Should Peak Shaving Be Playing a Bigger Role in Energy Cost Reduction?

by Contributor KelscNM on ‎08-15-2011 08:26 AM


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.

by New member tsuess
on ‎08-16-2011 08:44 AM

Hi Nick,


Ironic that you would start your blog post with the following:


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.


And then proceed to promote more oil and gas use!  


Had we not dumped billions of public tax dollars per month for the past ten years into subsidizing oil and gas drilling in the Middle East – by sending the military to secure those resources -- public entities across the country would have no debt crisis today.



Peak demand for electricity to power air conditioning occurs during summer days precisely when solar initializations are producing the most electricity – during daylight hours.  


The diesel and natural gas plants you mention as “dischargable” are not needed to meet peak electricity demand .  Your blog provides a mis-guided argument for diesel generators produced by Caterpillar.  The environmental and monetary costs related to r such a proposition are huge and well-known for both diesel (oil) and natural gas—both are carbon intensive fuel sources.  Both have caused and continue to cause severe environmental and economic problems for us:


1)      Both are major contributors to global warming


2)      Oil production has benefited from huge, economically damaging, military expenditures to assure “cheap oil” from the middle east.    The amount of money spent on wars in the middle east for oil over the past ten years could fund every state and city deficit in the U.S. several times over


3)      Oil production from ocean drilling and tar sands have resulted in massive environmental damage – witness the Gulf of Mexico, and the damage projected for arctic habitats


4)      Transport of oil also has resulted in massive environmental damage via ocean tanker spills


5)      Gas drilling using hydro-fracking has resulted in destruction of freshwater drinking supplies across the United States


6)      Gas delivery has increased risks of explosions associated with increasing pressure in natural gas lines


All of these should be reasons enough for everyone involved in energy industries to call for even greater and faster development of renewable energy sources and even more effective ways of enhancing our energy porfolio  --  through energy efficiency and energy conservation.   A kilowatt saved is much more cost effective than building new capacity, especially from dirty, polluting, greenhouse gas-emitting energy sources. 


Everyone who has children, grandchildren and who cares about the next generations needs to focus on real solutions, not short-term/quick-fix policy for profit.  Caterpillar needs to shift its diesel/natural gas generation production over to solar, wind, tidal power and to invest in equipment for energy efficiency.



by New member jaydee
on ‎08-16-2011 07:02 PM

Oh please "tsuess" Global Warming is a myth which has yet to be proven.  As for your other points, prove that the "military expenditures" in the middle east were/are for cant prove it because its your opinion (which is about the only thing in your post that I SOMEWHAT agree with) far as the oil drilling causing damage....where is all the damage you environmentalists said would come from the Gulf Oil Spill and the so-called "projected damage" to arctic habitats...where is your proof?  Coming onto Caterpillar's website and chastising them for using diesel and natural gas is rude, you will never see someone from the construction industry go onto your website (probably something like and chastise you for hugging trees.  This is not the platform for your environmetalist tripe.  Once wind, solar and tidal pover become solvent then Caterpillar will probably invest in them.  Please find another blog to comment on.

by New member ddmm
on ‎08-17-2011 10:11 AM

dear tsuess  it seeams that you would have the USA send all it money to the mid east and jobs to china

We have oil and gas here !

We need jobs HERE  in the USA

If we could get the goverment out of they way we would not have high cost energy nor would we be short of jobs.


I have installed dozens of power plants some gas some diesel some both as a bi fuel

and they operate in a real time price market  operating only when the price is high for a specific hour or 2 or more


does this consume gas and or oil  YES


it is the customers engines  and they have the right to run it when they want !!!!!!!

Remember it all about economics both for the privite market and the goverment

they all want to reduce costs while maintaining power and comfort to thier buildings and processes.




by Visitor Progen904
on ‎08-17-2011 10:45 AM

In the southeastern area the history for the past fifty years for total energy plants, peak shaving, engine driven HVAC, co:generation and combined cycle regardless of engine make, fuel type or turbines has been:

1. The concept is presented and sold with unrealistic  and unachievable pay backs and goals.

2. Fuel cost based on energy content and market fluctuations is ignored.

3. The determining factor in the sale is some type of tax incentive with a public relations boost.

4. As soon as the machinery warranty ends and the full cost is noted by the owner, reality sets in.

5. Attempts to maintain the plant with total in house resources begins.

6. The owner's purchasing group retires or finds new careers.

7. The owner begins negotiations with the utility.

8. The equipment is usually offered free to anyone for the removal.

by New member AlaskaPaul
on ‎08-17-2011 12:58 PM

I can understand that peak shaving can and is a major component of electrical energy cost reduction.  Bear in mind that this whole thing came about because of utilities having to design their systems to meet peak demand.  Peaking power plants are largely diesel  or natural engines, or gas turbines.  For fast response, they are expensive units to buy and operate.


