Navigating Forward Electricity Price Shocks

Three Essential Strategies for Cost and Load Management

Organizations in the market for term electricity contracts are facing significant price hikes. Various market dynamics are propelling these increases, signaling the end of an era of historically low electricity costs. Notably, traditional, full-requirements fixed-price contracts are expected to see substantial rate increases.

Despite these challenges, there are viable opportunities for end-users to substantially lower their electricity expenses by effectively managing demand and consumption without significantly impacting their operations. Engaging more proactively with real-time market conditions and implementing load management strategies can result in cost reductions exceeding thirty percent by focusing on critical periods that represent less than two percent of operational time.

Strategic Actions to Mitigate Electricity Costs:

Action 1: Optimize Contractual Agreements

Work closely with your electricity provider to develop a contractual strategy that capitalizes on shared savings from load reductions during peak times. Enhance this approach by integrating advanced energy management systems that monitor and respond to real-time prices and loads. Our analysis of ERCOT’s 15-minute real-time pricing data from 2023 indicates that by excluding the highest priced 1.3% of intervals (roughly 95 hours), annual commodity costs could be reduced by 47%. While eliminating consumption during these periods is unrealistic, significant savings are achievable through sophisticated energy management technologies.






Action 2: Target High-Cost Periods

Concentrate reduction efforts during the highest-value seasons and times, particularly the summer months (June to September), where ninety percent of high-cost events occur. Prioritize the hours from 4:00 PM to 10:00 PM, during which over 85% of costly energy events take place. Strategies such as pre-cooling, strategic event planning, and asset optimization during these times can be highly effective.

Focus efforts on late afternoon and evening:















Action 3: Leverage Real-Time Pricing and Grid Controls
Invest in technologies that utilize real-time pricing and grid event controls to also reduce demand charges. In Texas’s ERCOT market, for example, large and mid-sized facilities often face the 4CP (four coincident peaks during June-September), which can represent about 25% of annual electricity costs. Employing forecasting services to anticipate peak ERCOT grid events can effectively reduce consumption and alleviate charges.

Electricity costs have risen too high, and the potential for savings is too significant to ignore the need for investments in systems, processes, and expertise that effectively manage real-time pricing and automated demand strategies. These initiatives are crucial for cost reduction and for fulfilling sustainability reporting and benchmarking requirements.

THG collaborates with hundreds of clients across North America and 20 countries, providing customized solutions to measure, manage, and reduce energy costs while meeting sustainability mandates. If you are interested in discussing how we can help optimize your operations and energy strategy, please contact us!

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