Baltimore Utility Cuts Peak Demand by 300 MW, Puts Money in Ratepayers’ Pockets
Six years after it launched its Smart Energy Rewards program, Baltimore Gas and Electric (BGE) is reporting that local energy efficiency measures have reduced peak electricity demand by more than 300 megawatts, cut operating costs by almost US$200 million, and left ratepayers with more money in their wallets.
“At most times of the year, much of the electricity generating capacity in the United States stands idle,” explains Advanced Energy Economy, having been “built to handle demand at its peak—those few sweltering summer days when everyone’s AC is running full blast.” This long-standing infrastructure reality is expensive for the system and individual ratepayers alike, since “what utilities pay for power at those times of peak demand drives up the price we pay for electricity.”
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Ultimately, adds AEE, “approximately 10% of infrastructure investments in the United States focus on serving demand in just 1% of hours of the year.”
Enter Smart Energy Rewards, which “works by compensating customers with rebates on their electricity bills if they reduce their energy usage during a handful of peak demand events (referred to as Energy Savings Days) each year,” explains AEE.
The program has “consistently achieved customer participation levels above 70% because it is simple for customers to understand, and it provides potential bill savings with no downside,” AEE reports. Customers receive an email, phone call, or text message the day before a Savings Day, and receive a credit of $1.25 per kilowatt-hour on their power bills if they reduce their usage. Just as important, customers who don’t participate aren’t penalized—they just miss out on the savings.
A clever aspect of the program, writes AEE, is that it’s designed as an opt-out system, “rather than the more typical opt-in.” BGE’s 1.1 million customers “are enrolled automatically unless they take action to decline.”
The program’s success has been further buoyed by the fact that Maryland now allows utilities to treat both energy efficiency and demand response initiatives as capital expenditures. In 2010, the state permitted BGE to deploy advanced metering infrastructure and defer cost recovery until the investments actually begin to pay off.
And now they are. “Since the program’s inception in 2013,” AEE reports, “the number of eligible and participating customers has steadily increased as BGE has rolled out smart metering infrastructure, resulting in over 300 MW of peak demand reduction each year—about the size of an average coal-fired power plant.”
That reduction has saved BGE an estimated $165 million in capital expenditures for transmission and distribution.
All in all, says AEE, “the program helps manage summer peak demand, keeping down the overall cost of electricity, reducing wholesale market prices, and easing the burden on Maryland’s electricity delivery system.”