Scaling the Peak: How Efficiency Programs Can Leverage the Growing Value of Peak Demand

Take a look inside the spring edition of NEEP’s Energy Efficiency Snapshot

This blog is the first issue in a bimonthly series entitled: REED Renderings. The purpose of REED Renderings is to bring your attention to interesting trends that we see in the data and the stories behind those trends. Interested in learning more about REED and REED Renderings? Click here.


It’s no secret that the Northeast and Mid-Atlantic regions are national leaders when it comes to energy efficiency policies and programs. Support for successful electric efficiency programs is flattening overall electric energy consumption in the region while peak coincident energy efficiency measures have limited the growth in peak demand. The chart below describes the impact of energy efficiency programs on overall energy usage and peak load growth in New England.

A similar story exists in the Mid-Atlantic states, where investments in energy efficiency have drastically reduced a forecasted growth in electricity usage and peak demand. The impact of the region’s overall investments in energy efficiency are particularly important for peak demand — the yardstick against which regulators measure the necessity of investing in costly buildouts of the transmission and distribution grid.  As GWh usage remains flat and MW peaks slowly rise, the value of peak demand reduction is growing.  According to the U.S. Department of Energy, a more direct focus on reducing peak demand could provide even greater value — and lower overall bills — for electric ratepayers. 


Peak Coincident Energy Efficiency as a Demand Reduction Strategy

Much of the region has already seen success utilizing peak coincident energy efficiency measures as a means of limiting peak load growth.  The chart to the left uses data from REED to examine peak to energy ratios over time in New England.  Notable is the general decline in peak to energy ratios from 2013 to 2014 as programs in leading states reach for savings at approximately two percent of retail sales.  


Below is a chart developed from the 2014 ISO-NE Energy Efficiency Forecast that identifies the measures that have the greatest coincidence with the summer and winter peak. Heating, hot water, and appliances have the greatest coincidence with winter peak while motors/drives/VFDs have the greatest coincidence with summer peak.

In new England forward-thinking program administrators could do even more to target the measures identified on the left to provide even greater benefits to ratepayers. Although New England’s electric system peaks are greatest during the summer, an even greater focus on winter peak could help buffer the electric price spikes the region experienced during winter 2014-15. The aforementioned price spikes is a direct result of the region’s overreliance on natural gas for both power generation and heating.


When the temperatures drop in the winter and consumers use more gas for heating, there is less natural gas available for power generation. To keep pace with demand, a power producer must either import gas or utilize dirtier energy sources such as oil and coal. Both options are expensive and require the ratepayers to pay a premium. By continuing to focus on peak demand during the winter, the ratepayers will be more protected from price spikes and receive cleaner and cheaper energy. For further discussion of what is behind these spikes, see our blog on the matter.

States Targeting Peak Demand Growth

In addition to peak coincident energy efficiency measures, regulators throughout the region are beginning to explore time-varying rates, the geo-targeting of energy efficiency programs, demand response, and location-based marginal pricing of distributed energy resources; all early indicators that the electric grid of the future will measure a program’s avoided costs as a function of both geo-spatial and temporal value in an attempt to limit peak load growth.  

In some cases, regulators offer technology agnostic performance incentives to encourage peak coincident energy efficiency measures. In others, states are creating frameworks for integration of energy efficiency and demand response program offerings. The table below details some of the actions being taken at the state level throughout the region to focus on peak demand reduction.

Northeast and Mid-Atlantic States Seeking Peak Demand Reductions
New York

In their REV Policy Framework Order, the NY Public Service Commission describes how the utility of the future will “[R]educe peak demand and improve overall system load factor.” Commission Staff also describes peak load reduction as an attribute that will affect utility revenues under performance based ratemaking in their Whitepaper on Ratemaking and Utility Business Models.

Pennsylvania In their Order Approving Act 129’s Phase III, Pennsylvania regulators renewed a demand response program that had been retired after Phase I of Act 129 due to concerns over cost-effectiveness and program spending limitations in hopes that the program would help limit peak load growth in the state
Rhode Island In reaching a settlement on their 2015 Energy Efficiency Program Plan, the Rhode Island Energy Efficiency Resource Management Council (EERMC) and National Grid Rhode Island agreed to set aside 30 percent of National Grid’s performance incentives toward demand reduction goals. The EERMC is also currently scoping inclusion of a statewide demand response program in their 2017-19 least cost procurement plan, with a draft due out in September of this year.
Maryland Faced with the potential supply shortfalls and costly distribution investments, Maryland enacted the EmPOWER program in 2008 with a focus on reducing peak demand 15 percent below 2007 levels by 2015. As a result, the state currently has one of the most advanced demand response programs in the region.
New Hampshire While New Hampshire regulators are still in the midst of ironing out the State’s Energy Efficiency Resource Standard, the New Hampshire Electric Cooperative recently unveiled a comprehensive suite of demand response offerings.
Massachusetts In their recently approved 2016-18 Program Plans, Massachusetts program administrators committed to piloting demand response programs in the state, establishing a demand reduction subcommittee of the Energy Efficiency Advisory Council to study the issue.
Connecticut In their 2016-18 Program Plans, Connecticut program administrators have committed to piloting demand response programs in the state, with a focus on residential programs and possible geo-targeting of commercial programs.

Integration of Energy Efficiency and Demand Response: A Continuing Conversation

As utilities and other program administrators move toward integration of energy efficiency and demand response programs, many policy questions remain unanswered. In some cases, a static framework of inputs for cost-effectiveness testing remain unclear. In other cases, silos between budgets and staff may complicate data exchange, limiting the full potential of coordinated demand response and energy efficiency programs.

NEEP will be delving deeper into these and other questions at our 2016 Summit at the Mt. Washington Hotel in Bretton Woods, New Hampshire on June 13 & 14. On June 13, the Summit will feature a roundtable of experts in efficiency program geo-targeting, behavioral demand response, innovative new technologies, and system planning. For more information on the roundtable, “Scaling the Peak: Integrating Efficiency and Distributed Energy Resources,” or to register, please see our Summit website and agenda.

Editor’s Note: The graphs used in this blog are derived from NEEP’s recently updated Energy Efficiency SnapshotThe Snapshot uses data from NEEP’s Regional Energy Efficiency Database (REED) to examine trends in efficiency program savings and spending at the state, portfolio, and program level. Premised on the idea that transparency can help advance program saving sand related policies, REED is available for use by the program administrators, advocates, consultants, and the general public.

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