News

Summer Strategies: Keeping Demand in Check as Electricity Prices Rise

The sweet joys of summertime are upon us, which brings in tow all of your favorite summer staples from pool days to backyard BBQs. While warm weather is a welcome reprieve from winter for much of the country, the pendulum swing of extreme cold in the height of winter to extreme heat in the height of summer can yield similar results when it comes to the energy markets and your energy bills. What to expect and what to do to prepare? Let’s take a look:

Summer Outlook

NOAA predicts that much of the United States will experience higher-than-normal temperatures this summer. With a hot (and in some areas notably dry) summer on the horizon, it’s also worth noting the 4 regions facing potential summer energy shortages. In late spring, the North American Electric Reliability Corp (NERC) released their 2021 Summer Reliability Assessment, which warned of the regions that are at risk of energy shortfalls. California, Texas, New England, and parts of the Midwest were identified. California was tagged as the “greatest concern,” with the report warning that California will need 11 GW of late-afternoon energy transfers to meet system demand (as compared to 1GW needed on a normal day). For a full recap, click here

Of course, above average temperatures suggest increased demand, which go hand and hand with increased electricity prices. For customers on index energy contracts that are not locked in for fixed pricing, this could be a harbinger of market volatility.

Demand, Defined

As you’ll often hear our team mention, weather is a primary driver of energy demand, and is chiefly responsible for summer’s status as a peak demand season. Factors that drive energy demand typically create an upward pressure on prices. If summer proves hot, it is likely that we will see energy prices increase accordingly.

For example, a hot summer, driving demand, could have a negative impact on certain areas of the country, such as Southern California and Texas, where there are rising concerns about their ability to meet demand this summer, should we experience (as is predicted) above-average temperatures.  Just this week, ERCOT, the Texas grid operator, asked Texans to reduce their electricity usage in response to high demand and many unplanned generation plant outages, causing near-term pricing to spike upward.

What You Can Do

Usage can be reduced by dimming lighting, adjusting thermostat settings, shutting down equipment, using onsite power generators, or scheduling operations during nighttime hours. Additionally, we have a number of services available in the APPI Energy Intelligence Suite that are designed to help businesses utilize data-driven solutions to reduce and manage energy expenses. Services such as demand response, renewable energy procurement, and utility management systems are ideal for businesses that seek efficient solutions to summer’s peak demand conditions.

It's also worth making note of peak alerts as they come your way either from your dedicated APPI consultant, media outlets, or your supplier so that you can make smart, timely decisions on curtailing your energy usage.

Finally, consider enrolling in a demand response program. Demand response is a financially rewarding energy solution that reduces your organization’s energy usage during periods of high stress to the electric grid. By participating in demand response, clients benefit from both the compensation they receive from the programs and a reduction in capacity tags they receive for lowering their demand during peak hours. For large electricity consumers, particularly where electricity usage is consistent, it could be as simple as not running or curtailing energy usage during certain times of the day during peak events. In addition to realizing the savings associated with your energy curtailment, you’ll also receive payment for doing so, allowing you to maximize earnings while minimizing operational disruption.

Key Takeaway

While weather plays a fundamental role in energy demand, it is far from the sole contributor nor is it entirely predictable. When examining energy procurement strategies during the summer months, we typically find that it is best to start early, especially if there’s a contract expiring in July or August, when demand could be at its highest. By examining pricing early, even for a contract that expires 18-24 months in the future, it maximizes the time that we have to monitor the market and identify an ideal price point. Waiting until a contract expires to examine renewal pricing could subject a business to the upward pricing pressures present during the peak demand season.

To continue the conversation as it pertains to your organization, schedule a no-cost, no-obligation complimentary assessment with our team. Reach out to us here online via chat, by email at info@appienergy.com or by phone at 800-520-6685.