Outlier

Hot and heavy energy usage: How the demand and price for electricity skyrocketed on a 100° day

  • By Barry Fischer
  • September 5, 2012

The passage of Labor Day sadly marks the end of backyard BBQs and pool parties, but for many people it may also come as a relief: a brutally hot summer is finally coming to an end.

The first half of the year was the hottest ever recorded in the contiguous US. July 2012 became the hottest July on record. And in communities across the country, more than 27,000 daily high-temperature records have been broken or tied so far this year.

Across the river from Opower headquarters, Washington DC faced 11 consecutive days that hit or exceeded 95 degrees…it was the city’s most intense heat wave in 141 years of keeping temperature records.

Thankfully, air conditioners keep us cool and comfortable during these sizzling summer days. More than 60% of US households now have central air conditioning, up from 23% in the late 1970s. But the luxury of A/C comes at an obvious cost: higher electricity consumption.  Exactly how much higher? We found that the average home’s electricity usage on a 103°-high summer day is up to 40% higher than during a typical summer day.


How do we know? We cracked open our data warehouse to examine anonymized energy usage data across 18,000 homes from 3 different cities in the western part of US, which has faced blistering temperatures this summer.  In particular, we explored a few key questions about energy consumption on hot days:

  • What exactly happens to electricity usage as the outdoor temperature rises?
  • When does home electricity usage reach a peak on hot days?
  • How does a dramatic increase in air-conditioning affect the power grid and the risk of blackouts?

Our analysis shows that increased air-conditioning during the hottest days of summer 2012 caused residential electricity demand to shoot through the roof. And as we’ll see, when everyone tried to keep cool on the hottest afternoons, it put severe pressure on the regional power grid — in one case even causing the average wholesale price of electricity to double compared to a typical summer day.

Let’s dig into the data and start piecing together some energy impacts of this summer’s record-breaking temperatures…

Cranking up the A/C: home electricity consumption increases by 20-30% overall on the hottest summer days

The relationship between temperature and residential electricity usage is extremely strong, as we can see in the below graph. It displays average daily home electricity consumption on 45 summer weekdays (each dot represents a day), plotted against the average local temperature for each of those days.

The steady increase in home electricity usage as temperature goes up suggests that air conditioners are the driving force of the upward trend. The graph indicates that the typical home consumes 20-30% more electricity overall on the hottest days, relative to an average summer day (e.g. the days in the middle of the graph).

And as we’ll see, most of the increase in electricity usage on hot days takes place at a very specific time of day – a phenomenon that has major implications for the stability of the regional electricity grid.

In the late afternoon of the hottest days, home electricity consumption increases to 40% above average

A common pattern emerges in how home electricity usage fluctuates over the course of a hot summer day.

In particular, the “peak” (i.e. highest) demand in electricity usage comes somewhere between 3pm-7pm. That’s the time window when the day’s temperature is highest and also when many people are returning home from work or school. The line graph below shows average hour-by-hour home electricity usage during 4 different days in July and August. The temperature scale indicates the maximum temperature for each day.

Charting this data makes two things clear: 1) the hotter the day, the higher the electricity usage throughout the day, 2) on all these hot days, usage is highest between 3pm-7pm. Comparing a 103°-high day with an 83°-high day, we see that residential electricity demand during the late afternoon was nearly 40% higher on the hotter day. 

High A/C usage in the late afternoon means that 3-7pm on a hot day is effectively “rush hour” for electricity consumption.  But a big challenge looms during energy rush hour: how will power plants supply enough electricity to accommodate the huge increase in electricity demand?

Increased electricity demand on super-hot days means that more power plants need to be turned on, and that’s not cheap

To accommodate exceptionally high electricity usage on super-hot days, power companies typically obtain electricity from a system of backup power plants, called “peaker plants.” These plants, which otherwise sit idle, can be flipped on quickly to satisfy “peak” power demand (e.g. everyone blasting their A/C on a 100 degree day between 3-7pm).  However, electricity from peaker plants is expensive.

