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Gearing Up to Ramp Down: Preparing Your Municipality to Manage Peak Demand

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With spring on its way and the weather warming up, communities around the Greater Boston region are starting to plan for summer. Paving, construction, budgeting, preparing for town meeting – spring is a busy time for New England towns and cities. Is managing your peak power demand on your municipality’s to-do list? Read on to learn more and find out about how MAPC and your utility provider can help.

What is peak demand management?

As we explained during our recent webinar, peak demand refers to the one hour of every year when the electricity grid reaches the highest power consumption, usually during a hot summer day when cooling loads spike. Because we need to make sure we have enough electricity generation capacity to meet the demand at any given moment, our regional grid operator, ISO-New England (ISO-NE), has developed a system that helps ensure that we have enough power by paying generators to promise and then deliver electricity during peak times.

The ISO-NE master control center in Holyoke, MA, where grid operators monitor, dispatch, and direct the flow of electricity across our regional power grid.

The ISO-NE master control center in Holyoke, MA, where grid operators monitor, dispatch, and direct the flow of electricity across our regional power grid. Photo credit: ISO-NE

Graph showing that a quarter of the supply ISO-NE keeps in reserve is used just five percent of the year. CO2 emissions during the highest demand days are 8 to 15 percent higher than averageThis system helps keep the lights on and the A/C running during those hot days, but it also means that we are paying for generation that we only need for a brief time each year. As the adjacent image shows, we need a quarter of our total electricity supply to meet power consumption during just 6% of the total hours each year. The power plants that provide the extra boost to the grid during peak times are often fueled by more expensive and more polluting sources like oil and coal, meaning that wholesale electricity prices increase and CO2 emissions spike by as much as 15% during peak times.

Most large municipal buildings – schools, town halls, etc. – are billed a “capacity charge” to account for the generation capacity required to meet their electricity needs during peak periods. This charge is set based on the amount of power that a facility used during the hour in which the grid reached its peak demand in the previous year. The capacity charge is the product of the price for capacity set by ISO-NE and the quantity of demand from the previous year, often called an “ICAP tag”.  For example, it’s likely that a town’s high school, middle school, and library could use around 1,000 kW during the peak hour. That results in an ICAP tag of 1,000 kW. In 2019, the price of capacity is $7.03 per kW, resulting in a capacity charge of $7,030 per month, or about $84,000 per year.

Equation for the capacity charge: If a town uses 1,000 kw of energy during peak demand, it will be chargd a capacity charge of $7,030 per month.

 

How to reduce demand during peak times

Those capacity charges can really add up, but the good news is that you can control them by lowering your demand during peak periods. Municipalities around the region are managing their demand using a number of strategies including:

  • Turning off lights
  • Turning down air conditioning
  • Turning off and/or unplugging equipment (computers, appliances, etc.)
  • Turning on combined heat and power or energy storage systems

The City of Medford has deployed many of these strategies in its school buildings, explained Director of Energy & Environment Alicia Hunt during our April 9 webinar. In the summer of 2018, Medford earned more than $5,000 for participating in demand response and it anticipates that it will save as much as $15,000 this coming summer after it installs a new battery energy storage system. Overall, MAPC municipalities saved more than $450,000 in avoided costs through demand management in 2018.

Tools and resources for managing demand in your municipality

But how do you know when a peak period will happen? That’s where MAPC can help. Our Peak Demand Notification Program sends an email each day to let you know whether the annual peak is likely to occur that day and, if so, when the peak is likely to occur. The notifications look like this:

Peak demand notification email template includes the temperature high, peak load, and if annual peak is likely, possible, or unlikely.

Click here to sign up to receive our peak demand notification.

Municipalities can stack the benefits of peak demand reduction for increased savings. The image shows that towns and cities can save about $70/kW with payments from the ISO-NE forward capacity market for demand reduction, $25/kW with payments from utility programs for reducing demand in winter, $35/kW withpayments from utility programs for reducing demand in summer, and about $64/kW in avoided capacity costs. Reducing your capacity charges can save you money, but did you know that it can also earn money for your municipality? As part of the state’s new Three-Year Plan for energy efficiency programs, utilities around Massachusetts will be offering their own incentives for reducing demand. Eversource and National Grid will both be paying incentives of $35/kW of demand reduced under their “Targeted Dispatch” programs, which will ask participants to curtail their demand 3-8 times over the course of the summer. For the first time this year, the utilities will also be offering incentives of $100-$200/kW for customers who can use energy storage systems to support the grid during peak times. For the real demand management pros out there, ISO-NE also offers payments of $70/kW for demand reduction. If you’re interested in signing up for these programs, please reach out to cleanenergy@mapc.org and we’ll connect you with the resources to get started.

With all these programs to choose from, the benefits of managing your demand can add up fast. This spring, consider adding it to your to-do list and get ready to start saving.