So, what exactly is capacity on my bill?
To put it simply, capacity is a measurement of the highest amount of energy your business uses at any given time. In order to avoid blackouts, electric grids need to make sure they can provide energy to everyone on the grid at peak demand.
So, they measure the capacity needed on five ‘peak demand’ days where the demand for electricity is the highest and average the capacity.
Expert Tip: Peak demand days typically fall in the summer months, Monday – Friday from 2PM – 6PM, when businesses are simultaneously cooling their buildings and running their office.
Then the Regional Transmission Organization (RTO) who manages the coordination of multi-state electric grids, updates the capacity via the Peak Load Contribution (PLC) and charges are billed through the customer’s utility.
Depending on your region, your capacity tags can be updated monthly or yearly in a capacity auction. In the case of the PJM grid (which manages the grids marked in the map below), a capacity auction is held every 3 years. Meaning the capacity charges on your bill today are from a capacity auction set three years ago.
Results of the PJM Capacity Auction
The 2021/2022 year capacity auction results are in for the PJM, and prices increased by double per MegaWatt-day from $77 to upwards of $158/MW-Day in Ohio. In Maryland, we’ve seen similar increases from around $87 to $162/MW-Day.
“Experts were predicting auction results around $100 per MegaWatt-day,” said Roger Zona, CEO and founder of TPI Efficiency, “Even that would be a significant increase from $77 results for ’20-’21. I don’t think anyone expected prices to double.”
The prices are set for ’21/’22 delivery years, but what can you do for the future?
Click here to see how you can manage your capacity for the future.