July 2021 - Quarterly Market Letter
On behalf of the team at 5, I am pleased to forward our market letter for the second quarter of...
There are two main components of a client’s total electricity cost. The first is a consumption-based component, billed on a kWh basis and known as the supply cost. The second is a demand-based component, billed by the utility for the cost of the transmission and distribution of electricity. While most strategies focus on the supply component, between 30% to 60% of energy costs are related to the demand-based charges. Clients should actively reduce those costs through peak load management (also called Peak Load Contribution or PLC management).
Coincident peak demand is the total amount of energy (demand) a client is consuming at the time of the associated grid’s maximum peak demand. While the details differ from one ISO to the next, the concept remains the same that a large portion of a client’s utility charges for a calendar year is set by their coincident peak demand from the prior year. With proper planning and communication, a client’s coincident peak demand can be reduced or completely avoided, leading to lower overall energy costs in the following year.
Working with 5 to create a peak load reduction strategy is completely voluntary and there are no penalties for clients that are unable to reduce their electric load when notified of a potential peak load day. However, many clients choose to gather their operations teams annually with 5’s engineering team to review the prior year’s performance while also planning a strategy for the year ahead. The financial impact of a proactive peak load management plan can be substantial and the excitement that many operators express when they are called upon to impact the bottom line is palpable.
Contact Us to learn how we can help your organization to create and execute a strategic peak lead management plan.