TERMINOLOGY / DEFINITIONS
Peak Load Reduction: Help Control Energy Costs and Improve Reliability of Electricity
Electricity and Peak Demand
Since electricity cannot be effectively stored, electrical networks must instantaneously balance generation and load, i.e., supply must always equal demand. Therefore, there is a need to build for the peak because sufficient generation capacity must meet maximum instantaneous demand whenever it happens. Meeting varying demands requires a mix of generation capacity including base-load and peak-load generation.
Base Load Generation vs. Peak Load Generation
A base load generation unit is one that provides a steady flow of power regardless of total power demand by the grid. This unit runs all seasons except during the time when repairs or scheduled maintenance occur. Base-load plants usually run on low cost fuels such as nuclear or coal and are massive enough to provide a major portion of the power used by a grid. Therefore, these plants have high capital costs to build but low operating costs to run. In contrast, peak load units (also known as peakers) are power plants that generally run only when there is a high demand, known as peak demand, for electricity. In the U.S., this usually occurs in the afternoon, especially during the summer months when air conditioning usage is high. The time a peaker operates may vary from several hours a day to as little as a few hours per year. If a peaker is only going to be run for a short and variable time, it does not make economic sense to make it as efficient as a base load unit. Peak load units are generally gas turbines that burn natural gas, which is more expensive than coal and nuclear. Therefore, peak load systems tend to have low capital costs but high operating costs.
High Cost of Meeting Peak Increase
Wholesale electric prices in PJM market have risen considerably in recent years, primarily due to fast-rising natural gas prices. The escalating gas prices, however, do not fully explain the level of wholesale electric prices in PJM market. Increased demand for electricity, especially during the summer peak hours, is straining the market's ability to supply electricity. In order to meet growing peak demand, power companies run and maintain peak load units during times of peak demand. These systems go unused 90% of the time, resulting in inefficient use of investor, consumer and capital-market resources. Ever increasing peak demand also puts a strain on the transmission and distribution systems.
Peak Load Control and its Benefits
Compared with the supply-side option (i.e., increasing generation capacity and upgrading transmission and distribution systems), demand-side management (i.e., control of peak load) is more cost-effective. Peak-load control is a way by which consumers modify their level and pattern of electricity consumption to shed their peak electricity usage or shift their usage from peak to off-peak times. There are a lot of simple actions that business and residents can do to shift or shed their peak electricity usage. For example, customers can shift energy-intensive tasks such as laundry and dishwashing to off-peak hours (mornings, nights and weekends). Customers can also install programmable thermostats and set them at higher temperatures when away from home at daytime. Customers' peak load control can help reduce the peak load and thus change the load-shape by flattening out the load curve on utility systems ("valley-filling"). Peak-load reduction and other demand-side management options are cost-effective alternatives to the supply-side option. It is much cheaper to create a "negawatt" (reduced energy) than to generate a "megawatt" of electricity. Peak-load reduction is good for the consumers and the environment. Reducing electricity usage helps lower a customer's energy bill; reducing peak energy use helps ensure reliable and affordable electricity for homes and businesses; and reducing peak load minimizes the need for new capacity and, thus, reduces the amount of pollution produced from electricity generation.
