The season’s first heat wave is rolling across the Northeast this week, breaking temperature records and serving as a reminder to energy managers that another peak demand season is upon us. For the last three years, Genscape’s PeakAlerts service has emerged as the most accurate tool that large commercial and industrial power consumers use for notification of forecasted system peaks, in order to curtail usage and reduce their peak demand charges.
Genscape started providing PeakAlerts services to commercial and industrial clients three years ago, and has enhanced the service and expanded coverage every year since. In 2017, at the request of clients, Genscape has expanded the service to Ontario and Mexico, two regions with particularly high-peak demand charges.
Ontario’s Global Adjustment program applies to all “Class A” customers in the province and is generally the largest line item on their electric bill. Genscape estimates that its PeakAlerts clients will save $50,000 for every 100,000 KW average reduction during the five system peaks in 2017.
Mexico’s program operates a bit differently. Under Mexico’s newly reformed market, capacity charges are determined for the 100 “critical hours” each year starting in 2017. Capacity prices are not yet published, but according to market rules will follow a price curve topping out at two times the reference cost of generators. Due to this steep capacity price curve, reducing demand during these 100 critical hours will result in large savings for large industrial and commercial power users.
How does PeakAlerts work?
What if the amount you paid for air travel in a year was based on how much you traveled on the busiest four travel days of the year? You would avoid those days and fly for free, right?
This is an extreme analogy, but is essentially how peak demand charges work. Capacity charges are set based on peak energy use during specific periods, usually either monthly or annually. After generation costs, capacity charges are often the second largest cost-per-kWh line item for consumers. They represent between 10-30 percent of total power costs for most commercial and industrial companies, and have been increasing at double-digit rates in most regions of the United States.
With the right tools however, capacity charges are relatively easy to minimize for large, sophisticated power users. Energy managers who can accurately predict when these peaks will occur can curtail their usage during those periods and significantly reduce or even eliminate their demand charges for the following year.
The amount a customer pays in demand charges is based on their usage during a handful of peak hours or Peak Load Contribution (PLC). The precise details vary by region.
- ERCOT 4CP: One hourly system-wide peak per month (June - September)
- ISO-NE ICAP: One peak hour (June - September)
- Mexico: 100 critical hours (starting 14 days before the first critical hour of the preceding year)
- NY-ISO: One peak hour per year
- Ontario’s Global Adjustment: Five top demand hours on separate days (starts May 1)
- PJM 5CP: Five top system-wide demand hours on separate days (June - September)
The challenge is accurately forecasting when these peaks will occur. Genscape's PeakAlerts uses the industry's only independent demand forecast which is more accurate than the system operator's forecast, and is supported by an experienced team of meteorologists, not just an algorithm. Each curtailment carries a real cost in lost production or inefficiency, so energy managers need tools to help them confidently predict periods that have a high likelihood of setting the peak, and avoid "crying wolf." PeakAlerts addresses this with simpled but effective two-tiered yellow and red alerting system corresponding to moderate and high risk hours. To learn more about Genscape’s PeakAlerts, please click here.