Puget Sound Energy C&I demand response and VPP economics

PSE’s service area around Puget Sound is where Washington’s load growth is concentrating. In 2025, requests from new loads over 20 MW added up to almost half of PSE’s current peak, driven by data centers, tech campuses, manufacturing and multifamily development, according to a PSE presentation. Many are speculative: of 27 inquiries in one PSE filing, 17 had withdrawn, and 590 MW of the remaining 897 MW were data centers, mostly in King County, as Halcyon reported. Western planners raised PSE’s 2028 peak forecast by about 11%, from 4.4 to 4.9 GW.

Against that, PSE’s business flexibility today is conventional demand response. On February 12, 2025, PSE’s programs delivered a record 80 MW in a single event, according to its 2025 Climate Action Update. Medium and large sites take service on Schedule 25 (50–350 kW) or Schedule 26 (over 350 kW), which bill a large share of cost by demand, and they enroll curtailable load in Flex C&I. Small businesses can join Flex for Business.

For most participants, Flex C&I value comes from load they can drop for a few hours with no new equipment: raising cooling setpoints through the building automation system, dimming lighting, coasting refrigeration and cold storage, idling pumps, or rescheduling a production run. The capacity payment is earned on what the site commits and then delivers, so the work is in planning the curtailment, not in buying hardware.

Demand charges are a separate and larger value per kW, and because PSE bills the monthly maximum at any hour, a site has to know when it will peak to cut them. That is where a battery could fit.

Stacking needs care, depending on M&V methodology. Flex C&I measures reduction against the site’s own baseline, so a battery that already shaves the monthly peak on an event day would mostly lower the baseline rather than earn event pay. In the hypothetical below, we count Flex C&I only on the 40 kW of battery power not used for shaving, at the advertised maximum.

Hypothetically if investing in battery storage and leveraging that as primary program asset, with the federal credit, the stacked case covers about 88% of cost over 10 years, better than Portland General Electric’s Oregon case because PSE bills demand at any hour and has no long on-peak window. Without the credit, demand shaving alone covers only about 39%.

Flex C&I is resource-neutral: Enel works out what each site can curtail, writes the plan and handles measurement. PSE does not publish a business battery program or incentive, so almost all enrolled capacity is existing load.

Trident Seafoods, one of the largest seafood companies in North America, enrolled its Anacortes processing and cold-storage plant midway through the 2023–24 winter season. PSE introduced Trident to Enel, then its exclusive demand response partner for business customers. Enel tested the plant’s equipment, wrote an energy reduction plan, handled metering, measurement and payments, and sent event notices by email, text and phone, so the plant needed no new capital, according to Enel’s case study.

The plan used the plant’s refrigeration as storage: shut off evaporators, unload and then stop the main cold-storage compressor, and pull the temperature back down overnight. Trident committed 178 kW to the Peak Demand option and 464 kW to the Emergency option, delivered 100% of its nominations, and was set to receive about $27,300 for a partial season. It separately cut energy use about 8% through an efficiency project. Other early partners included Americold, Lineage, Walgreens, Target, Michaels, Keurig Dr Pepper, AMC Theatres, E&E Foods and Overlake Christian Church, and the program beat its 5 MW first-year target, according to PSE’s Resource Planning Advisory Group summary.

That is how demand response can lead to a VPP. Enel can install controls that let it switch enrolled loads remotely, turning a phone-call curtailment into automated demand response, according to Enel. PSE’s VPP platform is built to integrate sites of up to 5 MW, and PSE plans 33 MW of directly connected batteries by the end of 2027, according to its Climate Action Update. The same plan, meters and contracts that a cold store uses for 10 events a year are the starting point for dispatching flexible load and batteries more often.

PSE’s load growth and its 10% flexibility mandate arrive together. Simple demand response from curtailable load and thermostats has carried PSE so far, but resources that can be dispatched for hours on winter mornings and evenings, with predictable performance, are what the mandate needs most, and today’s rates and programs do not pay for that.

Keeping the Flex C&I pay and 75% of the demand savings, the developer falls well short at every term: about 67% at 10 years and 73% at 20. At the modeled cost, a developer cannot earn 8% and still leave the site a share of demand savings. Battery-service offers are not priced the other way around, as a fee on top of handing over the savings: shared-savings providers promote a guaranteed share from day one (Gridwealth Electric), and Peak Power’s projects in Westchester, New York, split bill savings and market revenue with the building owner (NYSERDA case study). A deal that cannot fund a share is usually not offered at all. A guaranteed 15% share would need an installed cost about 50% lower, near $119k, well below today’s prices, so here a deal depends more on new program pay than on cheaper batteries; larger sites help, and providers such as Peak Power focus on facilities with more than 1 MW of load (Peak Power’s overview). The gap is revenue a capacity market would fill elsewhere. The Northwest has none: PSE has committed to the Western Resource Adequacy Program, in which utilities show and trade capacity among themselves, from winter 2027–28, according to the Western Power Pool, and has agreed to join Southwest Power Pool’s Markets+ day-ahead energy market, as RTO Insider reported. Neither pays a business battery for capacity.

The policy lever is PSE’s own procurement. To reach about 500 MW of year-round flexible load by 2030, PSE’s 2026 demand response request for proposals invites turnkey programs, and an aggregator contract that pays per kW for a fleet of business batteries would give a developer the long-term revenue this model lacks. Even so, capacity pay alone does not close the gap: in our model, $130 per kW on the full 100 kW on top of the demand savings lifts the 10-year ratio only to about 82%. Reaching break-even would also take an upfront incentive, as Connecticut and New York offer, or lower battery prices.

Four changes would move business flexibility beyond event-based curtailment. A business battery track that pays for metered discharge at the device, as Flex Batteries does for homes, would remove the baseline conflict with demand shaving. Multiyear per-kW contracts of five to ten years, awarded through the demand response request for proposals, would give aggregators and site owners revenue they can finance against.

Large loads are the third. PSE lists load flexibility as an opportunity with large-load developers in its large-load presentation, and on-site batteries or flexible computing at data centers and campuses that respond to PSE peaks could count toward the 500 MW. Finally, business energy prices that vary by time of day would reward shifting process loads and charging fleets overnight every day, not only in events, and would give a battery a second daily revenue stream beyond demand charges.

Compare: Puget Sound Energy residential, Portland General Electric C&I for Oregon and Xcel Energy C&I for Colorado.