In the century since it was commercialized, electricity has become the lifeblood of modern industrialized societies. The Department of Energy projects that U.S. electricity use will increase by about 30 percent between 2008 and 2035. And in the digital age, consumers and businesses expect steady supplies of electricity at the touch of a switch, around the clock.
Delivering continuous high-quality power is especially difficult during peak demand periods, when electricity use reaches its highest point. Peak times are mainly influenced by weather but can also be shaped by factors like population and economic activity. Averaged across the U.S., peak electricity demand is highest on hot summer afternoons, when air conditioners are in heavy use. Many areas also have significant winter peaks, especially where electric heating is widely used.
Managing peak demand is challenging for power companies for several reasons. Electricity cannot be stored cost-effectively with today's technologies, so it has to be generated at the time when it is needed. Utilities are required to have enough generating capacity available to meet projected demand, plus some reserve capacity in case plants or transmission lines go down during a peak period. This means that some generation facilities — known as “peaking” plants — are only used during peak periods and sit idle much of the time, but companies have to maintain them year-round.
In Connecticut, for example, peak demand periods typically account for less than 5 percent of the total hours in a year. But electricity use during peak periods is rising with growing use of air conditioning, so the state legislature directed utilities in 2007 to submit proposals for building new peaking plants. One utility, PSEG, proposes to add three new turbines and a second smokestack to an existing plant in New Haven, at a cost of $140 million, with the expectation that the new units will run each year for parts of about 40 days.
Peak demand periods also affect consumers. Grid managers call on power plants to meet demand starting with the lowest-cost units and moving up to more expensive sources. In some states consumers pay the average cost of all generation, but elsewhere the last and most expensive unit called into operation sets the price of power, just as the highest bidder in an auction determines the sales price. This means that electricity costs can spike dramatically during peak periods when many units are called into service. And some peaking plants are old, inefficient and high-polluting, so air quality often suffers during peak demand periods — especially in summer, when hot weather and sunlight convert emissions from fossil fuel combustion into smog.
Utilities and grid managers say that smart grid upgrades will help them meet peak electricity demand with less need to build expensive new power plants and transmission lines. With better sensors, operators will be able to manage the grid second by second as demand rises, calling up just enough power to meet peak requirements. They will also be able to take some electricity generated during low-demand periods and store it in devices like advanced batteries, compressed air systems and flywheels (mechanical devices that convert electrical energy into rotating energy and back again) during peak demand periods.
Controllers at the command center for ISO New England — the nonprofit corporation that manages the region's electric system — tell power plant operators from Maine to Connecticut how much electricity to produce. They also monitor transmission lines for outages or overloads and track weather and other events to forecast electricity demand. (Courtesy ISO New England)
Utilities also can pay large power users, such as manufacturers, to reduce their electricity use during peak periods, a strategy called demand response (DR). ISO New England and other grid operators have used DR for years, but participants' commitments to “power down” have usually been limited to very specific days or time ranges. Now the ISO is piloting a DR program that requires users to reduce electricity consumption on unpredictable schedules and within 30 minutes of the ISO's request.
“That's a premium service, and we'll pay good money for it,” says Vamsi Chadalavada, ISO New England's chief operating officer. “It mimics the profile of a peaking plant, and it's a critical resource, so we need to be very confident that providers can deliver it.”
Grid managers will need advanced meters and sophisticated communications networks to develop this kind of DR on a large scale. But these investments could have a very high payoff. Last year the Federal Energy Regulatory Commission (FERC) estimated that DR programs would cut U.S. summer peak power demand by 37 gigawatts, or 4 percent, but that aggressive efforts to expand DR programs — including both new technologies and dynamic pricing — could increase the energy saved to 188 gigawatts (20 percent of summer peak demand) by 2019. Most DR comes from large power consumers today, but in FERC's maximum DR scenario, nearly half would come from residential users.
One gigawatt is roughly the capacity of a standard nuclear or coal-fired power plant, so intensive DR could avoid the need to site and build dozens of large new generating plants and associated transmission lines. This approach has gained support even in states like Idaho that have low electricity prices and have historically relied on building new generation. Since 2004, Idaho Power has cut peak demand by as much as 5.6 percent by paying farmers and homeowners to reduce their electricity use at peak times.
“I'm almost 70 years old, and this has been a lifelong education to me,” said Sid Erwin, a farmer and former Idaho Power employee whom the utility pays to turn off water pumps on some peak days.
— Jennifer Weeks