We’re here to help you understand your energy spendPeak Demand Days Explained

Peak demand on an electrical grid is simply the highest electrical power demand over a specified period. Peak demand is typically characterized as annual, daily, or seasonal and has the unit of power.

Peak demand describes a period in which electrical power demand is expected to be sustained at a significantly higher than average supply level. Peak demand fluctuations may occur on daily, monthly, seasonal and yearly cycles. For an electric utility company, the actual point of peak demand is a single half-hour or hourly period, representing the highest point of customer electricity consumption.

Some utilities will charge customers based on their peak demand. For example, the highest demand during each month or even a single 15 to 30-minute period of highest use in the previous year may be used to calculate charges.

The electricity grid was developed to deal with the highest peak demand; otherwise, a blackout may happen.

Join TPI's Peak Demand Email List

We’ll notify you that a coincident peak demand day is forecasted.

That means that one of the five highest-demand days (during the summer months) is when PJM chooses to measure the peak demand—typically during the hour of the day with the highest demand.

Your average usage/demand during the five peak hours of the summer (measured by PJM on the five coincident peak days) determines what your capacity obligation (i.e. “capacity tag”) will be for the following year—and impacts your overall energy costs.

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When Does the Peak Electricity Demand Happen?

It depends on the demography, the economy, the weather, the climate, the season, the day of the week, and other factors. Historically, around the East Coast and Mid-West, the peak demand days have occurred in the summer months, when the demand for air conditioning is often at its highest, competing with the everyday energy needs of manufacturing and commerce on the grid.

Off-Peak

Peak demand is considered the opposite of off-peak hours when power demand is usually low. There are off-peak time-of-use rates. Sometimes, there are three time-of-use zones: peak, shoulder, and offpeak. The shoulder is often the time between peak and off-peak in weekdays. Weekends are often just peak and off-peak.

Peak Demand

Peak demand may exceed the maximum supply levels generated by the electrical power industry, resulting in power outages and load shedding. Peak demand often occurs during heat waves when air conditioners and powered fans significantly raise the rate of energy consumption. During a shortage, authorities may request the public to curtail their energy use and shift it to a non-peak period.

Peaking Power Stations

Power stations that provide power to electrical grids for peak demand are called peaking power plants or ‘peakers.’ Natural gas-fueled power stations are fired up rapidly and often utilized at peak demand times. In addition, combined cycle power plants can frequently provide power for peak demand and run efficiently for baseload power.

WHY PEAK DEMAND DAYS MATTER?

It matters because of the Capacity Charges on your bill. Did you know that Capacity charges can make up to 30% of your bill?

WHAT IS A CAPACITY CHARGE?

PJM, the local grid operator, must ensure adequate capacity to meet the system's peak demand. PJM passes the costs associated with building and maintaining generation capacity off to local utilities and retail suppliers. Those costs are then passed on to you as "capacity charges," or "PLC charges". Moreover, capacity charges are not always itemized; if they are embedded in your bill, they can become complicated to manage.

TAKE CONTROL OF YOUR CAPACITY CHARGES AND SAVE THOUSANDS

Organizations in PJM paid over $4B in capacity charges last year. Did your business pay more than its fair share? Those who can strategically lower their demand during the annual system peaks can drastically reduce their capacity charges, saving thousands of dollars annually. TPI Energy Consultants can assist with tools and guidance in today's organizations about peak demand days so they can minimize capacity charge costs with minimal impact on operations.

How are capacity charges calculated?

Capacity charges are not based on the energy you use during a month. Instead, capacity charges are determined by the five highest one-hour system coincident peaks (5CP) on the electric grid. Your average demand during the 5CP comprises your "capacity tag" or Peak Load Contribution (PLC). The system's peak hours occur during the hottest summer weekdays between June and September. The grid operator determines the PLC hours after September 30 of each year, and the utility passes on the associated capacity tag to you during the following year.

How do capacity charges impact my organization?

You can significantly reduce your capacity charges for 12 months if you accurately anticipate system peaks and reduce your load when the grid needs it most. On average, organizations that reduce their demand by 1MW could save $22k annually.

What types of energy reductions can I make?

Typical reduction examples include:
• Reduce non-essential lighting
• Modify manufacturing processes
• Adjust HVAC equipment
• Dial back pumps
• Change settings in industrial freezers

Ask about our experience working with customers like you.

ARE YOU OVERPAYING FOR ENERGY?

Capacity charges are based on peak hour usage costs, and inaccurate capacity tags can result in businesses overpaying for energy during peak demand periods.

PJM INTERCONNECTION: OUR ELECTIC GRID EXPLAINED

The PJM Interconnection is a regional transmission organization (RTO) that operates an electric transmission system serving all or parts of 13 states and the District of Columbia in the United States. PJM operates a competitive wholesale electricity market and manages the high-voltage electricity grid to ensure reliability and efficiency. It is part of the Eastern Interconnection grid, one of North America’s two major power grids.

PJM ensures the reliability and security of the grid through various measures and initiatives.

Here are some ways in which PJM ensures grid reliability and safety:

Cyber and physical security

PJM recognizes that cyber and physical security are essential to fulfilling its mission of providing reliable power to the millions of people in its footprint. PJM implements robust security measures to protect the grid from cyber threats and physical attacks.

Resilience planning

PJM conducts studies and analyses to identify emerging risks and ensure the grid’s resilience. This includes assessing the impact of decarbonization, evolving load characteristics, public policy, and new technologies on grid reliability. PJM aims to enhance operational flexibility while maintaining reliability and resilience.

Preparedness and action

PJM, along with its members and stakeholders, takes proactive steps to ensure the bulk electric system’s reliability, security, and resilience. This includes preparing for extreme circumstances, managing global supply chain shortages, and establishing systems and procedures to accommodate dynamic conditions.

Communication and coordination

PJM maintains regular communication with its stakeholders, including generation resources and data management, to address possible reliability concerns resulting from fuel supply shortages

Market operations

PJM operates a competitive wholesale electricity market, which helps ensure efficient resource allocation and grid reliability. The market incentivizes generators to be available during peak demand periods and supports grid stability.

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