Electricity demand models are important in assessing electricity supply resources – Today in Energy

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August 27, 2013


Source: US Energy Information Administration based on PJM data

To note: Hourly demand for East Kentucky Power Cooperative, which joined PJM on June 1, 2013, is not included.


Reposted Aug 28, 2013 to correct a link.

The value of existing and potential electricity supply resources depends primarily on how much and when they are functioning. Because the power industry currently lacks large-scale storage, supply is adjusted in real time to match demand. The demand for electricity varies considerably from moment to moment, hour to hour, day to day and season to season. Thus, the pattern of electricity demand dictates the type, size and timing of supply needs.

Demand patterns are not the only factor in assessing the value of supply, nor even the most important. The commercial viability of existing and planned supplies depends on their value relative to other sources of supply. Typically, low variable cost resources are distributed before higher cost resources to minimize operating costs. But demand models are also an essential element of the profitability of supply.

For example, during the week of July 13-19, 2013, PJM Interconnection (PJM), a large power system stretching from the mid-Atlantic states to Chicago, had a minimum hourly demand of 70 gigawatts (GW) (see graph above). The minimum demand determines the size of the potential base load service, i.e. units operating at full capacity continuously, if they are able to operate. Units serving basic needs include nuclear generators; large, efficient coal generators; natural gas combined cycle generators (when the price of natural gas is sufficiently low compared to the price of coal delivered); and hydroelectric generators.

Sufficient supply to meet the lowest level of demand during the week, which typically occurs on weekend evenings, can operate continuously throughout the week. A small amount of supply will stay most of the week, but it will be closed on weekend nights. Other supplies will shut off each night, as demand for electricity drops from its daily peak, and increases again the next day. How much and when these intermediate service units operate depends on the configuration of demand. Natural gas units and unloaded coal units constitute the bulk of the intermediary service offer.

Electricity demand also varies considerably throughout the year (see graph below). PJM’s hourly demand peaked at 155 GW on July 18, 2013 at 5:00 p.m. (not including demand from the East Kentucky Power Cooperative region which joined PJM on June 1) and peaked at 59 GW on May 27, 2013 , at 4:00 am Peak electricity demand in summer and, to a lesser extent, in winter. Spring and fall, when demand is lower, are often referred to as “shoulder seasons”. Many facility operators use these seasons to perform maintenance. Daily and weekly variations in demand also increase in summer.

Graph of hourly electricity supply needs, as explained in the article text


Source: US Energy Information Administration based on PJM data

To note: Hourly demand for East Kentucky Power Cooperative, which joined PJM on June 1, 2013, is not included.


In reality, hourly supply needs do not exactly match hourly demand because operators have to produce or purchase additional supply to account for transmission losses. In addition, network operators also build up a reserve of capacity, generally 15% of the expected annual demand at peak times, in order to have sufficient supply to meet periods of high demand and forced outages (unplanned ) generating stations and transport facilities.

The value of the offer varies over time

Increased demand for electricity generally increases operating costs and wholesale prices; conversely, lower demand for electricity tends to lower operating costs and lead to lower wholesale prices due to economic allocation. PJM’s real-time hourly energy prices corresponding to week-long hourly demand values ​​are shown below. Prices also vary by hour and are much more volatile than demand. This means that the moment when the supply works is also important in assessing the supply, as energy revenues depend on production and price.

Graph of hourly electricity demand and energy prices in real time, as explained in the text of the article


Source: US Energy Information Administration based on PJM data

To note: Hourly demand for East Kentucky Power Cooperative, which joined PJM on June 1, 2013, is not included.


During the week shown above, price spikes tended to occur at the end of the morning ramp as the system brought in the last units to meet peak demand. In the early hours of Saturday, July 13, real-time prices fell to near zero. This decrease is likely due to the fact that wind generation put pressure on base load capacity. Base load operators would rather accept a very low price rather than cut production from their units for a short period of time. The degree to which variable energy resources, such as wind and solar, are a challenge to integrate into power systems depends on how the pattern of their variable generation relates to the pattern of demand for electricity.

High prices in real time indicate opportunities for demand response programs and technologies to reduce demand or shift demand to less expensive hours. Thus, the value of the demand response depends directly on the configuration of the demand for electricity. The magnitude of variation in demand levels and prices in real time also influences the value of electricity storage capacity.


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