Expert Energy Management | Electricity
Peak demand on an electrical grid is simply the highest electrical power demand over a specified period. Peak demand is typically characterized as annual, daily, or seasonal and has the unit of power.
Deep Dive: Peak demand describes a period in which electrical power demand is expected to be sustained at a significantly higher than average supply level. Peak demand fluctuations may occur on daily, monthly, seasonal and yearly cycles. For an electric utility company, the actual point of peak demand is a single half-hour or hourly period, representing the highest point of customer electricity consumption.
Some utilities will charge customers based on their peak demand. For example, the highest demand during each month or even a single 15 to 30-minute period of highest use in the previous year may be used to calculate charges.
The electricity grid was developed to deal with the highest peak demand; otherwise, a blackout may happen.
It depends on the demography, the economy, the weather, the climate, the season, the day of the week, and other factors. Historically, around the East Coast and Mid-West, the peak demand days have occurred in the summer months, when the demand for air conditioning is often at its highest, competing with the everyday energy needs of manufacturing and commerce on the grid.
Peak demand is considered the opposite of off-peak hours when power demand is usually low. There are off-peak time-of-use rates. Sometimes, there are three time-of-use zones: peak, shoulder, and offpeak. The shoulder is often the time between peak and off-peak in weekdays. Weekends are often just peak and off-peak.
Peak demand may exceed the maximum supply levels generated by the electrical power industry, resulting in power outages and load shedding. Peak demand often occurs during heat waves when air conditioners and powered fans significantly raise the rate of energy consumption. During a shortage, authorities may request the public to curtail their energy use and shift it to a non-peak period.
It matters because of the Capacity Charges on your bill. Did you know that Capacity charges can make up to 30% of your bill?
PJM, the local grid operator, must ensure adequate capacity to meet the system's peak demand. PJM passes the costs associated with building and maintaining generation capacity off to local utilities and retail suppliers. Those costs are then passed on to you as "capacity charges," or "PLC charges". Moreover, capacity charges are not always itemized; if they are embedded in your bill, they can become complicated to manage.
Organizations in PJM paid over $4B in capacity charges last year. Did your business pay more than its fair share? Those who can strategically lower their demand during the annual system peaks can drastically reduce their capacity charges, saving thousands of dollars annually. Ampica Energy Consultants can assist with tools and guidance in today's organizations about peak demand days so they can minimize capacity charge costs with minimal impact on operations.
Capacity charges are not based on the energy you use during a month. Instead, capacity charges are determined by the five highest one-hour system coincident peaks (5CP) on the electric grid. Your average demand during the 5CP comprises your "capacity tag" or Peak Load Contribution (PLC). The system's peak hours occur during the hottest summer weekdays between June and September. The grid operator determines the PLC hours after September 30 of each year, and the utility passes on the associated capacity tag to you during the following year.
You can significantly reduce your capacity charges for 12 months if you accurately anticipate system peaks and reduce your load when the grid needs it most. On average, organizations that reduce their demand by 1MW could save $22k annually.
Typical reduction examples include:
• Reduce non-essential lighting
• Modify manufacturing processes
• Adjust HVAC equipment
• Dial back pumps
• Change settings in industrial freezers
Ask about our experience working with customers like you.
The PJM Interconnection is a regional transmission organization (RTO) that operates an electric transmission system serving all or parts of 13 states and the District of Columbia in the United States. PJM operates a competitive wholesale electricity market and manages the high-voltage electricity grid to ensure reliability and efficiency. It is part of the Eastern Interconnection grid, one of North America’s two major power grids.
Here are some ways in which PJM ensures grid reliability and safety:
Cyber and physical security
PJM recognizes that cyber and physical security are essential to fulfilling its mission of providing reliable power to the millions of people in its footprint. PJM implements robust security measures to protect the grid from cyber threats and physical attacks.
Resilience planning
PJM conducts studies and analyses to identify emerging risks and ensure the grid’s resilience. This includes assessing the impact of decarbonization, evolving load characteristics, public policy, and new technologies on grid reliability. PJM aims to enhance operational flexibility while maintaining reliability and resilience.
Preparedness and action
PJM, along with its members and stakeholders, takes proactive steps to ensure the bulk electric system’s reliability, security, and resilience. This includes preparing for extreme circumstances, managing global supply chain shortages, and establishing systems and procedures to accommodate dynamic conditions.
Communication and coordination
PJM maintains regular communication with its stakeholders, including generation resources and data management, to address possible reliability concerns resulting from fuel supply shortages
Market operations
PJM operates a competitive wholesale electricity market, which helps ensure efficient resource allocation and grid reliability. The market incentivizes generators to be available during peak demand periods and supports grid stability.
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