Peak Pricing Program Methodology

Starting in September 2020, Keystone Designer now supports demand response program modeling, specifically peak-pricing programs. In these programs, utilities call "event days" multiple times a season (or year, depending on the specific tariff) during which the cost for energy and sometimes demand increases dramatically. Events are called when the forecasted demand on the grid is high, and the utilities want to incentivize energy reduction.

When modeling these programs, Keystone Designer lines up the events that have been called for the tariff selected with your energy use profile and uses event pricing to inform both the baseline utility bill as well as the modeled operation and financial results. Because event timing changes by year, the 12-month period of your energy use profile may or may not be representative of an "average" event year in one of these tariffs. To better enable our modeling to represent such an average year, a number of adjustments are made during the modeling process. The adjustments can be broken down as follows:

Average Events Per Year

The root of our pro-ration approach hinges on the idea of an "average" event year. To define this, we look back at the event history for the specific utility program. We aim to aggregate program history for at least five years, but that may not be possible in newer program rollouts. For each event year within the relevant history, we count the number of active events and then produce an average that we carry over through the next few steps.

Demand Charge Adjustments

Some demand response programs are set up such that end consumers receive a demand credit for enrolling in the program and then a demand penalty if a month's peak demand occurs during an event period. Our modeling currently enforces the rule that a peak demand cannot be set during an event, so we don't adjust the projected utility bill for demand charges; however, we do adjust the baseline utility bill. To do this, we

1. Determine how many times a peak demand charge for your energy use profile occurred during a peak pricing event as well as what the incremental cost of that demand peak is. Increment cost equates to the demand charge penalty, or the difference between the peak-pricing event demand charge - the regular base demand charge.
2. Determine the average cost across each of the peak event demand occurrences.
3. We then interrogate how many times we think this would happen for an "average" year, looking at how many months that peak demand penalty would apply during a 12-month span.

The baseline utility adjustment can then be expressed as:

[New Baseline Utility Costs] = [Baseline Utility Costs] + ([Average Cost] * [Average Number of Events])

Energy Charge Adjustments

In this case, the adjustment is applied to both baseline and projected utility costs metrics. The adjustment is calculated as follows:

1. Count the number of events that occurred during the 12-month period of this energy use profile. This becomes the Event Count.
2. Derive the average number of events over the previous 5 full years in the utility's event history. This becomes the Average Event Count.
3. Calculate the average cost of an event during the 12-month period of this energy use profile. This is done for both the baseline use profile and the projected use profile. This is done by summing up all the energy consumed during each event and applying the incremental energy cost of the event (event consumption rate - base consumption rate).

The utility adjustments are then expressed as:

[New Utility Costs] = [Utility Costs] + ( ([Average Event Count] - [Event Count]) * [Event Cost]

Some Examples

Ex. Profile Events: 2, Average Events: 4

Baseline Cost: $10,000

Projected Cost: $5,000

Adjusted Baseline Cost: $13,500

Adjusted Projected Cost: $5,750

Ex. Profile Events: 8, Average Events: 4

Baseline Cost: $10,000

Projected Cost: $5,000

Adjusted Baseline Cost: $3,000

Adjusted Projected Cost: $3,500

Demand Adjustments

Ex. Profile Peaks: 2, Average Event Months: 4

Baseline Cost: $10,000

Projected Cost: $5,000

Discounted Rate: $24.78, Normal Rate: $33.00

Peak 1: 100 kW, Peak 2: 250 kW

Incremental Charge 1: $822, Incremental Charge 2: $2055

Average Incremental Charge: $1,438.5

Baseline Adjustment: $5,754

New Baseline Cost: $15,754