It is mid-winter and we are not thinking about the cost of cooling. However, it is not too early to consider that large portions of the country face a conundrum of an aging infrastructure, not as effectively delivering electricity to satisfy growing power demand. There is a growing risk of brownouts and blackouts – not from a shortage of electricity, but the difficulty in delivering it in amounts required when needed. This is bad for the bottom line of the utility and, of course, bad for business because without power or even with the heightened risk of losing power, businesses are vulnerable.

There is a double whammy of growing demand for energy and weaker infrastructure to deliver it. While many homes used to air condition only a couple of key rooms, now more homes can cool the entire house. It used to be people came home from work to a hot apartment or house, then turned on their AC unit and in a short time felt comfortable again. But with today’s technology, people can turn on their home ACs from their office, so they are cool when they enter their homes. As a result, there is demand for electricity simultaneously cooling an office and a home. This becomes a greater risk on a hot, humid day, which are growing in number. With economic growth, people use more electrical devices. We have the conundrum of a growing demand for electricity, with an aging infrastructure to deliver it at its peak. Many utilities now charge for high peak demand, as well as usage, to encourage reduction, but they are limited in cost hikes as ratepayers will not absorb the cost of upgrading infrastructure in their utility bills.

Therefore, many utilities must invest in programs to reduce electric (or natural gas) demand, particularly in the peak seasons (summer for electric, winter for gas). It is simply risky to expect a utility in some areas to deliver to meet growing peak needs. Many utilities have programs to reduce peak load and improve efficiency. In the most vulnerable areas of New York City (weakest infrastructure), Con Edison is giving away free of charge LED lights to building owners to reduce peak demand.

Another program that some utilities encourage is Demand Management (DM), which provides financial incentives to move energy-using processes to operate at night when relative demand is low. An example is replacing a large AC unit with an ice storage system, which would cool intake air. While making ice at night and maintaining it can use more electricity than an AC unit, the majority of electric use moves to night and not the peak afternoon hours. Therefore, this is something that utilities encourage – reducing demand during the peak period (hot, humid afternoons).

Another option is using an organization’s backup generation system to generate power on a hot, humid day, called Demand Response (DR). The building can be taken off the grid during peak demand, somewhat relieving the pressure on the utility to deliver large amounts of electricity to a particular area. In a typical program, the utility informs the building manager a day before that it will take the building off the grid and make sure they run their generator(s) during a few peak demand hours the next day. The utility provides healthy financial benefits for being available to go off the grid and each time one is called on and does so. The backup generator, often forgotten equipment, becomes a revenue generator. One complication of DR is the requirement that the facility obtain an air permit from the local environmental agency (usually the State). Being in DR, the unit is no longer “emergency” and loses its exemption from permitting. In addition, some states have specific emission or air pollution control requirements for non-emergency generators. Often, generators used for emergency purposes are older and may not have been an advanced model. Why spend on a unit that will be used so rarely? Thus, their emissions are likely higher and may not be able to meet the emission standards, unless they are upgraded, which could cost 6 figures.

Getting an air permit has a cost but is not too expensive. Upgrading to meet stringent emission standards, on the other hand, can be very expensive and overwhelm DR economic benefits. DR is something that companies which already have emergency generators should consider as a sound financial program. However, one should research air quality rules to see if there are stringent control requirements for such generators requiring costly upgrades.

CCES has the experts to provide you with site-specific information to help you decide on strategies to reduce your peak electric demand and enter incentive programs that reward such strategies. We can manage the implementation of the strategies to maximize your financial and risk benefits. Contact us today at 914-584-6720 or at karell@CCESworld.com.