In our previous issue of Customer Insights, we introduced the concept of selecting the right energy product by understanding your energy data and working with our experienced sales team. Energy data tools provide a lot of information about how your business uses electricity. However, taking this knowledge a step further provides critical information that can help you make decisions on how to manage your investment through energy load management programs and services.
Energy load management offers several options for businesses, depending on your flexibility in operation and the investment your business wishes to commit. In this edition, we’ll take a deep dive into energy load management as a strategy for managing your total electricity costs. We’ll explore various programs and services available to you, such as managing your Peak Load Contribution (PLC) or Network Service Peak Load (NSPL) in order to reduce your capacity and transmission costs. PJM, the Regional Transmission Organization (RTO), incentivizes businesses when participating in demand response programs to secure grid reliability in times of emergencies. As we explore these programs and services, our AEP Energy team will work with you to find an option that fits your business model.
In a future Customer Insights, we’ll explore advanced reporting and analytics as another effective tool for your business to help ensure you get the most out of your product.
It Starts with the Product
Once you’ve carefully reviewed and analyzed your energy data patterns with our experts, it’s time to choose your product. While considering the energy product plan that’s best for your business, consider how you can manage the product to get the most financial benefit. It’s important to select the product based on your desire and ability to actively manage energy and demand-based charges. If you elect to manage your demand-based charges, choosing a product from our True Demand family, enables components of your bill to pass-through. In other words, you will pay the true cost for those demand-based charges without any risk premiums. The most common components to pass-through are capacity and transmission, which constitute approximately 30% of your total electricity costs and are set over just six to ten hours of the year.
True Demand products are ideal for customers who understand which of your operations use the most energy and have flexibility to stop or reschedule those operations, avoiding hours when capacity and transmission charges might be set. It’s important to keep in mind, while choosing a True Demand product, to maximize the value you will want to take part in a load management program or service.
As you consider which load management program might work best for your business, you’ll need to understand the value of load management programs and services, plus strategies your business can utilize for maximizing that value.
The Value of Load Management Services
There are a variety of load management programs and services to choose from through your retail energy supplier, like AEP Energy, or through PJM. The most common of these is managing your capacity and transmission costs. We’ve explained in previous editions, capacity and transmission costs are billed by a formula. This formula includes rates determined by PJM, your local utility and the number of days in the month or year, all of which you cannot control. The formula also includes your Peak Load Contribution (PLC) for capacity and Network Service Peak Load (NSPL) for transmission, which you can control through load management.
Capacity and transmission obligations are set by assigning annual “tags” to your business, measuring how much energy is used when system demand is at its highest, over one or five hours of the year. These hours are known as “peak-setting” or “coincident peak” (CP) hours and your tags during those hours are called your PLC and NSPL.
Market rates for capacity and transmission are set as $/MW values and are multiplied by your PLC and NSPL tags respectively to distribute these costs across all system users. This means that by using less energy at those critical hours you can effectively manage your costs. For example, depending on your location, capacity rates can vary between $35,000 and $75,000 per MW. In other words, by reducing your usage by 1MW during just five hours of the year, you may lower your total energy costs between $35,000 and $75,000 and that’s just for capacity. Transmission costs can vary even more, ranging from $17,000 to $135,000 per MW. Any reduction in your PLC and NSPL tags can provide immense relief in your demand-based charges.
Once you’ve decided managing your PLC and NSPL is a good fit for your business, the question remains – how do you know which hours will determine your tags? We’ll explain how our experts will help you each step of the way.
PLC and NSPL Management Service
Many energy suppliers offer some sort of peak load management program, where they predict PLC and NSPL setting hours and inform their customers who may then choose to take appropriate action to reduce load. AEP Energy’s complimentary PeakAdvisorySM Service, designed for PLC and NSPL management, assists you with reducing your capacity and transmission costs. We utilize our deep knowledge of markets, weather and load behavior to predict hours that determine PLC and NSPL tags and alert you of potential peak-setting hours. Over the last three years, this service has contributed towards our customers saving over $30 million in demand-based costs, while sending as few as ten alerts in one year. We track potential peak-setting hours in every PJM Transmission Zone 365 days a year. Once our model predicts a peak-setting hour, we email an alert to you at least one business day in advance so that you can take appropriate action to curtail your load. With our PeakAdvisory Service, if you choose to manage your PLC, at the end of the season we provide a customized report showing your performance during the peak hours and your forecasted capacity savings during the following planning year.
Other Load Management Programs
If you’ve selected a fixed-rate plan where the cost of capacity and transmission are included in the electricity price, curtailing load for PLC and NSPL savings does not provide benefit, but other load management programs are available.