I think that the whole approach to load peaks misses the mark, as this is a typical time honored utility response to peak power delivery.  Another approach is smart metering.  They are efforts to deal with the problem, but not to solve the problem.


Now some processes need to run at a certain time range, no matter what, so we cannot change that load to avoid peaks.  Also, with residences, that peak duration and shape is based upon people's diurnal activites.


What we really need is energy storage for the peaks in a distributed layout.  It would seem to me that industries need to take care of their own peaking, and when energy storage methods and equipment mature, even residences.  In this way, the utility generation and grid does not have to be sized for such large peaks, and energy storage to handle peaks is done at the local level, at the consumer. 


Depending upon economics, I would think that natural gas engines at a plant could deliver peak power.  When you look at it, more distributed electric power is also more resistant to terrorist attacks and natural disasters.  But that is a topic for another time.

by New member GregB
on ‎08-17-2011 03:22 PM

AlaskaPaul hit the nail on the head, this conversation touches on the many important points our country now faces when it comes to energy and power efficiency and the economics of using it.


I know that by developing a decentralized grid technology as opposed to our existing centralized or regional utility infrastructure we can benefit enormously from use surges and on-peak conditions that currently plague or utility infrastructure nation wide. The development of technology and the conversation of where we as a country need to start putting our money is in the technology of complete ownership...


Whereby as a developer and contractor negotiate for the high stakes involved within large scale developments both within an urban core, or at the city edge, the center and focus of a development must begin with the ideas of full-on turnkey relationships to energy production from the facilities that are proposed. This energy production needs to meet or exceed the projected use for that given development.


Essentially we are developing micro-power generation stations that will feed our legacy grid system. This establishes a peer group responsibility among a given community from the very beginning. This is the only way we (the United States of America) will ever get itself out of the enormous mess it currently finds itself looming towards. Actually, the U.S. Is already in deep kaka. So, we really have no choice - we have to become decentralized. By doing this, the U.S. Will start to see amazing benefits, starting with the flourishing development of business economics which comes from the ideas mentioned above and solidifies itself within the many new technologies now currently available.


What Caterpillar can do to help meet this new era of decentralized power generation, is to start focusing their time on energy storage, and to develop mechanical devices that work within a facility in providing energy management as common place. Also, to divest time and energy in fossil fuel driven machinery and to look into the future of micro-power generation sub-stations. These can and should be developed as coincident to a facilities needs. A micro-power generation sub-station can communicate with and enhance the future smart grid by owing all of its off-peak power capacity to the uses of the facility that it has been designed for.


This is only a small part of what can be done. Lets start to look at this energy problem as an end-user within a decentralized component of the industry. Then, you will become smart about how you can chauvinistically manipulate goverment entities enabeling the ideas of free market and control over your industry. Getting away from old technology is best because its expensive cash outlay over the entire life cycle from extraction to use is dogmatically unethical, when just about every other month there are newer technologies coming online that require more initial cash up front but over the entire financial life cycle make older mining technologies the dog.



by Trusted Contributor
on ‎08-18-2011 11:44 AM


by Contributor KelscNM
on ‎08-18-2011 11:49 AM



I share your concern regarding the impact of carbon emissions on our home planet, and have a few thoughts on some of your suggested solutions. The elimination of the internal combustion engine from Caterpillar machinery is simply not a viable option yet. Too much of the world's work is dependant upon the engine, including electric power generation. The good news is that many countries have mandated reductions in the emissions from diesel and natural gas engines and Caterpillar has invested hundreds of millions of dollars to provide technologies that meet or dramatically exceed those limits.


Further, there are also plenty of examples of sustainable, high efficiency applications of natural gas fueled engines. In Holland alone, Caterpillar has delivered 700MW of natural gas fueled combined heat and power systems to greenhouse farms. Most of these greenhouses are using exhaust purification systems that turn engine exhaust into pure carbon dioxide that is recycled as an organic fertilizer for plants. Cat has developed products that take it a step further to provide net reductions in carbon emissions by capturing naturally occurring fugitive methane (which is equivalent to over 21 times the carbon equivalent off carbon dioxide) that occurs on farms and in landfills. These methane emissions which would otherwise be vented to the earth's atmosphere have been captured and destroyed in Cat engines while providing beneficial electricity (over 1600MW worth!), not to mention certifiable renewable energy credits for utilities in the United States. Overall, the challenge of reducing the impact of carbon emissions is complex, but these are just a few of the many examples I could site where our engines are applied to the benefit of society.




