Two athletes are going to participate in sporting events. Athlete A is entering a Walk-A-Thon and will travel one mile at a leisurely pace. Athlete B is also racing one mile, but will have to run at a 6 minute per mile pace to have any hope of keeping up with the pack. Which event is more difficult? Even though the races are the same distance, clearly Athlete B will have to train intensely to increase her aerobic capacity for running. She will have to generate lots of power in a short period of time to run so fast. Athlete A could putter along in her comfy shoes and barely break a sweat.
Most of the time, an electric company is like a Walk-A-Thon, ambling along, generating some relaxed megawatts. But then a hot summer afternoon comes along and the general public comes home, cranks down the AC, sticks dinner in the oven, flips on the TV, and throws a load of clothes in the washer. All of a sudden the electric company is running a six minute mile and struggling to keep up.
This phenomenon is called peak energy usage. It’s a problem for electric companies because electricity cannot easily be stored. You can’t generate extra at night and save it up for the next day. Electricity has to be generated when it is needed, so electric companies have to build more coal plants (or natural gas plants or wind turbines) to produce enough power for peak demand than they would need if consumption were leveled out through the day. And when demand goes up, price goes up too. Chris Foster, an economist with Georgetown Utility Systems (GUS), explains that the wholesale price that GUS pays for electricity during peak hours (typically 1 to 7 pm) is up to four times higher than the wholesale price during the middle of the night. On really hot afternoons such as we are experiencing this summer, the price of electricity can skyrocket to the maximum allowed by law: $3000 per megawatt hour, 250 times the price of off-peak electricity!
Kathy Ragsdale recently took charge of the new Conservation Department at GUS. A Southwestern University grad, she joined the utility billing department over 25 years ago. She is not comfortable with the name of her new department, because when people hear “Conservation,” they think “Deprivation”. In reality, Kathy wants everybody to have all the electricity they want. Electricity makes people happy, and besides, the city makes money by selling it to us. Her goal is to create a win-win situation by decreasing peak demand so that GUS can get electricity at the lowest rates possible, saving consumers money on their electric bills.
How can peak usage be reduced? During a Texas summer, 90% of excess demand comes from air conditioners. Kathy, only half joking, suggests hanging a pair of reading glasses on the thermostat. “Instead of just turning it colder, look and see what temperature you are actually setting.” Just one degree of difference, setting it at 78 degrees instead of 77 for example, can decrease energy consumption by 2 to 4%.
But human nature being what it is, it’s hard to stay away from that thermostat when the temperature hits 104 degrees. There is no incentive to worry about peak energy usage. Residential customers are charged the same 10.74 cents per kilowatt hour no matter what time of day they turn on the air conditioner. So how can the Conservation Department encourage reduced demand?
You may have noticed on your electric bill a one dollar Energy Conservation Fee. This new fee generates about $20,000 a month from residential and commercial customers. Starting in the fall, these funds will be used to provide rebates to customers who upgrade to Energy Star appliances, improve home insulation, or replace electric water heaters with solar assisted water heaters.
Also coming this year are financial incentives for installation of solar photovoltaic (PV) panels. PV panels are particularly well suited to reducing peak demand because they are producing the most electricity on sunny afternoons, almost exactly when demand is highest. If enough roofs sport solar panels, it’s like having another power plant distributed through the community, but a power plant that doesn’t require burning coal.
Another idea being studied for the future is “time of use”, or TOU, price differentials. TOU plans allow customers to elect to pay more for electricity consumed during peak hours, but less than standard rates for that consumed during off-peak hours. For example, suppose that you work late almost every day. You would benefit from a TOU plan that charged a higher rate, say 18 cents per kilowatt hour, for the peak hours in the afternoon because you are not even home and can leave everything turned off. In exchange you get off-peak rates as low as 2 cents per kilowatt hour, allowing you, for just pennies, to indulge your love of sleeping in a cold room. People with flexible schedules might choose to do their laundry and cooking in the morning to take advantage of low rates. It’s like taking the red-eye: it’s cheaper to fly at night.