Utilizing Peak Alerts to Reduce Energy Costs

As the summer season approaches, organizations can expect to receive peak alerts, either from our team here at APPI Energy, or from your electricity supplier or local utility. While no one can know which days or hours will end up being called for the year, reducing your demand can help lower energy costs by lowering your peak load contribution (PLC) tags.

Key takeaway: By reducing energy consumption on the days of the year when the highest demand on the electricity grid occurs, you can have an impact on your monthly capacity costs for the following year. 

Capacity Costs

Electric utility companies measure and average each customer’s energy demand in kilowatts on the five highest demand days of each year. That average, known as peak load contribution (PLC), can be reduced and managed through best practices. PLC tags are used by the utility and competitive suppliers to determine the cost to serve your account, impacting both the supply and delivery sides of your electricity bill. Electric utilities and suppliers use each customer’s PLC, or “installed capacity tag,” from the prior year to calculate monthly capacity costs, which appear as a line item on customer electricity bills. Your peak load contribution in 2022 will determine your monthly capacity costs in 2023.

What You Can Do

Peak demand typically arises in afternoon hours, during summer months. Usage can be reduced by dimming lighting, adjusting thermostat settings, shutting down equipment, using onsite power generators, or scheduling operations during nighttime hours. Additionally, APPI Energy has a number of services available that are designed to help businesses utilize data-driven solutions to reduce and manage energy expenses. Services such as demand response programs, renewable energy procurement, and utility management systems are ideal for boroughs that seek efficient solutions to summer’s peak demand conditions.

Key factors to consider are:

• Understanding when & how you use power
• Spreading out energy intensive processes
• Considering smart/programmable AC/heating controls
• Opting for motion activated lighting

As well as:

• Peak shaving using storage or alternative energy sources
• Point of use monitoring devices
• Demand response programs

It’s also worth making note of peak alerts as they come your way either from your dedicated APPI consultant, media outlets, or your supplier so that you can make smart, timely decisions on curtailing your energy usage.

What is Demand Response?

Demand response programs are one way to further manage energy expenses through curtailment. DR is a financially rewarding energy solution that reduces your organization’s energy usage during periods of high stress to the electric grid.

During periods of high demand for electricity, the grid becomes stressed, which can have a number of residual effects, including brownouts or blackouts, higher energy bills, and sustained increase of electricity prices, to name a few. The simplest example of course is on the hottest and coldest days of the year, when electricity spikes put stress on the grid; but year-round, demand response programs seek to balance supply and demand, level out electricity spikes, avoid brownouts, and reward participating customers in the process.

How Do Demand Response Programs Work?

It all comes back to supply and demand. One option for the utility to better accommodate increased demand usage is to increase supply by building more power plants, which carries a hefty price tag and adverse environmental impact. Demand response works on the opposite end of the spectrum, with an aim to reduce demand rather than increase the supply.

By participating in demand response, clients benefit from both the compensation they receive from the programs and a reduction in capacity tags they receive for lowering usage during peak hours. Facilities may also aggregate their load-reduction capability across multiple locations, maximizing the financial incentives and contribution to grid reliability. Ultimately, such programs can lead to lower retail rates by lowering the cost of electricity in wholesale markets. By executing a demand response program, you’ll not only be creating a financially viable outcome for your organization, but one that benefits the health of the grid and the environment too.

What Are the Benefits?

Benefits include substantial bill savings, cash earnings and decreased energy costs, with financial results ranging from 5% to 30% of the annual electricity bill.

Additionally, benefits include:

• A cash flow positive sustainability program.
• Contribution to the stability of the power grid by helping to prevent power failures.
• Advanced notification of potential blackouts or brownouts.
• No geographic limitations: availability in both regulated and deregulated markets.
• Environmental stewardship by reducing demand instead of increasing supply.

Whether your organization takes action by way of following peak alerts or decides to go a step further with energy solutions designed to reduce the demand portion of your electricity bill, it’s important to note that there are numerous options for improving your energy management, particularly during the upcoming summer season.