Energy Resiliency
Peak Shaving
Peak shaving can be achieved through several methods, including load curtailment, on-site generation, battery storage systems, or demand response programs. Curtailing nonessential processes or running backup generation during peaks can result in substantial cost savings, especially in regions where capacity and transmission charges are based on the customer’s peak demand.
In PJM, capacity costs are often tied to a facility’s contribution to the grid’s five highest load hours of the year, known as the Five Coincidence Peaks (5CP). Reducing load during these hours directly lowers a facility’s future capacity tag, which determines its share of annual capacity costs. Accurate forecasting and proactive energy monitoring are essential to successfully implement a peak shaving strategy.
Ultimately, peak shaving provides both financial and operational benefits — reducing annual energy costs, lowering carbon emissions, and promoting grid stability. By partnering with experienced energy advisors, businesses can identify the most cost-effective approach to manage demand, optimize facility performance, and achieve long-term savings.
PJM Capacity Market and Five Coincidence Peaks (5CP)
A critical metric used in the PJM capacity market is the Five Coincidence Peak (5CP). The 5CP represents the five highest hourly system load events during the summer months (June through September) across PJM. Each hour’s system load is coincidence with individual utility peaks, which allows PJM to assign capacity obligations to load-serving entities proportionally to their contribution to these peak events. These five hours collectively determine a customer’s share of the system’s peak demand, which in turn influences capacity charges and planning requirements.
The 5CP methodology provides a fair and transparent mechanism for allocating capacity costs, encouraging efficient energy use and peak demand management. It also gives utilities and large consumers an opportunity to implement demand response or load reduction strategies during critical peak hours, potentially lowering capacity costs. By linking capacity obligations to the most critical system hours, PJM ensures the grid remains reliable during periods of extreme stress.
In summary, the PJM capacity market, guided by the 5CP methodology, balance’s reliability and cost allocation. It incentivizes both generation availability and load-side management, ensuring the system can meet peak demands while providing predictable capacity pricing for utilities and consumers.
Reducing demand through Peak Shaving will lower businesses capacity costs for the following year.