Using Energy Price Volatility to Improve Your Bottom Line.(Brief Article)

With summer approaching, businesses are bracing for high electricity consumption combined with the expectation of volatile energy prices. Homeowners have little choice but to accept higher cooling bills, but businesses that use large volumes of electricity can reduce their energy costs and, in some cases, even make money by taking advantage of the market volatility.

Continuing price volatility because of tight electric generation supply compared to demand creates a significant opportunity for anyone with dual-fuel capability, excess capacity, or backup generators.

As with businesses that take advantage of their natural gas fuel-switching ability, businesses can also significantly enhance their purchasing position on electricity by having similar capabilities. A facility with dual-fuel chillers will be able to take advantage of volatility in the electricity markets more so than a facility without such flexibility.

Many businesses--hospitals, telecommunications companies, financial institutions, and other businesses with power-critical processes--have emergency generators so that operations continue to run smoothly in the event of a power blackout. Not all such companies have pursued taking financial advantage of their generator assets.

In New York--and other states--businesses that can curtail their power usage or transfer their electric loads to an on-site generator can receive substantial payments by "selling" this capability. Under the rules of the New York Independent System Operator (ISO), businesses that can cut back or transfer at least 100 kilowatts (kW) to a backup generator can sell this capability to an ESCO under the Installed Capacity Program (ICAP). When the ISO needs additional generating supplies to maintain reliability, the ISO calls on participating ICAP businesses to switch on their generators and reduce the demand on the regional electric grid.

In New York City, the value of installed capacity during the past year was approximately $100,000 per megawatt ($100 per kW). Going forward, the ISO intends to cover the energy costs incurred by businesses when they are called on to operate.

In some cases, the emergency generator may not be wired to operate in this fashion. Many ESCOs have experts who can inspect backup equipment to make sure it's wired properly and, if it's not, reconfigure the generator wiring so that the customer can participate in the ICAP program.