2016-08-02 National Governors Association

States Respond To Increased Volatility Of Electricity Demand

WASHINGTON, D.C. – States across the country are confronting a shift to a “peakier” pattern in the use of electricity—meaning the highest levels of daily demand are increasingly greater than the average level of daily demand—that is driving up overall power costs.

Aligning Energy Efficiency and Demand Response to Lower Peak Electricity Demand, Reduce Costs and Address Reliability Concernsa paper released today by the National Governors Association (NGA), outlines how states can combine efforts at demand response, which provide incentives for customers to reduce their usage at peak times (when the incentives cost less than generation), with targeted energy efficiency efforts that focus on areas or sectors with high peak energy use to help address the peakiness problem.

Governors may be concerned about increased volatility of the electricity system and how it affects reliability and affordability for several reasons:

  • Serving peak load can be up to seven times more expensive than serving average “base” load;
  • Peaking plants sit idle most of the year, causing utilities to face greater excess capacity (lower utilization rates) during off-peak times and higher costs; and
  • Aging transmission and distribution infrastructure is further stressed when demand becomes peakier.

The paper explores several strategies states can employ to achieve cost savings and reliability benefits, including:

  • When creating or evaluating energy-efficiency and demand response programs, measure the peak or time-differentiated value of both demand response and energy-efficiency savings;
  • Support energy data collection to better understand patterns of electricity use and savings while addressing concerns about privacy and access;
  • Launch pilots that integrate energy efficiency and demand response at state facilities;
  • Encourage alignment or integration of residential and commercial demand response and energy efficiency programs;
  • Integrate demand response and energy efficiency into grid modernization efforts;
  • Explore the deferral or avoidance of capital investments by geographically targeting investments in energy efficiency and demand response where energy supply costs or grid congestion are highest; and
  • Consider setting goals for energy efficiency that include peak load reduction targets.

To learn more about the NGA Center for Best Practices Environment, Energy & Transportation Division, click here.

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