Otis Singleton
Supply and demand of electricity refers to the relationship between the amount of electricity that consumers use and the amount that suppliers provide. Demand for electricity is defined by how much is being used at any given time and is measured in kilowatts (kW). Consumption, on the other hand, is determined by how much electricity is used overall and is measured in kilowatt-hours (kWh). Suppliers need to generate more electricity when demand is high and less when it is low, and they typically measure demand in 15-minute periods. Demand is driven by factors such as demographics, business activities, and weather patterns, and it changes constantly throughout the day, with peak demand usually occurring in the morning and evening. Suppliers must ensure they have enough capacity to meet peak demand and maintain a reliable electricity supply.
| Characteristics | Values |
|---|---|
| Definition of demand | How much electricity is being used at any given time |
| Definition of consumption | How much electricity is used overall |
| Demand measurement | Measured in kilowatts (kW) and represents the rate at which electricity is used |
| Consumption measurement | Measured in kilowatt-hours (kWh) and represents the amount of electricity used over a certain time |
| Demand variability | Changes constantly |
| Factors influencing demand | Time of use, demographics, business activities, weather patterns, business cycles, energy efficiency improvements, growth rates of building electrification and electric vehicles |
| Factors influencing supply | Construction of new units and/or transmission lines, retirement of units, availability of hydropower, growth of DERs, capital availability, regulatory decisions, environmental restrictions, willingness of buyers to sign long-term power purchase agreements, market participants' perception of future profit opportunities |
| Suppliers' role | Generate more electricity when demand is high and less when it is low |
| Demand management | Staggering the use of major appliances, using timers, demand response programs, demand side management (DSM) programs |
| Billing methods | Volumetric billing (based on consumption in kWh), demand charges (based on peak demand in kW), fixed and variable charges, transmission and distribution charges, supply charges |
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What You'll Learn
Demand charges and billing
Demand for electricity is defined by how much is being used at any given time. The more electricity people use at any moment, the higher the demand. Demand is different from consumption, which is determined by how much electricity a user consumes overall. For example, ten 100-watt light bulbs turned on for one hour will consume the same amount of electricity as one 100-watt light bulb left on for ten hours, but the former scenario will result in a higher demand for electricity.
Demand charges are based on the peak amounts of energy used in a given time period, known as demand intervals. Demand charges are usually 30 to 70 per cent of the total electricity bill. Utilities supplying electricity have historically recovered costs through volumetric billing, which involves billing each customer for the amount of electricity they consume in a given month or year. However, demand charges shift the basis of billing from overall consumption to peak demand. This means that, instead of paying a variable charge based on total consumption, customers pay a variable charge based on their share of the total peak demand for energy on the system, measured in power requirement (kW).
Demand charges can lead to more expensive bills overall, especially for those with solar panels. However, it is possible to reduce your bill on a demand charge rate by adjusting your electricity usage to avoid peak demand. For example, you can use major appliances such as washers, dryers, and ovens at different times, and use a timer to ensure appliances such as water heaters only run when demand for electricity is lower. Demand response programmes can also provide incentives for customers to manage their electricity demand.
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Energy storage and flexibility
The demand for electricity is defined by how much is being used at any given time. The more electricity people use at any moment, the higher the demand. Demand is constantly changing, and suppliers need to generate more electrical energy when demand is high, and less when it is low. Demand is usually measured in 15-minute periods, with peak demand occurring when it is needed the most, such as in the morning and evening.
Energy storage technologies enable extra energy generated at off-peak times to be stored and released when demand goes up. This makes the electricity system more flexible and avoids the use of non-renewable resources during peak demand. For instance, organizations can save money by shifting their usage to lower-priced hours during the "evening ramp" hours in the duck curve when usage remains high, but solar generation slows down.
Grid operators are providing more financial incentives to encourage energy users to be flexible in their usage. This helps to tackle the challenges of integrating new technologies, such as solar, battery storage, electric vehicles, and smart meters, into the grid. A flexible power system can effectively re-establish supply-demand balance following any change and is crucial in the transition to a low-carbon economy.
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Peak demand and time of use
The demand for electricity is defined by how much is being used at any given time. Peak demand is a term used to describe a period of time when consumer demand for electricity is at its highest. This normally happens in the morning and evening. People use a lot of electrical energy when they wake up and get ready for the day. They turn on the lights, turn on the heat or air conditioning, take showers, and cook breakfast. Similarly, when people get home from school or work, they repeat these actions, leading to another peak in the evening.
The cost of electricity is constantly fluctuating, and it does not always cost the same every hour of the day. Some utility companies offer time-of-use plans, where using electricity during peak hours will cost more, but using it during off-peak times will be significantly cheaper. Running appliances during off-peak hours can save you money. During peak hours, when electricity is in high demand and the grid is strained, prices are higher. In contrast, off-peak hours have lower prices because fewer people are trying to access the grid, resulting in less overall demand.
