Generating Peak Power to Save Co-op Cash
A decision to invest in infrastructure began with a commitment to save money.
FreeState Electric Cooperative recently invested in large industrial generators at the Lakewood Hills and Oskaloosa substations. The purpose of the large investment was to save money through peak demand management. Why? Because generation of our own power during peak demand reduces the amount of energy purchased for members, and that means saving money on the wholesale cost of electricity.
Just as we encourage members to save during the summer months from 3-6 p.m., our East District power supplier, KEPCo, encourages the co-op to save as well. We accomplish this by using generators at our Stranger and Springdale substations, and starting this summer, at Oskaloosa and Lakewood Hills.
The use of generators during peak demand is not as simple as flipping a switch. The equipment to run these massive machines is much more complex than backup generators often used at home. Before making the decision to invest in the machines, a financial analysis was completed to make certain an investment of this type made sense for FreeState members.
“These are not going to be used as backup power,” said Matt Magill, FreeState’s engineering manager. “In fact, they aren’t able to serve enough load to work in that capacity.”
“What they do accomplish is transferring load during those days when power is at a premium on those peak demand days,” Magill added.
Peak Demand and Wholesale Billing
Peak refers to the time of day when the most power is demanded by consumers. Typically, peak demand occurs during the hottest days of the year during the afternoon between 3 and 6 p.m. Why so late in the day? Because 4 p.m. is typically the hottest time of the day, and air conditioning is the single highest demand for power. When people return home for the day and the air conditioner comes on around that time, demand for power peaks.
There are multiple ways members can help save. Reduction in consumption is the easiest. Turn off nonessential equipment, keep the air conditioner turned up, cook with slow cookers, or do laundry or run the dishwasher later in the evening.
Power suppliers bill us for both the highest demand set during the month and our coincidental demand. Demand is the highest total kilowatt-hour used during a one-hour period, during the month. The coincidental demand is the demand we contributed when our wholesale power provider peaked during the month. When members create more demand by using more electricity during peak times, the co-op pays more for the electricity needed by our members.
Reduction of FreeState’s wholesale costs is the most significant change to help keep our costs low. When you voluntarily conserve energy, you reduce the amount of energy and demand we need to buy, especially during the day or on days when temperatures reach 90 and above.
Why does the temperature matter?
Weather can have a real impact on your electric bill. Residential accounts see the most fluctuation due to heating and cooling, but the winter months are not necessarily comparable to summer months because heating your home in the winter isn’t always electricity driven. You have heating options, but most everyone uses electricity to cool their home.
If we have a mild summer with moderate temperatures, costs can remain lower, but if temperatures become a moving target, costs can fluctuate quite a bit.
One option to help that moving target is running the generators because the co-op has the most control.
“We can control the generators,” said Eric Wylie, senior engineer. “We work closely with our power suppliers to determine peak days by monitoring temperature and forecasts.”
“We may pay for fuel to run generators, but overall the reduction we see pays for itself,” Wylie added.
FreeState’s engineering team closely watches the demand and strategically runs the available generators to make the most of the resource.
“It’s really a moving target,” said Magill. “We have to consistently be aware of several factors and we communicate with multiple departments within FreeState and KEPCo (power supplier) to make sure we hit those targets and maximize our savings.”
Making the Investment
Planning for this project started over a year ago in response to increased demand and the unpredictability of the weather. Several departments began looking into ways FreeState could add more generation. The contract with KEPCo allows FreeState to generate a specific amount of power, while the contract with Evergy does not.
“The board of trustees, management and FreeState’s engineering team looked at all factors and have spent a significant amount of time preparing for this infrastructure upgrade,” said Chris Parr, FreeState’s assistant general manager.
“FreeState has clear financial goals, and we look at everything very carefully to determine the feasibility of an investment and how it will impact our members in a positive way,” Parr added.
Several factors were considered for the project including cost of equipment, installation, project planning and coordination and cost savings.
“Utilizing generators could take three to five years to see a return,” Parr said. “But, these pieces of equipment last about 30 years so we can really get a solid reduction in costs for about 15 years.”
“We had to get the right people involved early so we could maintain our timeline and get the best return on the investment,” added Parr.