A Cool Way to Lower Your Electric Bill
July 19, 2017
Outdated and/or inefficient equipment, poor insulation and drafts impact energy use. However, did you know that the main culprit behind rising electricity bills is actually peak demand perpetuated by air-conditioning? Demand for air-conditioning is a dominant factor in commercial utility bills and has a negative impact on our grid during summer months. Air-conditioning alone makes up to 40% of the grid’s yearly peak demand.
Air-Conditioning Spikes Power Prices
During the summer, energy use spikes for air-conditioning. According to Oracle utilities, “Electricity consumption increases by 20-30% overall on the hottest summer days….In the late afternoon of the hottest days, home electricity consumption increases to 40% above average.” This air-conditioning (AC) demand drives up the price of grid electricity.
In a year over year comparison in various regions, utility charges due to AC are on the rise. PJM, the regional transmission organization for DE, IL, IN, KY, MD, NJ, NC, OH, PA, TN, VA, WV, and DC conducted an auction for capacity, which is reserve power needed for hot summer days when the grid gets congested. Electricity suppliers (gas, nuclear, etc.) bid 3 years in advance to ensure reliability for PJM’s13 states.
The result in this year’s auction was a steep 64% hike in demand charges for ratepayers in New Jersey and Illinois effective for 2020. (Demand charges are different from energy charges kWh and don’t normally appear on residential utility bills. Demand charges reflect peak energy usage measured in 15 minute increments across the billing cycle for commercial properties.)
According to NJspotlight.com, spikes in power prices are a recurring cause of concern among state regulators since the effects of meeting air-conditioning demand can have long lasting, widespread effects for all ratepayers.
Image reference: Oracle Utilities
California is also seeing a big hike. A peak demand set by the 2008 heatwave in CA led to more power plants being built in case of an emergency such as a heat wave. (Peak demand is a measure of the highest peak energy use.) This has led to California ratepayers footing a bill almost $7 billion higher than they had in 2008 according to the LA Times. “Although California uses 2.6% less electricity annually from the power grid now [in 2017] than in 2008, residential and business customers together pay $6.8 billion more for power than they did then.”
Getting paid to reduce peak demand
The peak demand problem is so troublesome that in the U.S. some utilities will even pay customers to turn down their cooling. Take El Paso, TX where the peak demand increased in eleven of the past twelve years. To combat this rise, the utility is running a demand response program which lowers summer peak demand by linking AC to the grid.
Last year when ERCOT (The Electric Reliability Council of Texas that manages the flow of electric power to 24 million Texas customers -- representing about 90 percent of the state’s electric load) broke summer peak demand records, they announced "These hot summer days always put our grid to the test.”
In New York City, businesses are asked to practice peak load management. The New York State Energy Research and Development states that energy storage technologies such as ice can help offset energy needs in buildings and drive down electricity costs. Since the need for air conditioning drives up peak demand, cutting air-conditioning use above all else can dramatically impact the utility bill.
Using Ice to Reduce Air-Conditioning Demand
4,500 buildings in 60 countries have installed ice thermal energy storage systems to reduce air-conditioning demand and save on the expense of summer cooling. Ice storage systems create and store cooling at night when electricity is the least expensive. The ice systems also shift peak cooling loads from day to night, which reduces peak demand and associated demand charges.
Today there is over 1 GW of ice thermal energy storage, in schools, hospitals, office buildings, churches, government buildings, malls as well as in industrial and district cooling applications. Typical buildings sizes start at over 50,000 sq.ft. Savings vary from 20-40% off the costs of cooling. In regions such as Florida where cooling costs make up to 50% of the summer energy costs, the savings can be tremendous. In addition, peak demand charges that make up to 70% of the utility in places such as Boston make ice systems a cash cow.
Key Takeaways
Air-conditioning is the root cause behind higher energy costs in the summer and can easily set a precedent for the following year. To lower electricity bills as customer preferences for cooling change and temperatures warm, businesses will need to find strategies to reduce air-conditioning use especially during peak periods. Real time pricing can help. Installing affordable energy storage solutions will be key for flexible operational strategies. They can lower costs and impart comfortable building spaces while promoting grid stewardship. However, understanding your utility bill is a must. Since utility rates and tariffs are constantly changing and confusing knowing how a property uses electricity and when electricity is used will be invaluable to managing costs. Both supply and especially demand portions of the bill are pivotal to understanding how to control costs. Changing how electricity or energy consumption is managed is also important.