Our complimentary PowerPerksSM program allows you to participate in a voluntary load curtailment program in exchange for credits on your bill. Like PeakAdvisory, we alert you in advance of a potential high-demand period, providing you an opportunity to curtail your load and help overall grid reliability. It’s your choice to reduce your energy use, but if you do, we will credit you for the reduction. By participating in our PowerPerks program, you could potentially earn $500 per megawatt-hour (MWh) of reduced consumption. Over the last few seasons, we have paid out over $90,000 to our customers.
Several utilities or Electric Distribution Companies (EDCs) also offer voluntary load curtailment programs, incentivizing customers to curtail load in exchange for distribution bill credits. Customers can “opt-in” into these programs and sign-up to receive text alerts in advance of load curtailment hours.
PJM offers a DR program designed to compensate you for load reduction when there is an “emergency” on the grid. For example, emergencies could be due to weather spikes or outages, causing electricity prices to escalate and are usually confined to one PJM zone.
Over the last decade, some PJM zones have never been notified while others have had events with only minimal response requirements. Despite the historic scarcity of events, PJM needs to ensure they have resources available to respond in the event of an emergency on the grid. Customers can get paid tens of thousands of dollars per MW registered, for demonstrating their ability to reduce load through a one-hour test each year.
You can participate in PJMs DR program through a “Curtailment Service Provider” (CSP). AEP Energy is a CSP and we have over eight years of experience managing 100+ MWs of DR while securing millions of dollars for our customers.
PJM also offers DR opportunities in the day-to-day market through Economic Demand Response. Through this program customers offer the amount of demand they can curtail and set their own asking price to be paid for by reducing that demand. By participating in Economic DR, you help lower demand on the grid when locational marginal prices are high and get paid for doing so.
If the market reaches that price point and you reduce your load, you are paid the full market price for that hour, even if it’s more than your asking price. If your load meets certain requirements, you can participate in this program, regardless of the supply product you elect. AEP Energy can help you participate in this market as a CSP, as well as provide reports and access to online dashboards on market forecasts and behavior.
For industrial consumers or those with onsite generation who can respond to a PJM signal within seconds or minutes, there are other load management opportunities such as “Frequency Regulation” and “Synchronous Reserve”. These programs keep the balance between supply and demand on a minute-to-minute basis and prevent the system from becoming overloaded or failing to provide enough power. The requirements for participating in these are more stringent, though customers who can respond rapidly can stand to benefit immensely.
In summary, managing your PLC and NSPL through our PeakAdvisory Service is the most accessible load management program available, resulting in reduced capacity and transmission costs for the subsequent year. There are a variety of other programs offered depending on your appetite and capability to manage your load and commitment to that investment. However, unlike PLC and NSPL management, other programs can yield immediate revenue and credits, though the commitment requirements of PJM programs are very stringent. That’s why it is important that you have a solid strategy when implementing an energy load management program.
Load Management Strategies
In addition to load management programs, did you know there are strategies you could implement for additional cost savings? These strategies might be as simple as reducing lighting or transferring load to a battery. Here are a few examples that might produce profits for your business.
Consumers who have predictable load that can be scheduled or shifted to less critical hours can participate through direct load curtailment. Besides load shifting, you can follow simple principles of reducing non-essential usage or even employee behavioral change to reduce energy consumption. Strategies may include reducing space cooling during peak hours by turning the temperature up or extreme cooling beforehand, cutting down on non-essential lighting and even managing your miscellaneous “plug loads”, ensuring this type of equipment is set to sleep-mode when not in use. Manufacturing consumers may consider shifting energy-intensive processes to off-peak hours when energy prices are lower to reduce costs. For a detailed discussion of these and other strategies, please visit our webpage at https://www.aepenergy.com/commercial/commercial-energy-load-management/. The chart below shows how your load profile may appear if you decide to curtail load during peak hours.
With the growth and increased adoption of Behind-the-Meter (BTM) technologies, you can now participate in load management by transferring your load to either a battery or back-up generator; or by utilizing locally-installed solar panels. With these technologies enabled, you get the benefit of load reduction without making significant changes to your daily production schedule or behavior. The seamless integration of these technologies into your electric system is the most efficient way of realizing benefits without a significant disruption.
AEP Energy can help you with BTM installations and design your supply product to get the most value from these assets. Partnering with us will mitigate the cost, risk and worry to you, since we’ll own, operate and manage these assets for you. This is an emerging market, one that we have developed expertise in by deploying over 100 MWs of assets nationwide.
In conclusion, we have explained why information is critical before selecting a product and how managing your load helps fulfil your obligation towards cost savings. The programs and strategies highlighted in this article are a snapshot of all the opportunities available to you. With our support, your goals are achievable!
Get started today with your energy load management program. Contact your trusted AEP Energy sales representative or click here to request a quote.