Optimizing Peak Demand FactorOptimizing Peak Demand Factor and Reducing GA Costs

A Strategic Approach to Lowering Global Adjustment Charges

A significant portion of large electricity consumers’ costs in Ontario comes from Global Adjustment (GA) charges, which fund long-term generation contracts and conservation programs. As discussed in our previous blog, Managing Peak Demand: Understanding the Impact of Global Adjustment Charges, understanding and managing GA costs is essential for the financial stability of institutions. A key mechanism for controlling GA costs is the Industrial Conservation Initiative (ICI), which allows large consumers to classify as Class A, and reduce their charges based on their Peak Demand Factor (PDF)—a metric that determines how much GA a Class A consumer pays. Since GA charges can make up 30-55% of total electricity costs, strategically managing peak demand is critical for cost reduction.

1. Understanding Peak Demand Factor (PDF)

Peak Demand Factor (PDF) represents a business’s contribution to Ontario’s total electricity demand during the top five peak hours in a 12-month base period.

1.1 How is PDF Calculated?

  • The Independent Electricity System Operator (IESO) identifies the five highest demand hours during the peak-setting period, which runs from May 1 to April 30 each year.
  • A business’ electricity consumption during those peak hours is measured.
  • PDF is calculated as the business’ percentage of total demand during those peak hours.

For context, if a facility consumes 5 MWh of power during each of the top five peak hours (25 MWh total) and Ontario’s system-wide peak consumption during those hours averages 25,000 MWh (125,000 MWh total), the business’s PDF would be 0.02%. This means it will be responsible for 0.02% of the total GA charges for the period spanning June to July of the following year. For example, if the monthly GA cost in Ontario was $500 million, this customer’s share would be $100,000 for that month.

Since GA charges make up a large portion of electricity costs, a lower PDF means lower GA costs. Businesses that can strategically reduce their consumption during peak hours can significantly reduce expenses. At current GA levels, curtailing 1 MW of demand across all five peak hours could save an estimated $300,000 in GA costs.

2. How to Identify Peak Hours

Ontario’s peak demand hours fluctuate based on several factors. Accurately identifying these hours is key to optimizing PDF.

2.1 Indicators of Peak Demand Events:

  • High system-wide electricity demand, primarily driven by hot summer afternoons and, occasionally cold winter evenings.
  • Seasonal patterns, with peaks typically occurring in July and August. However, as winter demand grows due to increased electrical heating, electrical vehicle charging, and greenhouse sector expansion, the market is expected to shift toward a dual-peaking model in the coming years. 

Historical data analysis combined with accurate demand forecasting helps identify trends and predict when future peaks may occur. Real-time energy monitoring systems help businesses track their usage and compare it against expected peak hours.

3. Strategies to Optimize PDF and Reduce GA Charges

Once the peak demand hours are identified, businesses can take a variety of proactive steps to manage their electricity consumption, reduce their Peak Demand Factor (PDF), and ultimately lower their Global Adjustment (GA) charges. Implementing these strategies allows businesses to better align their energy usage with off-peak times, resulting in both immediate and long-term savings

3.1 Load Shifting

One of the most effective ways to reduce your PDF is through load shifting. This strategy involves moving energy-intensive operations to times when electricity demand is lower, thereby reducing your peak demand during the top five highest demand hours.

  • Energy-Intensive Operations: Activities such as manufacturing, cooling, or pumping often consume large amounts of electricity. By shifting these operations to off-peak hours (e.g., running production processes overnight or during weekends), businesses can significantly reduce their contribution to peak demand.
  • Planning for Off-Peak Times: By identifying periods of low demand in the day, businesses can schedule energy-intensive tasks to avoid peak hours. This ensures they still meet production goals without contributing to the demand spikes that drive up GA charges.

3.2 Energy Storage Solutions

Energy storage solutions, such as batteries, are another effective strategy for optimizing PDF. By investing in energy storage, businesses can store excess energy during off-peak hours when electricity prices are lower and use it during peak demand periods, when costs are higher.

  • Using Batteries During Peak Hours: When the grid is experiencing high demand, businesses can rely on their stored energy to supply power, rather than drawing from the grid at peak times. This significantly reduces their load during peak periods, which directly lowers their PDF.
  • Charging Batteries During Off-Peak Hours: By charging batteries when demand and prices are lower (typically at night or during weekends), businesses can ensure they have enough stored energy to cover their needs during high-demand hours, further reducing their reliance on the grid and their exposure to high GA charges.

3.3 Automation and Energy Management Systems

Automation and energy management systems can optimize energy consumption and reduce peak demand by automatically adjusting electricity usage based on real-time data and predictive insights.

  • Automated Controls for Peak Events: Energy management systems can be programmed to automatically reduce electricity usage when a peak demand event is predicted. For example, cooling systems could be adjusted to operate more efficiently or be cycled off during the peak hours, reducing overall demand.
  • Smart Building Technologies: Integrating smart building technologies, such as automated lighting, HVAC systems, and energy-efficient appliances, allows businesses to monitor and control their energy consumption in real-time. This helps optimize heating, cooling, and lighting loads, ensuring that energy use is minimized during peak periods without sacrificing comfort or productivity.

By adopting one or more of these approaches, businesses can take control of their energy consumption, reduce their costs, and move towards a more sustainable energy future.

Blackstone Can Help You

Our team of energy experts has been helping businesses in Ontario identify critical peak hours, optimize energy strategies, and reduce costs for over two decades. We offer tailored solutions to specifically optimize and reduce your Peak Demand Factor (PDF). Whether you’re looking for a reliable and easy-to-use tool or a more specialized solution to centralize your energy data and access comprehensive dashboard visualizations, Blackstone can strategically help you manage and lower your Global Adjustment charges. This allows you to redirect savings toward other sustainability initiatives across your value chain. Reach out to us info@blackstoneenergy.com today to start optimizing your energy costs.