For most of us, paying for electricity means paying for what we use. Municipalities do that, too, but they also have to pay something called a capacity charge for their large accounts. This is a charge assessed by ISO-New England, the grid operator, to ensure account holders pay in proportion to their usage and that there is enough electric “capacity” available on the grid. The charge is calculated for each account on the basis of its demand during the grid’s annual peak hour that year: the one hour of that year during which grid-wide demand was at its highest. It is like children being put on Santa’s nice list according to their behavior not over the whole year, but over a single hour.
Capacity Charge Math
If a large account can shut down large energy consuming systems during the peak hour, it can reduce its demand and significantly decrease its capacity charge for the whole year. The question is, which hour is it?
This is where MAPC’s Peak Demand Notification program can help cities and towns. Our program, now in its second year, helps municipalities manage capacity costs for their biggest energy users (often the High School, Middle School, City Hall and Library).
We know that every year, the peak demand hour occurs on one summer weekday afternoon – but narrowing down the forecast to the particular afternoon and hour takes additional work.
Using historical data on ISO-New England’s website, we defined three levels of risk that the peak demand hour would occur on any particular day: UNLIKELY, POSSIBLE, or LIKELY. We apply these levels of risk to ISO New England’s daily forecast of what the peak demand will be and when it will occur, and send our risk warnings to subscribers.
In our first year (summer of 2015), ten cities and towns participated. They achieved an average electricity reduction of 51% during the peak hour, and we conservatively estimate that they reduced a total of 15,245 KW across five load sheds. This translates to 6.7 metric tons of avoided (about the equivalent of one car driving on the road for a year). Additionally, the actions they took garnered an estimated total savings of $261,905 (average of $29,100 per community – nine communities). All the communities deserve to be congratulated, but the biggest load-shedder was the Acton-Boxborough School District, which reduced its demand by 80% and saved approximately $75,000.
This past summer, the program grew to 45 participating municipalities. We also had our first commercial business and a university participate in the notification program. While the data from this summer is still being collected, we can conservatively estimate that if at least ten additional communities took action to load-shed during the peak hour, we will have doubled our impact from the first year of the program.
Aside from some significant financial savings, and moderate energy and emissions reductions, the actions communities are taking are creating efficiencies in other important ways. At times of peak demand, grid operators like ISO New England are required to call upon some of the dirtiest power sources available to meet our electricity needs, making the emissions and pollution implications even greater. As more communities and businesses reduce demand during this time, the need for such sources can potentially be eliminated. As cities and towns start to manage their energy use more aggressively throughout the year, not just during the peak hour during the summer, we will hopefully begin to see a reduction of energy use grid-wide and deeper savings for individual communities.
If you’re interested in learning more about MAPC’s Peak Demand program please visit MAPC’s website. If you have any additional questions or want to sign up for the program next year, email PeakDemand@mapc.org.
Neal Duffy, Clean Energy Intern