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Energy: a new demand approach

Energy: a new demand approach

How much is it worth to postpone investments in the electric energy distribution area? Here's the proposition.

I Calculation references.

  • Assume an increase in the load factor of 5% of a distributor to its customers contracted on demand
  • Equivalent to enabling the same power grid infrastructure for about 2 years, to serve these customers
  • The investment in the power grid infrastructure is USD  0.7  Billion/installed GW 
  • The annual amortization of this investment is USD 100 Million/year/ installed GW
  • Considering the postponement of 2 years, it means USD 200 Million/installed GW savings

II How to increase the load factor by 5%

  • The proposal is a NWA (non-wire-alternative)
  • The power distributor offers a new service: "exchange of differences of contracted demands"
  • Customers who have excess contracted demand with respect to the recorded demand  "post" them on a specially designated transaction platform
  • Clients who have an interest in increasing their contracted demands "capture" the existing leftovers, enabling "swaps" with customers in the opposite situation
  • It's a zero-sum game.
  • Customers gain flexibility to change their contracted demands and this has economic value. 
  • The concessionaire postpones investments therefore alleviating its cash flow
  • It is a huge "win-win" 

If you would like to know more about this concept, please contact me. I am interested in transferring knowledge of this creation (which I called Demand Exchange) to "make it happen". This solution can be applied universally.

Rafael Herzberg's picture

Thank Rafael for the Post!

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Matt Chester's picture
Matt Chester on Jul 10, 2019 10:38 am GMT

Clients who have an interest in increasing their contracted demands "capture" the existing leftovers, enabling "swaps" with customers in the opposite situation

Would this part of it be an instanteous/day-by-day type of exchange, or is this a large overall one-time exchange at the beginning of contracts?

Rafael Herzberg's picture
Rafael Herzberg on Jul 10, 2019 12:49 pm GMT

Hi Matt,

The power distribution company compares - each month - the recorded demand (maximum registered demand usually measured in 15-min-intervals with the contracted demand and charges the bigger one. Or it may be a ratchet system that compares the recoeded demand of that month and a % of the maximum recorded demand in a on-year period and charges the bigger one.

So this idea is designed to deal with contraced demand x recorded demand. It means that an energy user (charged by demand) could adjust the contracted demand to be closer to the recoded demand. 

The energy user is always facing changes: type of activity in that specific location, energy conversion processes, retorfits for energy efficiency, intensity of activities in the location usually dependent on the economy's humor and a lot more.

Regulations stipulates stiff conditions to change contracted demands because it is associated with the power distribution CAPEX - accordingly they have the right to get a compensation for it. Usually reducing contracted demands mean wiating several months paying a higher than the recorded demand. The proposed demand exchange is a great solution for the utility comany (since it is a zero sum game) and solution and also for the energy users who will be able to adpat in a more cometitive fashion according to the changes.

Rafael Herzberg's picture
Rafael Herzberg on Jul 10, 2019 12:54 pm GMT

Forgot to conclude: given the monthly timefrme power distributions companies record and bill demand the prospoed demand exchange is a place to change contracted demands. So if a company engages in a demand exchange transaction it will become effective for the next billing month.

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