Electricity prices are on the rise and don't look to stop surging

August 11, 2015

If you've kept a close eye on your facility's energy bills over the past few years, you may have noticed a disturbing trend. If it seems that the cost of your building's electricity has been seeing incremental increases, then you are not alone. Electricity rates across the country are rising - and unfortunately, this trend does not seem to be losing steam. "We are now in an era of rising electricity prices," said Philip Moeller, a member of the Federal Energy Regulatory Commission.

In fact, many of these cost changes may be permanent, according to the Los Angeles Times. Varying factors include gas pipeline constraints, reductions in nuclear and coal power and an increase in renewable energy to the grid. Fortunately, thermal energy storage can help companies offset these rising utility costs.

Lack of natural gas contributing to rate spikes
One of the major contributors toward the change in electricity prices is the rising popularity of natural gas. The Los Angeles Times pointed out that environmental regulations updated by the government led to a rapid shift toward natural gas as energy companies decommissioned coal-burning plants. As a result, the price of electricity is now tied more closely to the price of natural gas, a resource with far more price volatility than coal.

Additionally, the uptake of natural gas as a means of generating electricity has put extra logistical strain on power companies - including challenges experienced last year due to the polar vortex. In January 2014, coal piles froze and natural gas went scare resulting in a fifth of all power generating capacity in the PJM Interconnection going offline. (PJM is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity in all or parts of 13 states and the District of Columbia. See if you're affected). As the costs of wholesale electricity shot up 40 times the normal rate due to the energy shortage during the polar vortex, escalated energy costs were passed along to customers.

In lieu of this event, PJM developed the capacity performance plan, a no "excuse approach" to ensure power plants can delivery energy when energy is needed most such as in emergencies in summer or winter. Plants that cannot provide power would be assessed payments that go to the plants that can provide. In June 2015, The Federal Energy Regulatory Commission (FERC) accepted PJM's capacity plan to ensure reliability in the region. As a result, businesses can expect the costs of the new capacity plan to be passed on through increased electric rates that penalize customers that don't have the ability to reduce energy consumption when its needed most such as during peak demand periods on hot or cold days and the coincidental peak days or five highest-demand days of the summer (June – September).

Renewable mandates have come with electric sticker shock 
Statewide renewable energy mandates have been passed by nearly 30 states, and this green legislation has contributed to the higher cost of electricity as well. According to the Wall Street Journal, some states are even considering a repeal of their renewable energy mandates because the cost of integrating the technology has proven higher than originally expected.

Having on-sites renewables won't reduce the utility's capacity charges either, which can make up the majority of the utility bill in the heat of summer. Even with solar panels installed, companies will need power from the grid when the sun is not shining. When the time of grid connection coincides with peak demand periods or coincident peak days, customers are assessed significant capacity charges. In certain regions, these charges are also ratcheted, meaning the charges are applied to the utility bill for an entire year. As a result, commercial buildings with PV installed will need a means of countering the unambiguous rise in electricity costs.

Thermal energy storage can help offset rising utility charges
There are two main ways to combat the rising energy costs. First, you can use less energy. Second, store energy at night when it's the least expensive. Thermal energy storage helps with the latter by storing cooling—the main contributor to peak energy usage in the summer. By freezing water into ice at night and using that ice to cool the building during the day, facilities incorporating thermal energy storage are able to dramatically reduce electrical usage when the resource is at its most expensive and thereby offset rate increases.