As the demand for electricity grows, managing peak load effectively is crucial to ensuring the stability and sustainability of the electricity grid. Unmanaged load growth can strain infrastructure, increase operational costs, and undermine the reliability of electrical service. Traditional strategies for managing peak load have involved either building new transmission or distribution capacity or adding generation. Advances in grid and consumer technologies mean that public power utilities now have expanded options for managing peak load, including encouraging changes in usage patterns, designing new rates, and leveraging distributed energy resources.
Each strategy for managing peak load presents potential benefits and considerations for public power utilities.
Demand Management Strategies
Demand Response
Demand response, or DR, is when consumers adjust their electricity usage in response to signals from the utility. These signals can be price changes, financial incentives, or requests to reduce consumption during peak periods. DR programs can be automated or manual, involving residential, commercial, and industrial consumers.
| Benefits | Drawbacks and Considerations |
|---|---|
|
Helps utilities balance supply and demand, enhancing grid reliability. |
Requires robust communication infrastructure and consumer participation. |
| Reduces the peak load, lowers operational costs. | Utilities must invest in technologies such as smart meters and control systems that allow utilities to measure and verify demand reductions made in response to a DR event. |
| Can defer investments in new infrastructure or additional power generation. | Utilities must also have the capacity to provide timely and accurate price signals to program participants. |
| Provide consumers with opportunities to save on their electricity bills by shifting their usage to off-peak times or reducing usage during peak times. | Consumer awareness and willingness to participate are critical, which may necessitate extensive outreach and education efforts. |
| If providing a financial incentive, it must be set at a level sufficient to motivate the desired consumer response. |
Energy Efficiency
Energy efficiency involves reducing energy consumption through more efficient technologies and practices. Energy audits and retrofits are common approaches to identifying and implementing energy efficiency measures for consumers, which can include upgrading lighting, HVAC systems, insulation, and appliances. For public power utilities, energy efficiency efforts could include reducing line losses, conservation voltage reduction, transformer upgrades, and adding cap banks for power factor correction. Efficient use of the distribution system is a highly effective approach for managing peak load.
| Benefits | Drawbacks and Considerations |
|---|---|
| Reduces overall electricity demand, leading to lower energy bills for consumers and reduced strain on the grid. | The initial cost of energy efficiency upgrades can be a barrier for some consumers. Utilities may need to provide incentives or financing options to encourage adoption. |
| May limit or defer more costly investments in new generation or distribution infrastructure. | Measuring and verifying energy savings can be challenging, requiring ongoing monitoring and evaluation. |
Rate Design Strategies
Time-of-Use Pricing
Time-of-use, or TOU, pricing is a rate structure where electricity prices vary based on the time of day. Prices are higher during peak demand periods to incentivize consumers to shift their electricity usage to times when demand is lower.
| Benefits | Drawbacks and Considerations |
|---|---|
|
Helps flatten the demand curve, reducing peak load and operational costs for utilities. |
Requires advanced metering infrastructure to track and bill electricity usage based on time. |
| Encourages consumers to use energy more efficiently and can lead to significant cost savings for those who can adjust their consumption patterns accordingly. | Some consumers may face bigger challenges in adjusting their usage, potentially leading to higher bills. |
| Effective communication and education are essential to help consumers understand and benefit from TOU pricing. | |
| As TOU pricing is meant to encourage changes in consumer behavior, pricing structures must be carefully designed to maximize effectiveness. |
Peak Demand Charges
Peak demand charges are imposed on consumers who either use electricity during utility peak demand periods or are charged additional fees periodically (e.g., monthly) based on their highest electricity usage during a defined interval. These charges are designed to incentivize consumers to reduce their peak demand and distribute their usage more evenly throughout the day.
