The summer season for peak demand management begins on June 1, 2021. The peak demand day is typically the day with the hottest temperatures and occurs in the late afternoon, when buildings’ air conditioning loads are the highest. There are often 5 to 8 days during the months of June, July, August—and maybe early September— that will meet these characteristics. Managing demand on each of these days can lower your potential peak load contribution and next year’s capacity charge.
This summer, plan on being in the state of mind to take action: be in tune with the ﬂow of energy and how the energy is being used in your building(s) as summer temperatures rise and reliance on HVAC equipment increases. The avoided capacity cost saves money, energy, and carbon, and complements demand response and utility programs.
Understanding the ISO-NE load duration curve and its relation to your building’s individual load and capacity charges will save you money. It should be noted that when demand on the grid is high, ISO-NE may activate its reserve generation, which includes oil and coal. With demand reduction efforts across industry, it is possible to avoid the use of these fossil fuels, thereby inﬂuencing greenhouse gas emissions and environmental impact.
Figure 1 shows the seasonal demand curves, indicating July as the likely month for peak demand, with demand shifting to later in the day. However, the peak has occurred in both June and the end of August, so pay attention to our Actual Peak Alerts to capture that one important hour in the 8760 hours in the year.
Figure 1 (Source: iso-ne.com)
Your capacity is determined during the annual peak hour. As noted above, the charge to your facility is based on the Forward Capacity Auction price and your peak load contribution at the time of the coincident peak in the ISO-NE system. Knowing this gives you the power to manage your capacity tag through load shedding, reducing consumption, or load shifting.
The Forward Capacity Auction is set three years in advance through ISO-NE. The following chart shows capacity pricing between 2011 and 2025. This chart shows capacity pricing decreasing over the next four years, but this isn’t a reason not to manage your peak demand, as it contributes to the price you pay for your electricity supply. Lowering your peak demand this year will lower your energy bills next year by as much as 30%.
The 2022 Capacity Tag Savings example below assumes a 40% gross-up. The gross-up converts the generator payment rate to retail load rate by accounting for reserve margins and losses.
2022 Capacity Tag examples
Peak load w/ no reduction 750kW: 750 * $4.63*1.40 = $4,861.50 * 12 = $58,338
Peak load w/ 50% reduction 375kW: 375 * $4.63*1.40 = $2,430.75 * 12 = $29,169
Is it worth saving nearly $30,000 on your electricity supply for a few hours of peak demand management? There are key measures to take to manage your peak load contribution. Start with identifying a facility “champion” and inform them about the need for load reductions and cost/energy savings. Your HVAC load is your biggest energy contribution, so adjusting the temperature set point a few degrees higher will directly affect the peak load. Other measures may include turning off lights, powering off computers and other electronics, or shutting down non-critical operations.
Annual energy use on the grid has reduced each year due to energy efficiency, renewable energy, and conservation efforts. Though these measures contribute to annual cost reductions, they do not replace the need to manage peak demand.
Learn more about Actual Energy’s Peak Alerts here.
John Driscoll, Actual Energy’s Director of Energy Engineering, is a Certified Energy Manager with an extensive background in energy and the environment. He is a veteran of the US Navy and received a B.S. in Facilities Engineering and an M.S. in Facilities Management from Massachusetts Maritime Academy. John has experience across many industries: healthcare, utilities, energy engineering, and algorithmic software technology. He brings to the Actual Energy team a depth of knowledge in procurement, facility load analysis, and energy markets. John can be reached at John.email@example.com