Time-of-use rates can help grid operators and businesses to control their costs
December 16, 2015
Japan's perspective on energy infrastructure has changed considerably since the tsunami and subsequent nuclear power failures of 2011 resulted in major power outages across the country. Since then, the nation has aimed to limit variability in the power grid by controlling the surges in energy consumption that characterize daily peak demand.
According to Renewable Energy World, the nation's answer was to encourage residents to take advantage of the country's time-of-use rates. Purchasing electricity at night when demand is low allows consumers to take advantage of reduced electricity rates. This trend is also advantageous for grid operators, as shifting demand from peak times to off-peak periods naturally reduces strain on the country's energy infrastructure. Notably, one of the reasons this strategy was so successful was that energy storage technology was available at a price that Japanese consumers could afford.
The international science journal Nature stressed that cost-effective storage is a necessity for incentivizing energy consumers to take full advantage of time-of-use energy rates. After all, why wouldn't customers prefer cheaper electricity if the option was made available? The journal also emphasized that energy storage is likewise requisite to integrate renewable energy into time-of-use rate strategies. A means of saving power for later is required before intermittent renewables can affordably offset energy consumption while peak demand rates are in effect.
Companies interested in leveraging time-of-use pricing to limit electricity costs can benefit by learning more about why these energy rates are so popular and how energy storage technology can maximize their value.
Utilities across the country are experimenting with time-of-use rates
Multiple energy experts have praised the advantages of time-of-use rates with regards to easing burdens on the grid, according to Platts. Gary Ackerman, executive director of the Western Power Trading Forum, noted that encouraging utility customers to adopt new time-of-use patterns could be instrumental in minimizing the peak demand spikes, the same spikes that increase blackout rates and encourage dependence on environmentally harmful peak power plants.
Likewise, Stanford University professor and environmental engineering expert Mark Jacobson told Platts that low-cost off-peak power, made available with time-of-use rates, can permanently reduce the country's need for peaking capacity overall.
That's why it's no surprise that several major utilities are already in various stages of deploying or reaping the benefits from time-of-use strategies. In Texas, TXU Energy recently rolled out a plan that offers free power at night, coupled with a bump up to more expensive rates during the day. While TXU Energy's plan is notable for being the first to offer completely free electricity during off-peak periods, the utility is just one of the many in the Lone Star State to incentive customers to shift their electricity consumption over the past three years, according to The New York Times.
The California Public Utilities Commission is currently in the midst of an effort to shift the state onto a time-of-use pricing scheme by 2019, reported the Rocky Mountain Institute. Analysis of the state's plan indicates that establishing time-of-use rates as a default will ensure that the state's utility customers pay a rate that better reflects their usage.
Hawaii, another state facing pressure to resolve its recurring blackout problems, has also seen a major utility turn to time-of-use. According to Hawaii News Now, Maui Electric Co. is currently seeking permission from the state government to adopt its proposed time-of-use rate plan. As more utilities catch on to the advantages of shifting consumption away from peak periods, it's only a matter of time before more businesses are inspired to take advantage of less expensive nighttime energy.
"Time-of-use rates ensure customers pay according to usage."
Energy storage allows businesses and campuses to turn time-of-use into big savings
Much like how cost-effective storage was key to making time-of-use strategies successful in Japan, affordable energy storage makes it possible for companies managing full office buildings and business campuses to enjoy the same cost savings. One example of this available cost-effective storage is the IceBank energy storage tank designed by CALMAC.
According to Forbes, CALMAC's thermal energy storage solution allows commercial facilities to purchase electricity at night, reducing costs via off-peak rates, and store this energy in the form of ice. The ice is then used to cool one or multiple buildings during the day, reducing the need to run costly air chillers when energy rates are at their highest. Considering that air conditioning costs are one of the leading expenses of commercial facilities nationwide, leveraging energy storage to take advantage of time-of-use pricing and reduce cooling costs seems like a natural choice.