I won't propose that doing any project is without risk, however, I would suggest that projects have been done successfully in the southeastern United States.  To some of your specific points:


1. The concept is presented and sold with unrealistic  and unachievable pay backs and goals.

A realistic finacial plan is key to long term success.  This includes understanding current and potential future rates structures, fuel prices, etc.


2. Fuel cost based on energy content and market fluctuations is ignored.

Natural gas price volatility is a valid point given the fluctuations in past years.  However, current Energy Information Administration price projections would indicate a favorable price forecast for natural gas fueled electric power generation.


3. The determining factor in the sale is some type of tax incentive with a public relations boost.

I agree that the projects should be based on sound economics, not public relations.


4. As soon as the machinery warranty ends and the full cost is noted by the owner, reality sets in.

There are programs available by many manufacturers where the distributor or service provide shares in the risk of downtime and it's associated costs.  Any customer looking at a peaking or cogeneration plant should explore these options and weigh the benefits.


AlaskaPaul & GregB,


Kudos to your suggestions on industrial and utility scale energy storage.  I agree that this could be the key to make best us of all power generation technologies, especially off-peak renewable generation technologies like solar and wind.



by Super Contributor
on ‎08-18-2011 01:30 PM

Well, this one sure touched a few nerves, didn't it!


In my experience in the Southern California and in the US Southwest in general, I agree with Progen about siteing peaking plants, most don't work out money wise, especially with the added impact of emissions regulations, aftertreatment, added maintenance and operating costs. Hard to pay back a plant that may only run from a couple hundred to maybe 2000 hours in a year.  Fluctuating fuel costs, both gas and diesel, make it even harder to have a real benefit.


Nick, we were talking about peak shaving, right?  Don't toss in CHP plants for comparison.  Most peaking systems don't have heat recovery or other processes to improve financial viability.  The plants in northern Europe are amazingly well designed, operated and managed.  They also enjoy a climate where the energy and enviromental policy makers actually try to work together for long term solutions.  Not too many district heating plants or large green houses in our neck of the woods, which is really too bad because if properly integrated offer a great piece of the overall energy puzzle. As for the price projections, PLEASE, want to know how many plants I've seen fail because someone relied on ENRON math?


So back to the topic, peak shaving is needed to respond to larger changes in demand.  A large industrial facility mave have a large short term peak load that is either expensive or can't be supplied by the local utility. Some of our most succesful peaking projects were done with blocks of power modules in utility substations, for farily short periods of time, 2-4 years, until a more permanent solution could be devised and implemented. But building a large gas engine driven facility, like City of Geneva or Basin Creek, took a lot of capital and the paybacks, at least in the rumor mill, haven't been that great.  Can succesful project be done? Sure, but need a lot of planning, good buy in from all parties (nothing like building a plant then the utility dropping electric rates or the gas company upping fuel costs), and realistic expectations.


What has enjoyed a limited success in our area, IF properly done, is demand response using existing standby systems.  Most here are involved in utility supported programs, with switchgear modifications and aftertreatment and limited run time permits.  So far, at least in my opinion, I've seen pretty positive results from this.  Units that normally only get 20-40 hours of maint run time a year, mostly at no load, get a chance to operate at load, roll their fuel supply, and provide some economic benefit for the equipment that goes mostly under utilized. These projects would actually do better if the companies managing them weren't making such a huge cut, the ability to modify existing switchgear from so many vendors (including CAT) is such a pain and expensive, and there weren't so many sales type folks offering good sounding/poor deliver solutions for things like fuel supply, exhaust aftertreatment, and controls.


Unfortunately anything, at least in this part of the world, offering an engine driven solution, gets looked at with a pretty negative view, however some projects are moving forward, and how well we can intergrate multiple generation sources to provide long term needs is really going to be the challenge.


Some excellent points made above, tough part is to get those really in charge, policy makers and politicians to come up with realistic long term solutions and enable sound technical alternatives to work along with our existing generation and distribution systems.


