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Peak Load Management & Demand Response: Webinar Recap
In this article, we will summarize the contents of our most recent webinar: Peak Load Management & Demand Response in 2023, which can be viewed in the webinar section of our resource library. In this webinar, WatchWire’s CEO, Andy Anderson, and guest speaker Matt McCue, Account Executive at CPower discuss all things Peak Load and Demand Response Management, including:
- What to expect from the 2023 peak load season
- Why it is imperative to focus on when your building is using energy, not just how
- How each building’s peak load contribution is determined
- How to control your peak load costs through the development of a peak load management plan
- How peak load management can work to control your GHG emissions
- How WatchWire alerts you of peak load times and helps manage your peak load strategy
Peak Load Management: Presented by Andy Anderson
Why It Is Imperative To Focus On When Your Building Is Using Energy, Not Just How…
If you’ve been on our last few webinars, they have skewed heavily towards the sustainability side, discussing GRESB, CDP, and sustainability reporting frameworks in general. This webinar skews heavier towards the energy management side of things, so we’re going to start with the most foundational thing we think you should know about electricity markets:
kWh vs. kW
In the 14-week class, Andy Anderson teaches at NYU, he tells students that if they retain just one thing from the course, it’s this – understanding the difference between consumption and demand, kWh vs. kW (explain analogy)… kWh is analogous to an odometer, indicating how far you’ve gone or how much energy is used over a given period of time/ how much you’ve consumed in total. A speedometer tracks how fast you go at a particular point in time, much like kW, which indicates energy usage at one point in time.
Another way to think about it is using this analogy of a mall parking lot. Mall parking lots are designed to handle car capacity at the peak shopping day of the year (Black Friday). Similarly, an electrical grid is designed to include a spot for each kWh consumed at a typical peak capacity day. Without this capacity design, we would be at risk of rolling brownouts and blackouts on a regular basis. Aside from the liability and safety perspective of ensuring the grid can handle full capacity days, the dollar perspective is another reason to ensure robust peak load management and future-proofing within a company’s operations.
So why does this all matter? It wouldn’t matter if demand charges weren’t such a driver of electricity costs, particularly for C&I accounts, but they are and are increasingly so. We sampled the nearly 25,000 locations in our portfolio and looked at the past 12 month’s breakdown of demand-driven charges in a few of the major ISOs. Just one 30-minute, or 2 consecutive 15-minute time periods in a year, or whatever the methodology is in your territory drives 25-45% of the TOTAL cost of electricity. In other words, .07% of the hours in a year can drive up to 45% of your electricity cost. That’s why peak load management and demand response is important, and why understanding the difference between kWh and kW is critical. By targeting your usage at certain times, as opposed to solely focusing on reducing consumption at all times, you can cause significant impacts on overall costs and from an emissions perspective.
What Are PLC And ICAP Tags And Why Should You Care?
Let’s dive a little deeper into the kW charges in the deregulated electricity markets and discuss PLC and ICAP tags.
This chart is a good way to look at the grid from a duration mode perspective. The grid is generally overbuilt for the majority of the year, designed to ensure capacity at the absolute hours of the year so we don’t experience blackouts. To understand why PLC and ICAP tags are a thing, we need to understand how the electricity grid is built. Just like the mall parking lot example, the grid is overbuilt for the majority of the year, essentially designed to ensure capacity during the absolute highest peak hours in a year so we don’t experience blackouts. In this case, we’re looking at the load duration curve in Con Ed territory, which shows the hours in a year on the x-axis, and the demand on the y-axis. This top part of the curve is saying that just a few hours of the year experience a peak load of over 12,500 MW, while the majority of the load is at the median level. The grid is built to meet this top demand, and then the rest of the year that capacity is unused, while costs are spread out to accommodate the most expensive peak times. To adequately plan for both T&D capacity and generation capacity, utilities assign PLC and ICAP tags to your account, essentially making sure you’re paying your fair share of costs associated with the needed T&D and generation capacity.
Generation Billing (supply):
For supply costs, most people think it’s just the cost of generating the electricity times how much electricity you use, but that’s just one component – energy generation. What we’ve been talking about is Capacity, or what you could use.
Here are a couple of examples of actual client invoices showing the % of supply costs attributable to energy, capacity, and the rest:
From a pie chart breakdown perspective, typically, capacity charges are low in the winter months, which intuitively makes sense since the grid peaks, i.e. experiencing the most strain, in the summer months when it’s super hot, AC is blasting, etc.
In the summer, capacity rates are usually double or more than they are in the winter. Think back to the step function pricing for NYISO. Capacity prices were about $19/per month in the summer of 2020, followed by about $8 per month in the winter of 2020/2021.
An interesting side note is considering what will happen to the grid when we inevitably shift from summer peaking to winter peaking due to mass electrification. As more gas bans are enacted and building performance standards are passed like Local Law 97 in New York, which essentially force electrification, all of that demand that was once met by heating fuels like natural gas, fuel oil, and steam, will now be met by electricity, and the grid was not designed to meet summer equivalent peaks in the winter. That’s when you’ll start seeing T&D rate increase requests in the 15-30% range, which we’re already seeing here in NYC with Con Ed’s latest rate case proposal.
T&D Billing (Delivery):
Much like the generation side, the T&D side is affected by demand billing as well. It is the same concept as generation, except that it is not PLC/ICAP based where your peak will remain with you for 12 months. T&D is generally monthly based, with ratchet demand in some territories covering longer periods. The rates are set in tariffs as opposed to market-based rates as we see on the generation side. Demand typically plays a larger role in determining your overall T&D bill than consumption in both the Winter and Summer.
