DEX: A New Concept for a Century Old Challenge
- Mar 23, 2020 10:24 pm GMT
This item is part of the Special Issue - 2020-03 - Innovation in Power, click here for more
Industrial, commercial and institutional energy users above a certain size (usually 100 kW) must contract kW capacity (demand) from their local power distribution companies.
These energy users pay on a monthly basis not only for the commodity (kWh) but also for the demand (kW), known also as “wire fees” - a fixed monthly cost. Actually the demand charges are one of the most important breadwinners for power distribution companies. This model is universal. Just in the USA, power distribution companies collect about one hundred billion Dollars in demand charges!
This model is actually very stiff for energy users, mainly because from their prospective, changes is the name of the game - as opposed to what happened in the past, when they could plan kW demand well in advance. These changes involve the intensity of the activities, energy conversion processes, what actually is done in a given location, energy management controls change the way power is used, human behaviors change and of course the economy as a whole… so at the end of the day, changes are a very important factor.
But… the way kW demand is charged did not change for many decades. It is a very simple arrangement around the globe. The power distribution company compares the recorded, physical, demand (usually the maximum of 15-min intervals in every month) with the contracted demand. The biggest one is then used to charge the client. The contracted demand may be a fixed kW value – a very popular arrangement or a “ratchet” by which the power distribution company stipulates that the contracted demand is a percentage (typically in the 50% to 85% range) of the maximum recorded demands of a window of months (it may be a one year period or sometimes just the summer months).
Demand charges represent anywhere from 20% to 40% of the end-user’s monthly power bill. It is therefore a very significant value!
The proposed concept is a demand exchange – DEX (as I call it). It is basically a zero sum game from the power distribution company’s prospective, meaning that the demand charges collected as whole will not change. On the other hand it will allow energy users to trade their demand differences in a win-win situation.
An energy user willing to reduce its contracted demand “posts” the “idle kW” (difference between contracted demand and recorded demand) at the DEX. Another energy user connected to the same power distribution company, in the opposite situation, is willing to increase its contracted demand. The DEX enables these energy users to meet (internet based service sponsored by the local power distribution company) and engage in a demand transaction, by which their kW differences are exchanged.
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