This article was originally published on Alternative Utility Services, Inc.
An Integrated Energy Plan could keep a big mistake from coming back to haunt you.
What you did over 5 short hours during your summer will impact your electric costs up to 30% for the entire following year! What could you have possibly done that would impact your electricity costs that much? The answer lies in your Capacity Peak Load Contribution (PLC for short); basically how much load your building placed on the electric grid during 5 designated peak load hours (1 hour per day over 5 different days).
Lower your Capacity PLC – and you could have a dramatic impact on your cost of electricity. In fact, if you could pinpoint those 5 specific hours (if you are in PJM and only 1 hour in NY and New England) and shut your facility completely down, you could save up to 30% on your electricity costs starting the following June.
Do you have the ability to do a load curtailment or demand response? If so, you have the ability to cut your PLC number IF you know when the 5 magical hours are going to happen. Don’t have a crystal ball? AUS’ PJM team provides a predictor service which focuses on up to 30 hours of load curtailment (no more than 3 hours at a time) to make sure you hit the 5 hourly periods. To date, these periods have all been weekdays, between 3PM and 6PM.
An Integrated Energy Plan will look at supply side and demand side integration to maximize savings and revenue for your business.
The devil is in the details. To maximize the savings benefits an energy plan must look “holistically” at purchasing and be coupled with plans to reduce consumption. The strategy for reducing your electric load is two-fold; review opportunities for 1) permanent reductions in energy consumption, and 2) short term response via Load Curtailment (also known as Demand Response). An Integrated Energy Plan looks at and coordinates energy purchasing (supply-side), that is then matched or integrated with demand reduction (demand side). Without this approach you can miss out on savings.
Looking at your energy holistically means you need to consider:
Plans for Energy Efficiency, Cogeneration, or Renewable Energy Projects - How does your energy efficiency reduction plan impact your energy supply contract? A major energy efficiency project could lower your new consumption below the contracted level and trigger a penalty. Working with a Chief Energy Officer for your energy plans can maximize savings more than multiple parties each doing their own thing.
Usage Tolerance - Bandwidth (or how much you can deviate from your previous normal consumption on an energy supply contract) could end up costing you big time. Swing or bandwidth accounts for changes in weather or production from year to year. Allowable bandwidth (swing) needs to be considered as part of any reduction strategy in conjunction with energy procurement plans.
Product Type - Both permanent load reductions through energy efficiency measures and short-term reductions through load curtailment require an electric contract with capacity as a pass thru cost. If instead, you sign up for a fixed, all-in long-term contract – you will miss the additional savings of the PLC reduction from the energy efficiency project.
Coordination of Permanent & Short-Term Demand Reduction
While a permanent load reduction through an energy efficiency project will automatically remove the kW load reduction from your capacity PLC the following summer, a short term load response during the 5 hours (see our white paper on Capacity Management in PJM) that everyone’s Capacity Peak Load Contribution is set can be a very inexpensive way to reduce your cost of electricity.
Although a permanent load reduction through energy efficiency improvements is ideal, you need to review what is being bid and contracted into the Demand Response Auction annually to make sure you still have the ability to meet your performance obligation.
Short term usage reduction in the form of Demand or Load Response contracts could also be impacted by your energy conservation measures (ECM). Short term load curtailment also offers a way for your building to generate additional income. But an annual assessment should be done, based on an Integrated Energy Plan, to make sure all energy issues are orchestrated to minimize costs and maximize returns.
Permanent load reductions or short term load curtailments to reduce your Capacity PLC are part of a Capacity PLC Management Strategy that is integrated with your payback or IRR of an energy efficiency project, and should be considered as part of your electric commodity procurement plans.
PJM transmission offers an added bonus for energy efficiency reductions by allowing a PJM Member to bid your load reduction into the Generation Auction and earn income for up to 4 years from the time the project was commissioned.
With Capacity costs representing up to 30% of your cost for the electric commodity, an ongoing plan to reduce and manage the capacity number is critical.