Mike L.

by Regular Contributor
on ‎08-19-2011 10:02 AM

i are in italy, i are user and i follows many CHP istallation with cat engine and not (sorry) manutance company and more, here long time a go many private company he have try to do peak saving sistem, wat this the problem, first our national energy network need a lot of safety instruments, to go in paralleling line,second diesel at now for pollution controll, after some big power is realy throble to apply, cost and more (sorry mi englice is to bad), soo late many projects go to try CHP system by gas engine and paralleling system and stan alone, Gas first  problem is the low capacity to take load from gas engine more 50% go in throble, second many application not thing realy the realy power of thermal, yes we have big istallation of CHP plant by 36 series or CM series, most is by superb 35 series (and competitor are more of us),  but for gas cost or manutance cost, or difficultose spooking by all actors, many of this is near to close, and we still  loose JOB, some is to difficultose for me esplaine, (bad englice), basicle the sistem it self it work and for mè and some small plant we save money, not a lot but we save money, special if CHP 24H12M a year works, in europe rat now a lot of person company born to proposal only mega projects,   sorry  not works for private iniziative,in italy pubblic also, we need proposal, small but realy size needet, integrative in the contest of custemer, absoluty chp systyem, fuell gas or renovable combustible, dual fuel for mè the best option, working paralleling and stanalone if needet, and clean exaust, low profile with particular colors,pakage size small and semply engine possible, but thing for continuos works, esemple i have start now small project with perkins engine, from diesel we cam to do gas engine inside of PowerPak (Geminiani spa Oem distributors), to solve small demand of power with wood gas, for remote location in mountain (less 1500 metres high), and small agricoltural company, and cut down energy by renovable Biomass, in same time we have start spook with elettryciti network for special connection in low tension (400V), and special feature we call local escange ( energy conuter is doble reading), i do no if are in topic or out , sorry in italy the peak saving same to USA not exist, only some island in summer season call rental genset to produce power, (dealer here is do to good), but to small, i hope mi small contribute is so clear to understand, regards (hallo ciao) Claudio.Gordini

by Visitor Progen904
on ‎08-24-2011 11:11 AM

Nick Kelsch,

As I am always open to re-education and correction please post a list with web sites of successful sites in the southeastern United States.

by Contributor KelscNM
on ‎09-07-2011 04:27 PM - last edited on ‎09-19-2011 04:39 PM by Trusted Contributor



Sorry, I've been away from my blog duties for a while.  So, I have only a few Power Profiles covering utility projects that Cat has been involved with in the Southeastern USA.  Don't say "gotcha" as this is not a comprehensive list.  And yes, I am including customers in other parts of the Unites States that  fall into the "real time pricing" category where peaking power makes tons of sense...assuming the equipment is taken care of.  I believe in this market, obviously, or I wouldn't be blogging about it!





by Visitor Progen904
on ‎09-19-2011 03:17 PM

The first example requires a Cat employee username and password. The others are locations in Montana, Tennessee, Utah, Illinois,  hardly what would be considered as the southeast. In Nashville Tenseness there was the grand experiment with end users who could not escape ( hard piped steam and chilled water ) free fuel ( garbage ) and the economics did not work.  The one in Florida was a four month rental. I do not want to embarrass the owners of closed plants that are in the junkyard or ones that no longer peak shave but in a private conversation I could list many. User owned co:generation, peak shave and CHP will not pay off until fossil fuels are honestly priced. Drill baby drill is a continuation of the same problem. Drill here, refine here and consume here may help. Not a drop of oil that flows through the Alaska pipe line is consumed in the USA. Even the north / south natural gas pipe line may not help. Why do they want it to reach the Gulf of Mexico? LNG and export terminals that will limit the natural gas used in the USA.    

by Contributor KelscNM
on ‎09-28-2011 09:43 AM

Progen.  I respect your opinion.  However, today's natural gas pricing has returned to historically low levels.  With a huge domestic supply, natural gas price forecasts by the EIA are such that gas pricing will remain stable over the next couple decades.  I witnessed the natural gas pricing craziness of the late 1990's and early 2000's so I know where you are coming from.  I saw the last gas genset CHP plant in the Phoenix metro area get shut down around 2003.  This wasn't being driven by unreliable machinery so much as unstable, high natural gas pricing.


Today we really are living in a different world.  The massive investment in both natural gas pipeline infrastructure and fracking technology has brought abundant, cheap, domestic natural gas to nearly any industrial or commercial enterprise's doorstep.  For utilities, there is a growing interest in operating smaller distributed peaking plants.  For CHP, there has never been a better business case.

by Visitor roufishah
on ‎10-24-2011 02:09 PM
yes surely , becoz, one unit of electrical energy saved is equivalent to two units generated...if u need explaination i can...
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