Peak Demand Reduction Strategy

Posted by Reports on Oct 14, 2015 1:07:00 PM

Publish Date: October 14, 2015

Demand for electricity can spike during just a few hours a year, and typically 10 percent of our electric system capacity is built to meet demand in just 1 percent of hours during the year. This comes at a significant cost to consumers.

This report, prepared for AEE by Navigant Consulting, evaluates the benefits and costs of reducing peak demand in two states, Illinois and Massachusetts, and the feasibility of utilities to procure the resources to meet demand reduction goals over 10 years.

In each of three scenarios, the cost-benefit ratio is highly positive, with the ratio of benefits to cost increasing as the standard rises. The analysis finds that for every $1 spent on reducing peak demand, at least $2.62 can be saved by ratepayers in Illinois and $3.26 by ratepayers in Massachusetts.

One proven tool for reducing peak demand is demand response (DR). DR enables grid operators and electric utilities to relieve stress on the electricity distribution system by compensating commercial, industrial, and residential customers for curtailing electricity use at times of peak demand or system emergency. The paper also highlights the importance of continued DR participation in wholesale markets, as many of the benefits of peak demand reduction policies are realized through wholesale market participation.

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Topics: State Policy, 21st Century Electricity System, Utility