Peak Demand Events
There are certain days each month when the collective demand for electricity in our area is highest (i.e. the "monthly peak"). In addition to monthly peaks there is also an annual peak event (“yearly peak”) which typically occurs on a day in the summer during a heat wave when everyone is using air conditioners. These monthly and yearly peaks are known as ‘peak demand events’. These peak demand events are one of the key drivers of overall electricity costs and are a major determinant of electric rates for customers. This is because these events determine the costs that HG&E must pay towards maintaining transmission lines and ensuring there is enough capacity to supply the grid. . Because some utilities require less electricity than others, these collective transmission and capacity costs are divvied up among the electric utilities in New England based on the individual utility electric demand during these monthly and yearly peak events. The costs for energy and the carbon emissions associated with energy production also vary depending on the amount of electricity needed at a given time.
Transmission Costs: Throughout New England, electricity is distributed in bulk from one area to another via high voltage transmission lines. Due primarily to federally mandated reliability improvements, transmission owners have spent billions of dollars to maintain, expand and modernize the transmission system. These costs are passed on to all electric consumers in New England. While HG&E owns and maintains 9.25 miles of regional transmission lines located in Holyoke, we are still required to contribute to regional costs.
Capacity Costs: In New England there are a variety of generation sources, including solar, hydro, natural gas, nuclear, coal, wind, and oil. These generators must produce enough electricity to meet the regional peak electrical load. Owners of electric generators get compensated not only for the energy that they sell, but also for their capacity available to generate. Utilities who serve customers with energy are responsible for providing their proportional share of funds to the generators for their capacity, which is based on a utility’s demand is during certain peak events.
Energy Costs: Electricity needs are met by generation in real time, leading to high energy prices during times of high peak demand. While HG&E has enough energy on an average day to provide its customers through owned generation and power contracts, , there are times when additional electricity is needed to be purchased from the wholesale electric market, where supply and demand control much of the price. In fact, the top 1% of peak electricity demand hours account for 8% of electric energy costs, while the top 10% of hours accounts for 40% of overall electric energy costs.
Carbon Emissions: During some periods of high demand, back-up power plants need to come online to provide enough electricity to meet the demand. These back-up power plants are usually fossil-fuel powered generators thus producing higher carbon emissions than many other types of power generation facilities. Reducing electric demand during peaks helps avoid the production of carbon-emissions that would otherwise have been produced as a byproduct of electricity generation.
Demand Response
Because its sometimes possible to predict when a peak event will likely occur, HG&E has various demand response programs and processes to help reduce demand during monthly and yearly electric peaks which helps reduce overall costs as well as mitigate carbon emissions. These include dispatching utility-scale generation resources, such as batteries, onto the grid along with offering demand response programs for customers to lower usage, including the following:
- Electric Vehicle Charger Program: This program provides an incentive to customers in exchange for charging their vehicles outside of peak times.
- Connected Homes Smart Device program: This program provides a monthly incentive to customers for allowing their smart thermostat, water heater or heat pump controller to be remotely adjusted a few times each month to reduce its associated electric demand during an anticipated peak event.
- Beat the Peak: Through our new Beat the Peak voluntary demand response program, customers can sign up to be notified of an upcoming peak event and reduce their electric or natural gas use during the event.
The graph below represents the effect that our demand response programs have on our territory's electric demand during the time of a peak event. The reduced demand, shown as the horizontal green line, allows us to help keep customer electric rates low as well as avoid carbon emissions from higher emitting power plants which otherwise would have needed to come online to supply enough electricity to meet the demand.
