Is Peak Shaving more Lucrative than Demand Response in PJM?

April 09, 2019

Peak-shaving, essentially the practice of an organization reducing its demand during times of peak grid stress to lower its capacity charges, is part of what the Federal Energy Regulatory Commission is considering as the agency examines PJM’s annual capacity construct.

In a June 2018 proposal, PJM stated it hoped to reduce its capacity market demand curve by including peak shaving among the variables it considers when developing its load forecast.  

To do this, PJM would have to adjust its current forecasting model, which involves identifying gross load for a delivery year and establishing a forecast that includes economic, weather, and end-user changes, but excludes peak shaving as a variable.

PJM believes their proposed model will provide a more holistic view of the grid and its potential need for resources to maintain the balance between supply and demand.

Opponents are concerned whether PJM’s proposed methods for integrating peak shaving as a variable in forecasting its load are underdeveloped and will ultimately provide an accurate forecast.

They may have a point.

PJM’s proposal states among its outstanding issues that accounting for existing peak shaving activity relies on entities providing PJM with historical peak shaving activity and that currently there is no established best practice for obtaining this crucial data.  

Is Peak Shaving Right for Your Organization?

Given all this uncertainty around peak-shaving in PJM, it’s a fair question to ask if the practice is right for your organization.

Since no two organizations are alike, the answer to that question will naturally vary from one organization to the next.

Consider that an organization involved in peak shaving will likely curtail for about 30 hours in a single summer in an attempt to time their curtailment with the hours PJM’s grid is at peak system load.

Is the organization better off curtailing for that long and realizing the savings in subsequence peak charges? Or would the organization be better off participating in demand response, which, if not called for an emergency event, only involves just one test hour during the summer?   

It’s best for a given organization to consult a licensed curtailment service provider that has the ability to evaluate all of an organization’s energy assets and explain how they may best be leveraged in PJM’s existing markets to optimize savings and earnings through demand-side energy management.


This post was excerpted from the 2019 State of Demand-Side Energy Management in North America, a market-by-market analysis of the issues and trends the experts at CPower feel organizations like yours need to know to make better decisions about your energy use and spend.

CPower has taken the pain out of painstaking detail, leaving a comprehensive but easy-to-understand bed of insights and ideas to help you make sense of demand-side energy’s quickly-evolving landscape.

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Dann Price

Mr. Price has specialized in PJM Demand Response for more than 10 years. As Power’s Executive Director of Market Development for the PJM market, he is responsible for keeping hundreds of customers with thousands of sites up-to-speed on market conditions, energy prices, program particulars, and regulatory issues in the ever-changing PJM demand response market.

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Dann Price

Mr. Price has specialized in PJM Demand Response for more than 10 years. As Power’s Executive Director of Market Development for the PJM market, he is responsible for keeping hundreds of customers with thousands of sites up-to-speed on market conditions, energy prices, program particulars, and regulatory issues in the ever-changing PJM demand response market.