How Are Capacity Tags: PLC And ICAP Determined and Allocated to Your Accounts?
- NYISO – Your peak load contribution (PLC), or installed capacity tag (ICAP tag), is determined by your usage during the single highest peak hour from the previous year. The peak hour is the hour during which the usage was the highest across the entire NYISO grid (not just your zone or utility) on non-holiday weekdays in July and August. Your ICAP tag is effective each May 1 to April 30.
- PJM – Your PLC tag is based on your peak demand usage during PJM’s five Coincident Peak Hours during the previous June 1 through September 30 period. PLCs are effective each June 1 to May 31.
- ISO-NE – Your peak load contribution (ICAP tag), is determined by your usage during the single highest peak hour from the previous year. The peak hour is the hour during which the usage was the highest across the entire ISO-NE grid (not just your zone or utility). Your ICAP tag is effective each June 1 to May 31.
- Texas– ERCOT 4CP (and NCP): Texas is a bit different as it’s an energy-only market, without a capacity market like in NY, NE, and PJM. Rather than 1CP or 5CP, it’s a 4CP structure. Your contribution to the grid’s peak in each of June, July, August, and September are averaged to get your 4CP tag, which is then used to assess the TCRF charge in ERCOT. Your NCP, or non-coincident peak, is your meter’s peak for the month, regardless of the grid’s peak hour. These rates keep increasing, now reaching $38-81/kW-year.
How Does Peak Load Management Relate To Your GHG Emissions?
The Peak load hours of the year are also typically the “dirtiest” from a GHG emissions standpoint. All available generation is usually dispatched to meet the highest peaks, meaning the old, dirty plants that typically can’t clear the market in “normal” times get dispatched. So by curtailing load during peak load hours, you are effectively avoiding a bunch of emissions, but that’s a byproduct of responding to economic or grid reliability signals. Where we think the market is going is also having dispatch signals based entirely on marginal emissions, not just grid peaks. Yes, there would be overlap, but we see a world where emission thresholds can be configured and alerts sent to avoid those dirty hours, as opposed to optimizing for PLC/ICAP tag reduction.
Demand Response: Presented by Matt McCue
Guest Speaker: Matt McCue, CPower Account Executive
Matt is currently the Account Executive at CPower Energy Management focused on providing Demand Side Energy Management and Demand Response services for New York’s Electrical Grid (NYISO). As New York enters the clean energy transition Grid resiliency is paramount to the success of building owners and operators in reaching their carbon neutrality goals. Matt works with Building Owners and Operators to identify flexible kW load within their Buildings and DERs to provide On Bill Demand Charge savings and annual Demand Response Revenue streams to improve Net Operating Income for owners and investors.
About Demand Response:
According to Matt, the demand side of your energy management is the last edge of a well-rounded energy operations plan. Automation has really started to help demand response, given that response was once a very manual process that involved shutting off machinery. Now, with the enablement piece in place with software and hardware automation, demand-side energy management is proliferating in popularity.
Demand Response is a resource on the Supply Side to balance electrical grids in deregulated markets in America. In short, it keeps the lights on and strives to ensure the lights are affordable to keep on.
Demand Response is called by System operators & utilities (the grid) to:
- Supply more energy to the Grid (Capacity), by monitoring times in which demand is trending upward and notifying when to curtail energy
- Balance the Grid in times of emergency (Ancillary)
- Reduce the cost of energy when prices become too high (Economic) by injecting energy supply back into the grid to help stabilize the price.
Demand Response in supply stack allows customers to optimize flexibility characteristics by accessing multiple revenue streams as a generator. (Capacity, Economic, Ancillary Services). The customer is paid in annual demand response revenue for its capable load reduction as a resource regardless of whether a Demand Response event is called or not. Demand Response has proven to be the most popular and successful mode of integrating demand-side flexibility into grid operations. It is in the best interest of businesses to look into the many demand response programs to take advantage of offerings that may occur at times when curtailing energy usage would not be affecting business operations. Depending on if you are able to value stack different programs, you could be getting paid up to $400,000 in a given year.
Demand Response Benefits:
Supporting the Grid:
- Provide critical demand reductions
- Enable renewable penetration
- Support overall grid reliability
- Keep energy costs down
- Provide grid decentralization
- Enhance utility/customer relationships
Customer Benefit and Risk Mitigation:
- Provide low-to-no-cost battery storage solutions
- Drive on-the-bill and off-bill savings and earnings
- Enable storage and DG assets for demand-side energy management programs
- Maximize energy asset value
- Demand side energy optimization and data visualization
- Provide ongoing market intelligence to enable better energy decisions
- Shorten ROI for energy projects
Sustainability and Decarbonization:
Companies that make their buildings more competitive with renewable energy efficiency and measurement and verification schemes, should not overlook the opportunity for demand response programs to pay for that permanent curtailment and shorten the ROI on upgrades and decarbonization endeavors. In addition, when you are doing demand response you are actually curtailing energy at the most carbon-intensive times on the grid. Certified demand response companies like CPower can actually quantify over the course of a set number of hours, how much carbon is avoided during that due to efforts made by clients to curtail energy usage at that time.
Demand Response: CPower & WatchWire Integration
WatchWire can pull CPower data, both the interval data in real-time and the program information/ alerts into our platform to have one single source of truth for engineers and sustainability analysts looking at property performance. We can visualize the demand event, and what the property performance/ curtailment actually looked like at that time.
WatchWire Peak Load Alerts:
Within our platform, we will notify you when the grid is likely to peak by monitoring the actual grid and looking at our algorithm & forecasts.
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