Many local, state and federal governments are under increasing pressure to reduce costs in order to resolve debt crises related to the economic slowdown of the past couple years. Some government-owned utilities, such as municipal utilities, interagencies and federal authorities, are located in power markets that operate in a real time pricing environment where the market price of electricity is driven by supply and demand at any particular time of day.
Those utilities are discovering that there are opportunities to reduce costs related to providing electric power services to their members or communities. While there are good opportunities to reduce costs by taking advantage of subsidies to install solar, wind, and other renewable resources, those resources cannot generally be dispatched to cover the cost of electricity when it is most expensive: during times of peak consumption. Don't get me wrong. I'm a supporter of renewable energy technologies, but not as a dispatchable resource. Our utility customers are telling us that a significant portion of their power generation costs come from providing electricity during the peak times of day and the peak times of year.
Spikes in residential electric power demand typically occur in the early morning before the workday, and in the late afternoon after the workday ends. We all can relate to getting home from work and immediately flipping the light switch, turning up the air conditioning, and tuning into the local news on television. When thousands of people collectively engage in the same behavior, large spikes in power consumption occur for a relatively short period of the day. Further, those same daily peaks tend to grow where seasonal weather can impact the use of heating or air conditioners, such as in the hottest days of summer or dead of winter.
Some utilities choose to enter into long-term power purchase agreements so as to own a block reserve of power to meet the needs of those intermittent power spikes. However, this approach can be analogous to renting a semi tractor trailer to go grocery shopping. You know you'll have enough capacity, but chances are a lot of that capacity will go to waste.
Typical peaking power plant solutions operate in the 2 - 50MW range from 100 hours to 3000 hours per year. The 100 hour per year plants would typically be diesel fueled and cover what would be called a super-peak, while natural gas plants have been commissioned to handle higher hour applications to provide power for longer duration peak demand. In open power markets, the power produced from these generators during the peak times of day can be dispatched to meet local customers' needs or sold into the spot market at a profit. I've seen some utility customers demonstrate the economic viability of operating reciprocating gensets as peaking assets in practice, even during the natural gas price spikes of 2008. Now, with much more normal gas prices being forecasted, the economics have become all the more viable.
- Do you work for a municipal utility? - If so, do you have an interest in reducing power costs by investing in peaking assets? - Are you familiar with any peaking projects in your area? - Would you be interested in learning more about how other energy suppliers are currently benefited from peak shaving?
- Do work for a company that is a large consumer of municipal electric power? - As a large utility customer, are you being approached to operate on a curtailment basis?
- Do you work for an energy consultant? - If so, what role do you see power generation assets playing versus energy reduction strategies to reduce the cost of electricity for consumers?
Please share your experience and thoughts by posting below. Thanks.