Managing Peak Demand
Posted July 28, 2009 at 10:11 am 
Filed in: While everyone is scratching their heads to figure out the big question of the century – how to be more sustainable consumers of energy – some of us have not forgotten the simple adjustments that will benefit everyone. Peak reward programs are offering customers the option to be conscious and responsive to real-time electricity costs. There are also many innovative ways to promote reduced consumption during peak hours when costs are highest. For example, the latest 2009 Idaho’s Irrigation Peak Rewards Program lets farmers choose to sign up for an automatic power switch-off during certain times of day, or to install a communication device with utility services that will allow more flexibility for those switch-off decisions.
Time-of-use, demand, and real-time pricing in non-residential sectors are not novel concepts.
Alabama Power has been offering these options to industrial and commercial customers for several years (for pricing indices click here). The market for demand response, a mechanism which requires electricity customers to reduce consumption at critical times, has grown considerably in recent years. Founded in 2001, EnerNOC works as a middleman between utilities or grid operators and the appropriate commercial and industrial businesses that can most easily respond to changes in electricity supply. By enrolling qualified customers in demand response programs, EnerNoc allows utilities to shut down or dramatically reduce energy supply to those customers during critical times, like peak hours. In exchange, participating companies earn money for helping protect their community from blackouts and avoid the need for new power plants.
Within residential markets, several U.S. electric utilities are already experimenting with real-time pricing. Exelon Corporation, which operates the largest nuclear fleet in the U.S., has commenced its Residential Real-Time Pricing Program (RRTP) in the Northern Illinois market, the service territory managed by Commonwealth Edison (ComEd). Residents may volunteer for a minimum 12-month consecutive billing period, which uses hour-by-hour price variations based on wholesale market prices. The program requires installation of a new hourly recording electric meter, with a monthly meter lease fee of $7.65. A similar program by Baltimore Gas and Electric (BGE) offers residential consumers the option to install programmable devices in electronics, such as air conditioners, that allow the central utility to monitor and control in real-time.
Peak reward programs spark a plethora of great ideas for applying smart gadgets and implementing new management strategies for utility services. Utilities welcome the program because it is the most costless way to improve system reliability by easing the stress during peak hours. Energy efficiency programs, like Energy Star, seem more than willing to offer rebates to offset the cost of installing smart meters. Some states, like Missouri and Kansas, have already handed out programmable thermostats for free to thousands of residents as part of their endorsement for the energy saving initiative. Most importantly, consumers have the incentive to pay a fee for enrolling in these programs. The U.S. Environmental Protection Agency estimates a 10 to 20 percent savings on participants’ electricity bills, which can easily cover the extra 3 percent increase in the average electricity rate that pays for meter costs and servicing.
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Other stuff:
As a follow up on our previous post, Revisiting Speculation, here are some updates on CFTC’s hearing today:
Gensler Pushes for Trading Curbs Wall Street Journal
Traders Blamed for Oil Spike: CFTC Will Pin ’08 Price Surge on Speculators, in a Reversal From Bush Findings Wall Street Journal
CFTC poised to move aggressively on position limits Reuters
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