Distributing Co-Op Wholesale Demand Charges to Hours of a Day

This Presentation

The presentation and dashboard are available to the public.

• The slide can be found online at https://rpubs.com/gdeyoung/Understanding_Demand
• The dashboard where the analysis is run can be found at https://gdeyoung.shinyapps.io/UnderstandingDemand

Co-op Wholesale Power Costs

• Overall wholesale power cost typically range from 45% to 55% of a Cooperatives total expenses.
• GVP wholesale power cost around 51%
• Costs Categories

• Fixed Costs ($) - not a focus here.
• Energy Cost (kWh) - easy to distribute hourly by consumption
• Demand Costs (kW) - Our focus

Why do you need to know this?

If you are going to develop any rate tariff that is time dependent you need to know how costs vary in time.

• Load shaping – When to reduce peak hours charges?
• Fairness – “Cost causers should be cost payers”
• EV tarifs – when and and how much?
• Tariffs with time dependent demand component – what are the demand levels by the hour of day?

All require KNOWLEDGE of power costs by the hour.

Demand Charges

Demand charges are based on the single hour of the month that has the highest average hourly demand.

\[\mbox{Avg Demand (kW)} = \frac{\mbox{Consumed (kWh)}}{\mbox{Hours of Consumption (h)}}\]

Demand Charges - Background

• The grid infrastructure is designed to accommodate the maximum peak demand.
• Demand charges were conceived to spread the cost of infrastructure over the useful life of the asset.

Demand Charge Formula and Issues

• Formula: Demand Charges \(\mbox{}=\mbox{}\) Peak hour kW \(\times\) Demand rate
• The peak demand hour of a month is as predictable as the weather.
• The peak hour only minimally indicates demand levels!
  What are the other high (or low) demand times/hours?
• How to charge for infrastructure use which is being used at different levels ALL the time?
• If the entire demand charge is associated with a single hour, all hours have 0 charge except one is this correct?

Goal

How to distribute demand costs equitably across hours.

Equitably is define as paying for your share of system usage while you are using power.

Not the Goal

• Understanding load shaping to lower wholesale costs or reduce system capacity issues.

But … there are ways using the model being developed to inform this goal.

Take Aways

At a high level, I hope that you take away from this presentations three things:

• Method: To understand how demand charges can be distributed over every hour of the month.
• Insight: Gain a better understanding of the hourly distribution of wholesale costs.
• Framework: Provide a framework to inform decisions that take into account hours of use.

Two Curves - Same Information

Hourly Demand Curve

Time series of system demand (in monthly board packet).

Monthly Duration Demand Curve

This has the same data as the Hourly Demand Curve, ordered by demand not time

Demand Curve

Monthly Demand Duration Curve

Animation Demand to Duration

Watch the peak couple of points or any other point – They all move horizontally to their final position.

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Animation 10!

Reminders

• The demand charge is based on the peak demand of the month.
• The goal is to fairly distribute the demand charges from the peak hour to other hours. In away that accounts for members “usage” of the system.

Demand charges

• The peak demand is leftmost point in the Monthly Demand Duartion curve.

How to Distribute Demand Charges?

Assumptions to build hourly demand costs model.

• Hours of similar demand should have similar demand costs.

• Continuity Assumption – small changes in demand should not drasically change a hour’s demand charge.

• Monthly Baseload contributes to demand charges.

Hours of similar demand

Hours of similar demand

Hours of similar demand

• The difference of the highest point is 566 kW
  The difference amounts to $9,000 to $10,000 in costs.
• If the red dot moved to the green line, the demand in each hour is equal \(\implies\) split demand cost 50-50.
• If all the costs were assigned to one hour: 100-0 \(\rightarrow\) 50-50 \(\rightarrow\) 0-100 as red dot move from above to below.

Hours of similar demand

• If hours of similar demand are to have similar demand costs then all demand in one hour will not work.

• Violates the continuity assumption.

Baseload

• What happens if you wave your magic wand an all demand is only baseload?

Baseload

• Baseload accounted for 36.8% of the demand charges in June 2023.

Baseload

• The baseload has a significant demand charge component.
• How should demand charges be distributed?
• Natural Answer: To every hour of the month equally.
• Minimum Hourly Cost \(=\) Baseload Demand Cost/720

• At GVP each month has 1/3 (June, July, August) to little over 1/2 (March, April) of demand related to baseload.
• The last GVP COSS assigned NONE of the baseload demand costs were attributed off peak hours.

Shared Model

• If there is a tie for the peak level divide demand charges by two.
• For baseload divide demand charges by the number of hours in the baseload.

Shared Model

In the Shared Model

• A level occurring in 50% of the hours, costs 2\(\times\) baseload.

• A level occurring in 25% of the hours, costs 4\(\times\) baseload.
• A level occurring in 10% of the hours, costs 10\(\times\) baseload.
• A level occurring in 1% of the hours, costs 100\(\times\) baseload.
• The peak hour costs 720 times a baseload hour.

• Or a baseload hour costs 0.00138 times the peak hour cost (month has 30 days).

Hours of similar demand

• The difference between similar hours is only the extent of the difference in demand in the hours.
• Below the green line, costs are the same for 17:00 and 18:00

Shared Model Formula

• “Peak hour kW” is the number of kW levels, so …

Monthly Demand Profile

• Applying the Shared Model

Monthly Demand Profile

June 2023 — Percent of monthly demand attributed a hour.

Monthly Demand Profile

March 2023 — Percent of monthly demand attributed a hour.

For the Math Nerds (Or Engineers)

If the monthly duration demand curve is represented by \[f(y) = \mbox{the number of hours at kW level } y\] and \(H\) is an hour of the month, then the monthly fraction of cost atributed to the hour \(H\) is \[\int_0^H \frac{1}{f(y)} \; dy\]

Monthly Cost Profile

June 2023

Demand = $18.1/kW, Energy = $64.25/mWh, Std/Daylight hrs,

Annual Demand Profiles

12 months starting 2023-05-01

Annual Cost Profiles

12 months starting 2023-05-01

Demand = $18.1/kW, Energy = $64.25/mWh, Std/Daylight hrs,

Annual Relative kWh Cost

12 months starting 2023-05-01

Demand = $18.1/kW, Energy = $64.25/mWh, Std/Daylight hrs

Annual Wholesale Cost Framework

Dashboard

https://gdeyoung.shinyapps.io/UnderstandingDemand/

Review

• What is on each tab.
• Options can be set.

Application of Framework

Where is the subsidy with net metering and how large is it?

Questions?

gary.deyoung@gvp.org