| Benefits | Drawbacks and Considerations |
|---|---|
| Can reduce the overall peak load on the grid. | Requires accurate measurement of peak usage, necessitating advanced metering systems. |
| Helps defer investments in new infrastructure and enhances grid reliability. | Some consumers may face difficulties in reducing their peak demand, leading to higher charges. |
| Consumers can reduce electricity costs by managing their peak usage. | Utilities need to ensure that the charges are clearly communicated and that consumers have access to tools and programs to help manage their usage. |
Dynamic Pricing
Dynamic pricing involves electricity prices that change in real-time based on market conditions and grid demand. Prices can vary throughout the day, reflecting the actual cost of electricity production and delivery at any given time.
| Benefits | Drawbacks and Considerations |
|---|---|
|
Provides a strong financial incentive for consumers to adjust their usage, which can lead to significant reductions in peak load and operational costs for utilities. |
Requires sophisticated metering and communication infrastructure. |
| Promotes efficient use of the grid. | Consumers must be willing and able to respond to price signals, which can be challenging without automation technologies. |
| Can more effectively integrate renewable energy sources. | Utilities need to provide clear information and support to help consumers understand and adapt to dynamic pricing. |
Distributed Energy Resources
Energy Storage
Energy storage systems, such as batteries, accumulate electricity during periods of low demand and release it during peak periods. These systems can be deployed at various scales, from residential to utility-scale applications, and can store energy from various sources, including renewable generation.
| Benefits | Drawbacks and Considerations |
|---|---|
|
Helps balance supply and demand, reducing the need for peaking power plants and enhancing grid stability, helping to regulate energy prices. |
High upfront cost can be a barrier to widespread adoption. Utilities must consider the long-term benefits and potential revenue streams from storage to justify the investment. |
| Can provide backup power during outages and serve as a stabilizing resource when paired with intermittent renewable energy sources. | As energy storage technologies evolve, utilities need to stay informed about advancements and best practices. |
Vehicle-to-Grid Systems
Vehicle-to-grid, or V2G, systems support peak load management by enabling electric vehicles to discharge stored energy back to the grid during peak demand periods. V2G technology allows EV batteries to act as distributed energy storage resources, providing additional capacity to the grid when most needed.
| Benefits | Drawbacks and Considerations |
|---|---|
|
Can significantly reduce the strain on the grid during peak periods, enhance grid stability, and decrease reliance on costly peaking power plants. |
Requires compatible EVs, charging infrastructure, and grid management systems. |
| Enhanced grid flexibility and reliability while providing EV owners with potential financial incentives for participating. | The grid itself must be configured to allow for bidirectional energy flows in a manner that is safe, controlled, and properly metered. |
| May allow utilities to defer investments in centralized energy storage systems. | The technology is still in its early stages; widespread adoption will take time. Utilities need to address regulatory, technical, and consumer acceptance challenges. |
Virtual Power Plants
A virtual power plant, or VPP, is an aggregated network of centrally managed distributed energy resources, such as solar panels, batteries, and demand response assets like smart thermostats. VPPs operate as a single power plant, offering flexibility and reliability services to the grid.
| Benefits | Drawbacks and Considerations |
|---|---|
|
Enhance grid resilience by leveraging distributed resources to balance supply and demand. |
Coordinating and managing a diverse set of distributed resources can be complex. |
| Can reduce peak load, support renewable energy integration, and provide ancillary services. | Requires advanced software platforms and communication systems to operate effectively. While many VPPs utilize cloud-based computing systems to simplify implementation, cyber-physical security concerns may arise. |
| Leverage underutilized assets. | Regulatory frameworks and market structures must also evolve to accommodate the unique characteristics of VPPs, which may involve compensating utility customers for use of diverse assets. |
| May defer investments in new transmission, distribution, and generation capacity. |
More Resources for Public Power
The American Public Power Association has produced numerous resources that more fully explore many of the peak demand management strategies introduced in this technology brief. These include:
- Public Power Rate Design Case Studies
- Aligning Utility Rate Design with Grid-Edge Technologies
- A Refresher on Reducing Distribution System Loss
In addition, APPA Engage is an online space for the public power community to discuss important topics, share successes, ask questions, and connect with peers. APPA members interested in peak load management can request to join the Energy Innovation group or the Energy Transition Community group.