Commercial, Industrial, Utilities - July 21, 2022 - By Darren Legge, Ndustrial
Hot Texas Summer
You already know Texas electricity prices can spike dramatically. Are you ready for a record-breaking summer?
Electricity used to be a “cost of doing business.” It’s not that simple anymore.
Utility bills are now a major line item in many businesses’ P&L. Inflation has hit the energy sector hard, and weather events are driving massive price volatility. In Texas, electricity prices have been known to spike 10,000% during extreme events, including in February of this year – a full year after the infamous Texas freeze. Clearly, underlying grid instability has not been fixed.
Considering recent events, large energy users need to find ways to manage their risk. That’s especially true as we enter the hot summer months – and this summer’s risks are looking more severe than usual. Grid operators around the country are forecasting massive shortfalls this summer, particularly in Texas and the Midwest. In California, some companies are closing plants due to high energy prices.
In addition to real-time price spikes, commercial and industrial energy users will need to watch out for big demand charges as their cooling loads ramp up on hot afternoons. Depending on their utility contract, they may also need to navigate Coincident Peak charges that penalize users for taxing the grid at its busiest time each month. These additional penalties can be a hefty surprise on a utility bill.
And in Texas, everything is bigger. The Texas grid operator, known as ERCOT, has its own version of Coincident Peak called 4CP. A company’s 4CP charge is based on its demand during the hottest 4 months of the year. If they use a lot of energy during critical peak periods, it will haunt them for another year.
Here’s how it works:
- The utility tries to predict which periods will have the most grid congestion during each of the hottest 4 months (June, July, August, and September).
- They then notify large energy users that a 4CP event may be coming, giving them a chance to reduce their load.
- Each month for the next year, customers are charged an extra fee based on their average power draw during each of the 4CP events.
These fees can account for as much as 30% of an industrial electricity bill, so managing demand during 4CP events can mean huge savings.
There’s one big problem: ERCOT’s notifications aren’t always accurate, and they don’t provide much time to prepare unless companies work with a partner who can better predict these events and help them respond quickly.
So how do you beat the game?
- Prediction: Event notifications are available from different sources, with varying degrees of accuracy. Experienced partners can analyze weather data and grid conditions to predict the Coincident Peak further in advance.
- Notification: Good communication helps ensure the right people have the right information at the right time. Using multiple communication channels helps. It’s also important to understand who is available (and qualified) to curtail systems when needed.
- Automation: The easiest way to respond quickly is to automate the process. This means codifying which loads should be curtailed under various circumstances and how to properly sequence the shutdown. It then requires integrating with existing control systems to provide automated load control. This can be challenging when working with legacy systems that weren't designed for cloud connectivity, but with the right expertise, it can be done relatively quickly.
Companies that can effectively measure and manage their load during the next few months could see huge savings. It’s a nuanced game, but it’s not hard to win. Those with in-house energy managers should lean on them right away. Those needing help navigating the complexity should contact an experienced partner. The results can pay for themselves in a matter of months, not years.
Darren Legge is the Senior Marketing Manager at Ndustrial, the industry’s only production-first Energy Intensity platform – enabling companies to minimize energy spend and achieve the highest production efficiency possible.
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