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It’s Summer- What Are You Doing to Attack Your Capacity Tag?

Posted by SJI Energy Advisors on Jul 5, 2020 4:02:00 PM

Your Capacity charge is the second-largest component of your electricity bill – comprising roughly 15% – 20% of the total. Are you taking the proper steps to control and/or reduce it?

The Capacity Charge: PJM defines capacity as a commitment by a power resource, such as the utility or grid operator to provide energy for a certain period. The capacity market, which is regulated by PJM, ensures the grid will be reliable for the long-term by procuring capacity needed to meet predicted energy demand three years into the future. Currently, Capacity rates are published through June 2021/2022.

How it’s calculated: In PJM, the grid operator identifies the 5 highest hours of peak load on the entire grid – usually between 3:00 p.m. and 6:00 p.m. on hot summer afternoons between July and September. Then they look at each user’s consumption during those 5 hours and allocate a Peak Load Contribution (PLC) number in kW. Your PLC is measured in kW rather than kWh because it represents the maximum amount of power you need delivered by the utility at a moment in time.

PJM then determines a Capacity Tag for each customer, also referred to as a PLC, or Peak Load Contribution. These new capacity tags are released in April/May, based on the previous summer’s peak load.

What can you do about it? It’s hard, but not impossible, to predict when the 5 peak hours will occur, because the grid operators give warning of anticipated peak days – usually the day before a peak is expected and again the morning of the day one is expected. This allows you to manage and/or reduce your PLC during those 5 critical hours. To be reasonably certain you’ll hit all 5 peak hours, you’ll probably have to aim for 10 hot afternoons when you’ll plan to lower your consumption as much as possible.

What is possible will depend on the nature of your business, and how well you understand the equipment you operate and its load profiles. Here are some suggestions:

  • Red-Alerts / Peak hours typically run from 3:00 p.m. to 6:00 p.m. If you can make employee shift adjustments to shut down completely during those hours and resume operations after 6:00 p.m. you are sure to hit the 5 peak hours.
  • Identifying and shutting down pieces of equipment that are nonessential to production or operations.
  • Lighting and HVAC - If you have lighting and HVAC automation controls, adjusting settings or shutting off completely will also help curtail electricity load. This is especially true for commercial buildings which most of electricity load is HVAC and lighting.
  • Lastly, if you are going to make the effort to curtail load to manage your capacity tag, why not participate in a Demand Response Program, which rewards you financially for reducing your usage during peak periods?