Full Title: Economic Potential For Peak Demand Reduction In Michigan
Author(s): Demand Side Analytics, LLC & Optimal Energy, Inc.
Publisher(s): Advanced Energy Economy
Publication Date: 02/2017
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The electric power sector in Michigan is changing quickly. Policy decisions made over the coming months will shape the state’s energy outlook for years to come. The retirement of coal plants, reduced competitive generation supply, increased penetration of smart meters, and changes to Midwest electricity markets will all fundamentally alter infrastructure investment strategies moving forward. Findings from this analysis commissioned by Advanced Energy Economy (AEE) Institute show that a combination of demand reduction strategies could entirely offset the projected 2,000 megawatt (MW) growth in summer peak demand in the Lower Peninsula from 2017 to 2026, avoid or defer the need to construct additional power plants, and save the state as much as $1 billion over the next decade.
To date, challenges in Michigan’s power sector have been characterized mainly as potential shortfalls in generating capacity to meet projected electricity demand. The Midcontinent Independent System Operator (MISO) has identified a need for capacity imports to Michigan. The Michigan Public Service Commission’s Chairman has also voiced adequacy concerns, stating “load serving entities in the Lower Peninsula do not have adequate capacity within the state to meet reserve requirements.”
But resource constraints on the electricity system in the Lower Peninsula are largely driven by hot weather and air conditioning loads in the summer. This means peak demand events that drive potential capacity shortfalls are predictable and good candidates for management. We examined the potentially constrained areas of Michigan’s electricity system – MISO load resource zones 2 and 7 – for the past two years. (Figure 1) The power system must be sized to meet loads in the highest hour plus a reserve margin of approximately 15%, meaning that a lot of system capacity is utilized for a very small number of peak hours. In 2015 and 2016, load exceeded 95% of the annual peak for just 76 hours. This means nearly 2,000 MW of capacity was needed to serve load in just 0.4% of hours. Demand reductions are less capital-intensive and often more economic for meeting demand during these peak hours than investment in traditional “peaker” power plants, which sit idle for most the year.