That’s because peaker plants are often old and inefficient, using gas-turbine or steam-turbine technologies that have low fuel efficiency. And as a result, flipping them on entails high operational costs that can be six times higher than a comparable power plant.  Peaker plants also have a poor environmental reputation — they are considered to be more polluting than similar power plants that operate throughout the year.

Just how expensive is it to operate peaker plants on the rare occasions when we need them? It’s been estimated that 10-20% of the overall cost of providing electricity each year in the US comes from just 100 hours of the year — largely corresponding to the highest-usage hours when air conditioners are relentlessly gobbling up electricity.

For the above reasons, when a larger share of electricity generation is coming from peaker plants on a particularly hot day, it becomes substantially more expensive for power companies to obtain electricity. This trend is readily apparent in the below bar graph. Although the price that most homes pay for their electricity stays constant, the wholesale price that their power company must pay for obtaining electricity on a super-hot day is double that on a typical summer day.

It’s clear that power companies pay a dear price for electricity from peaker plants.  And arguably, it’s a price worth paying: in ensuring that the supply of electricity keeps pace with electricity demand, peaker plants serve as an important last line of defense from power outages.

It turns out, however, that firing up peaker plants is not the only possible approach to managing peak electricity demand on hot days. Fortunately, there exists a cleaner and more cost-effective approach: reducing the need for peaker plants in the first place.

The cheapest and greenest kilowatt-hour of electricity…is the one that is never produced

If each household could reduce their peak electricity demand even slightly on hot days (e.g. by delaying laundry/dishwasher loads until after 7pm, or using window blinds to prevent unnecessary work for the air conditioner), the aggregate benefits for the electricity grid and households themselves could be enormous.

First and foremost, reducing peak demand relieves pressure on power plants, and so protects us all from power outages. But slimming down peak demand is also in the direct best interest of homes and businesses because it helps keep energy costs low: that’s because in the long term, many power companies are likely to incorporate the high cost of infrequent peaker-plant operations into customers’ everyday energy bills.

On a positive note, there are now often immediate cash benefits for customers who reduce their home electricity demand at peak times.  Many power companies have found that, instead of using expensive peaker plants, it is cheaper and more environmentally friendly to encourage customers — through incentives — to reduce peak demand in the first place. For example, a number of utilities actively reward customers who agree to slightly turn down their air-conditioner or electric water heater for a handful of short intervals on hot days.

As the summer of 2012 winds down, the number of days with extremely hot temperatures—and the intense air-conditioner usage that follows—may yet crank up further.  But if we can each trim down our usage just a tad during the hottest hours of these days, we’ll all benefit—lower energy bills, fewer outages, less pollution, and perhaps even extra cash payments from our power company.

Check out these easy-to-do tips, as simple as setting your thermostat to 78°, to get ideas on how to decrease your own peak electricity demand as the mercury rises.

Special thanks to David Moore, Ashley Sudney, and Yoni Ben-Meshulam.

Methodology:

For the purposes of comparability, days considered for this analysis are confined to weekdays between June 1-August 11, 2012 (excluding July 4) that were above 55° and did not have precipitation.  Results are based on averages across 18,000 anonymous households in 3 weather-comparable western US cities. Prices reported for wholesale electricity are Locational Marginal Prices in the day-ahead market for the 4-5pm interval, as reported by the California Independent System Operator. Weather data is sourced from Anything Weather and Weather Underground.

The estimated sixfold difference in operational costs between peaker plants and an average power plant is based on Monitoring Analytics (2012) and a related discussion in Alcott (2012). The former reports that the variable operation & maintenance cost of a combustion turbine peaker-plant facility is $7.59/MWh, which is approximately six times higher than the $1.25/MWh variable operation & maintenance cost associated with a combined-cycle gas power plant.

About Outlier

Outlier explores trends in how people are using energy at home. Pulling from an unprecedented (and still growing) amount of energy data—currently drawn from 50 million homes—Opower crunches energy-use information from more than 75 utility partners every day, and cross-references that with weather, household, and demographic information to produce compelling analyses in the Outlier series.