Demand charges aim to shift billing from overall consumption to a customer's share of the total peak demand for energy on the system, measured in power requirement (kW). Demand charges can lead to more expensive bills, especially for those with solar panels on their roofs. Utilities must plan to provide enough generating capacity to meet peak demand, generate enough electricity for annual consumption, and maintain the transmission system.
To reduce the impact of peak demand, the supply of electricity can be increased or the demand can be decreased. Energy storage technologies can help with this, allowing energy generated at off-peak times to be released when demand goes up. This makes the electricity system more flexible and reduces the use of non-renewable resources during high-demand periods. Additionally, some utility companies offer incentives for customers to reduce their electricity use during peak hours or allow the company to remotely adjust their smart thermostat, water heater, or heat pump controller during these times.
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Forecasting and planning supply
Forecasting and planning the supply of electricity is a complex task that involves multiple factors and stakeholders. The primary objective is to ensure that there is enough electricity to meet the demand and that the supply is reliable and stable.
Demand for electricity is constantly changing, and suppliers need to be able to generate more electricity when demand is high and less when demand is low. Peak demand periods, typically in the morning and evening, see the highest electricity usage as people turn on lights, heating or air conditioning, cook meals, and use various devices. Demand also varies with the seasons, with higher overall demand in winter due to increased heating needs.
To effectively plan and manage the supply of electricity, utilities employ various strategies and technologies. Load forecasting, or electric demand forecasting, plays a crucial role in this process. It involves accurately predicting the magnitude and geographical locations of demand over different periods, from hourly to monthly intervals. Seasonal data, historical data, weather data, and human mobility data are all utilized to make these forecasts.
In addition to forecasting, utilities must also plan for and provide enough generating capacity to meet peak demand. This includes generating sufficient electricity to meet annual consumption on the grid and maintaining the transmission system that delivers electricity to each customer. Volumetric billing, where customers are charged based on their overall electricity consumption, has been the traditional method of billing. However, with demand charges, utilities are shifting towards billing customers based on their share of the peak demand for energy on the system, measured in kilowatts (kW).
To optimize supply planning, utilities also consider the incorporation of renewable energy sources. For example, energy storage technologies allow excess energy generated during off-peak times to be stored and released when demand increases, reducing the reliance on non-renewable resources during high-demand periods.
Long-term forecasting is also crucial for investment profitability analysis and planning, such as determining future sites or fuel sources for power plants. This type of forecasting typically looks at months, quarters, or even years ahead and helps utilities make informed decisions about their infrastructure and resource allocation.
Overall, forecasting and planning the supply of electricity is a dynamic and challenging process that requires constant monitoring, adaptation, and innovation to ensure a stable and reliable electricity supply for consumers.
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Reducing demand and costs
The demand for electricity is defined by how much is being used at any given time. The more electricity people use at any moment, the higher the demand. Consumption, on the other hand, is determined by how much electricity a person uses overall. For example, turning on one 100-watt lightbulb for 10 hours will consume 1 kilowatt-hour (kWh) of energy. Turning on ten 100-watt lightbulbs for one hour will also consume 1 kWh, but the demand for electricity will be much higher.
Suppliers measure demand in 15-minute periods. Peak demand refers to periods with the highest electricity use, which normally happens in the morning and evening. During peak demand, suppliers must generate more electricity, which often means using more fossil fuels.
Demand charges are a way for utilities to bill customers based on their share of the total peak demand for energy on the system, measured in power requirement (kW). Demand charges can lead to more expensive bills, especially for people with solar panels. However, reducing energy use during peak times can help to lower electric rates over time by avoiding the need for utilities to ramp up an additional power plant or buy more expensive power. Utilities are also introducing programs that encourage customers to use electricity during off-peak hours, passing on the savings to customers through rebates or reduced electricity rates.
To reduce your electricity costs, you can:
- Stagger your use of major appliances such as the washer, dryer, oven, or water heater.
- Use a timer to ensure appliances like the water heater, dishwasher, or pool pump only run when demand for electricity isn't at its highest.
- Reduce your "always-on" appliances. Examine your hourly consumption and look for electronics that you don't use or can switch off.
- Shift your power use to off-peak times, such as running your dishwasher late in the evening.
- Purchase energy-efficient products and operate them efficiently, such as switching to an electric stove or an ENERGY STAR certified dishwasher.
- Wash clothes in cold water and hang them to dry.
- Take shorter showers and use vent fans in bathrooms and kitchens to remove humidity.
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Frequently asked questions
Electrical power plants generate electricity, which travels through the electrical grid to supply power to homes, schools and businesses. Demand for electricity is defined by how much is being used at any given time. Suppliers need to generate more electricity when demand is high, and less when it is low.
Demand is usually measured in 15-minute periods. It is measured in kilowatts (kW) and represents the rate at which electricity is used.
Peak demand refers to the periods with the highest electricity use. This typically happens in the morning and evening when people are at home and using appliances.
Suppliers will generate more electricity when demand is high and less when it is low. In the long term, supply is often driven by demand forecasts.
Demand for electricity impacts the reliability of the supply and the market price. It can also affect your electricity bill, as demand charges are based on your share of the total peak demand for energy.
