What is peak energy demand and why should I care?

Using less energy during peak demand times can lower your bill in the long run

The U.S. power grid controls the flow of energy to most homes and businesses. Its purpose is to provide reliable electricity service throughout the year, regardless of demand. This means the grid has to produce enough power to meet the needs of everyone, all the time, no matter what the conditions. It’s not easy, and our aging infrastructure doesn’t make it easier.

What is peak demand?

Think about energy in two parts: usage and demand. Usage is how many kilowatt hours (kWh) of electricity is consumed over a specific period of time. Demand, on the other hand, is how much power is required at any given moment.

Peak demand is the capacity required in the single moment when the grid experiences the highest demand for power. Evenings are a planned-for residential peak demand time: people are home with lights and devices turned on, and appliances are likely to be in use. It’s the highly variable, unplanned spikes that create the kind of sudden demand that drives up the cost of electricity.

Where’s the problem with peak demand?

Electricity is the only commodity produced at roughly the same time it’s consumed. That means there always needs to be capacity to produce enough electricity on the fly – we don’t yet possess the technology to store the vast quantities required for a meaningful stockpile (though it could be on the horizon). To meet surges in demand, grid operators everywhere maintain power plants that only operate during peak times. Called “peakers,” these tend to be older, less efficient plants, some of which are officially “retired” already but can’t be shut down because they’re still needed. Overall, peaker plants tend to be inefficient and expensive to operate, in terms of both financial cost and environmental impact.

Until fairly recently, most utility customers were charged one, year-round flat price for each kWh used, because the variability in power usage throughout the year was low enough to create a realistic “average” rate. But ever-mounting power consumption, increasingly unpredictable weather, and the inherent inefficiencies of our nation’s aging power grid have intensified fluctuations almost to the breaking point. In the future, it’s predicted that blackouts and brownouts will become much more commonplace.

What does this mean for me?

Utilities like IMU have rate structures designed to reflect customer demand patterns, so that you pay less when energy consumption is naturally lower. While there are many ways to charge for demand, IMU prefers to keep things simple for our customers, whose rates are divided between summer (July – October) and winter (November – June).
IMU gets its electricity from Municipal Energy Agency of Nebraska (MEAN), which generates power for members in six Midwestern and mountain states, including Iowa. The total amount IMU pays for your electricity is based, in part, on the prior year’s peak usage use, so using less electricity during peak times can save the community money in the long run. IMU has no profit motive, so any savings we receive is passed directly to our customers. Using less electricity can also help to reduce the need for power produced by peaker power plants.

Key takeaways

• Electricity consists of both demand (measured in watts) and consumption (measured in watt-hours)
• Peak demand represents the moment when demand is highest on the grid
• Keeping power plants around to provide capacity during only a few peak hours of the year is pricey, and utilities are beginning to charge for demand in addition to consumption
• Limiting your use of electricity during peak demand times can keep rates lower over time