Demand response supports reliability of the power grid by helping to reduce load during peak demand periods. Demand-side management includes company-sponsored programs and rate structures that encourage customers to reduce energy consumption during these peak demand periods. Within each of AEP’s state-integrated resource plans, demand-side resources and other smart grid-related projects such as Volt VAR Optimization (VVO) are modeled on the same economic basis as supply-side generating resources.
Peak demand is reported in megawatts and is the amount of power used at the time of maximum power usage. Peak demand periods vary across AEP’s service territory. For example, Appalachian Power Company’s system peak generally occurs on a winter weekday morning, when electric heating and appliance usage are happening at the same time that commercial equipment and industrial machinery are ramping up electric use. Public Service Company of Oklahoma’s system, on the other hand, peak typically occurs in the afternoon of a summer weekday, as people get home from work or school and increase their use of air conditioners and fans while the demand from commercial and industrial customers remains high.
Historically, as peak demand grows with the economy and population, new capacity would ultimately be needed. AEP can defer building new power plants by developing interruptible contracts with customers to allow AEP to “interrupt” their power consumption during peak times in exchange for reduced rates.