand could well be key to managing future electricity systems cost-effectively. Flexible demand tends to occur at the distribution level. This in turn creates at least two issues: First, how can load flexibility be activated to help manage the electricity system? What interactions need to exist between wholesale and retail price signals? What role do aggregators play, what is the role of retail pricing – and who should determine retail pricing – competitive suppliers or wires companies? Second, is a wholesale (or perhaps transmission level) view sufficient to determine optimal participation of demand flexibility? Put differently, might constraints and costs at the retail level be important enough to necessitate their consideration when creating incentive structures for demand-side flexibility in future electricity markets?
