Thursday, July 5, 2018

The Game of Peaks

Weapons used as props in the Game of Thrones
By Benjamin Skinstad [CC BY 3.0 ]
The Game of Peaks

Cutting back on electricity use on the hottest day of  the summer is not a moral imperative. It is merely part of The Game of Peaks. This game allows large utilities to shift costs to smaller utilities and co-operatives.

Luckily Game of Peaks is all about accountants, not swords.  The Game of Peaks is nowhere near as brutal as the Game of Thrones. Nobody gets killed in the Game of Peaks, but lots of people get misled about the situation on the grid.  And lots of people end up paying more than their fair share of grid costs.  There are losers in the Game of Peaks.  You may be one of them.

Rules for the Game of Peaks

ISO-NE must charge utilities their "fair share" of system costs, particularly transmission costs. But what is their fair share?  ISO determines a utility's share of the grid-wide transmission costs by determining the power used by that utility during the peak-usage hour on the grid.  The percentage of power used during the peak is the percentage of transmission costs that the utility has to pay.

Of course, this percentage calculation is an opportunity for utilities to shift costs elsewhere. Utilities campaign about "shaving the peak." Announcements state that "we saved hundreds of thousands of dollars by shaving the peak."  For example, in this Burlington Free Press article from 2016, Green Mountain Power claims to have used batteries to reduce its peak power demand, saving customers $200,000 in an hour.

Conservation Now?

The statement about saving $200,000 in an hour is a bit misleading.  It looks like it is about energy conservation, sparing the grid, etc.  It isn't.

That $200,000 wasn't some excess cost of electricity in that single  hour.  The savings comes from the fact that Green Mountain Power used its predictive power and its batteries to reduce its demand at the time of peak demand.  Therefore, it will  reduce the amount it pays for grid-level transmission. Somebody is still paying that $200K for transmission: the overall cost of grid transmission hasn't changed. Some other utility is paying that cost.

According to an article yesterday in Electrek, Green Mountain Power has now has 5,000 kWh of battery storage at this time.  This 5 MWh of storage will not make much difference to expense of transmission on the grid. However, Green Mountain Power hopes it will make a major difference to their own bottom line, as it did in 2016.

Saving Electricity in Summer: The Game as Played

As I wrote in an earlier post, The Not-Stressed Grid in Summer, "beating the peak" is not about
  • saving money while the grid power is expensive, (it is not that expensive in summer) or
  • diminishing pollution (coal and oil are not in use much during the summer), or
  • keeping the grid from failing (there's plenty of reserve capacity). 

 The local grid is doing well in very hot weather.

I am writing this post because utilities only seem to talk about the grid when they are pushing "beat the peak." If the peak is beaten, the peak-beating utilities save money, and the other utilities have to pay more.  It's a zero-sum game, not a moral imperative.

Unfortunately,  people know very little about the grid, except that you "shouldn't" (whatever that means) use as much electricity on a hot day in summer.  If I write about the grid, I need to debunk that fallacy.  I feel that if I am going to write about the problems the local grid faces in winter, I also needed to write about the problems of summer. Or rather, about the non-problems of summer, and the misleading rhetoric of some utilities.

Yes.  Saving electricity is always good

Don't get me wrong. Being thrifty and not using excess power is always a very good thing.  Still,  it helps the environment more if you are thrifty with electric usage in winter (with all that oil and coal-burning) than in midsummer.  It helps your local utility's bottom line more if you are thrifty with electric use in summer.

My voice is rather muted,  compared to utility advertising campaigns, but I felt that I must speak up.


Ike Bottema said...

I can appreciate the reason for charging for peak transmission usage is that there's a peak power transmission limit. But misusing this charging scheme isn't fair either. Would it not be possible to base a proportion of Tx usage on average usage?

Meredith Angwin said...

Seems like a good idea to me. Thanks for sharing it.

Jim Conca said...

Nice explanation, Meredith! - Jim Conca

M A Lewis said...

Thanks for sharing few if any key energy leaders understand the utility markets mindset. Thanks for sharing. Do you have a way to show your on cost shifting concept in a graphic? Mark Lewis

Robert Hargraves said...

I'd think the capital cost of a transmission line is proportionate to its peak use. So sharing costs proportionate to peak use seems reasonable.

As Meredith point out, battery-assisted peak-sharving is a zero-zum game for utilities. They just battle as to whose customer pay. And they buy batteries and pass the costs on to the customers, too.