In energy management, peak demand periods mark the times when the electricity grid faces its greatest strain, often during extreme weather events like heat waves or cold snaps. During these high-stress windows, energy usage surges, driving up consumption and cost. For commercial and industrial users, this can lead to a noticeable spike in monthly electricity bills. The good news? With tools like Peak Demand Notifications, these costs can be anticipated and managed more effectively, helping businesses stay ahead of the curve.

What Are Peak Demand Notifications?

Peak Demand Notifications are advance alerts sent to building managers when a surge in electricity demand is expected. By analyzing grid conditions and weather forecasts, experts can anticipate these high-demand events. Consumers receive timely notifications, usually on the day of the event, giving them a valuable opportunity to reduce energy usage during critical periods and avoid elevated costs. 

How Can Businesses Curtail Energy Usage?

When a Peak Demand Notification is received, it includes a specific timeframe during which the grid load is expected to peak. During this time, consumers can lower costs by reducing usage during peak hours or using onsite generation. Some examples that consumers can take with their current setup include:

• Adjust the thermostat up by 3-4 degrees to use less AC.
• Turn off any machinery that you can.
• Unplug or turn off electronics that are not in use.
• Adjust lighting to your actual needs; rely on daylight when possible.

Some examples of worksite enhancements that reduce usage include:

• Installing a new BMS or BAS
• Updating A/C systems
• Upgrading building envelope
• Upgrading to LED lighting

Worksite enhancements that can offset demand include:

• Running a generator at specified times
• Utilizing solar or wind onsite at specified times

The Inner Workings

What is a Capacity Tag, and How is it Determined?

A capacity tag is the total kilowatt demand hours used by your facility on the peak hour(s) of the peak day(s). Each consumer is assigned an individual capacity “tag.” Your capacity tag is tied to the number of capacity units that the business will require on the peak demand day(s) of the year.

• Each utility company is required to calculate and report its peak load contribution to its grid operator on an annual basis.
• They will calculate the highest peak load hours that occurred during a predetermined period of time.
• The utility will then determine each customer’s specific load during that time, and the customer’s peak load capacity will be determined.

The Financial Benefits of Heeding Peak Demand Notifications

By cutting back on energy use during peak periods, businesses can practice what's known as 'peak shaving.' This strategy involves lowering their highest energy demand within a billing cycle. Since electricity bills often include both energy usage charges ($/kWh) and demand charges based on peak power usage ($/kW), reducing demand during these critical hours can lead to significant cost savings.

In addition to lowering their own bills, businesses that reduce energy use during peak demand also contribute to a more efficient and reliable grid. This helps ease the strain on the transmission system and reduces the long-term costs of grid development and maintenance, which are ultimately reflected in electricity rates. 

2024 Program Results

The graphic below shows which days in 2024 Mantis Innovation called peak demand events and which days ended up being the peak day(s). Please note that ISO-NE uses the single highest period, while PJM uses the five highest periods.

PJM Results:

ISO-NE Results:

Example Savings

The graph below compares energy usage across two scenarios on the same peak demand day. In the first scenario, the consumers’ typical usage is shown without any curtailment. In the second scenario, curtailed usage is highlighted in blue. As illustrated, the peak occurred at 5 p.m., which means the cap tag for the following year will be based on that specific hour. While the number of peak demand days can vary by ISO, this example focuses on a single day for simplicity.

So, let's fast-forward a year and look at the difference that one hour could make on your energy bill.

For this example, we need a high-level understanding of how total capacity costs are determined. Below is the basic formula highlighting the primary inputs for deriving these costs: Capacity Tag, Reserve Margin, and Capacity Auction Rate. The Capacity tag is the part you can control, so we are concentrating on it in this article. Contact us today if you want to learn more about the other components.

• A: Capacity Tag is the value derived by the utility corresponding to a customer account’s usage during the peak(s) for a given capacity power year. This is the portion that the consumer can control.
• B: Reserve Margin is the adjustments that scale the actual system peak load to the amount of capacity procured in a given capacity year.
• C: Capacity Auction Rate is designed to ensure the system has enough generating resources to meet demand.

Note that for this example, we kept the Reserved Margin and Capacity Auction Rate all the same to illustrate how much just the capacity tag can impact your costs. 

Integrating Peak Demand Notifications with Procurement Strategies

Mantis Innovation’s Peak Demand Notifications are tailored to support a wide range of energy procurement strategies. Whether used independently or integrated into existing plans, they help reduce exposure to volatile electricity prices and support long-term cost savings by identifying opportunities to avoid peak demand charges. 

Next Steps

Peak Demand Notifications offer a smart, proactive way for energy consumers to manage costs while supporting grid reliability. By curbing energy use during high-demand periods, businesses can lower their electricity bills and contribute to a more sustainable energy future. Ready to take control of your energy expenses? Sign up with Mantis Innovation today to start receiving your free Peak Demand Notifications.