Electricity Cost Optimization: Reserved Capacity as a New Key to Savings

What makes up the price of electricity?

As the name of the invoice suggests, the price of electricity supply encompasses payment for the actual electric power and services related to the delivery of electricity to your point of consumption. The total billing then breaks down into a somewhat cluttered set of items. The payment for the supply of electric power is the Commercial part of the price and is determined by the agreed price per MWh with your electricity supplier. Therefore, it can vary among different suppliers and corresponds to the amount of energy consumed (the so-called power component). The rest of the price for electricity supply consists of Regulated items and is set by the decree of the Energy Regulatory Office, including: the price for distribution, payment for reserved capacity, support for electricity purchase from supported sources (RES - Renewable Energy Sources), price for system services, and the fee for the activity of the electricity market operator (OTE).

Price Development

The Commercial (power) part of the price significantly increased in the previous two years, but it is now stabilizing and slightly decreasing. However, at the end of 2023, decisions by the ERU (Energy Regulatory Office) led to a significant increase in the items of the regulated part of the price. This has currently had a significant impact on the budget of all consumers. Specifically, reducing one's own electricity consumption directly won't help because some regulated items are not directly linked to the amount of electricity consumed, yet they still constitute a significant part of the price.

Reserved Capacity: A Key to Savings and a Great Risk

One of the regulated price items that customers can significantly influence is the reserved capacity. Reserved capacity is a contractually agreed value of the maximum quarter-hour electrical output in MW that a customer is allowed to draw at a single consumption point from the distribution system in a given month. Reserved capacity can consist of two components - annual reserved capacity and monthly reserved capacity. The amount of reserved capacity is determined by the client in agreement with their supplier.

This item typically constitutes a quarter or more of the total electricity costs, making it a significant portion. (to understand the potential for its optimization, in extreme cases, a reduction of up to 30% is comparable, for example, with how challenging it is to achieve a reduction in total consumption by – in a comparably overall impact – about 8%)

Properly setting this item can significantly affect the amount of your electricity bills. However, it is important to know that there is a significant risk involved. If a client arranges for a reserved capacity and exceeds this agreed consumption in a single quarter-hour in the month, their supplier will charge multiples of the price for the monthly part of the reserved capacity as a penalty. These penalties can be quite substantial, easily reaching into the tens or hundreds of thousands of crowns for a single exceedance.

Correct and safe setting of capacity is possible on several levels. How to do it correctly?

Basic user optimization

(typically 0-10% savings)

The first step is to determine if we have set the capacity unnecessarily high, either for part of the year or for the entire year. Suppliers indicate the utilization rate of the reserved capacity (maximum quarter-hour) directly on the invoice. It is necessary to look at all the months in the past year and verify that the difference between the maximum realized quarter-hour consumption and the reserved capacity is optimally 10%-20%. It is possible to combine a permanent monthly reservation for different parts of the year with additional monthly increases for periods when higher (peak) consumption is expected. A higher percentage of reserve is used for more dynamic consumption patterns, while a 10% reserve may suffice for stationary consumption. However, reducing it too much poses a significant risk of accidental exceedance during the year.

Process optimization

(0-15% savings)

The second step requires more detailed data. It is advisable to display the time sequence of consumption (in a ¼-hour resolution) and determine whether maximum withdrawals are caused by the simultaneous operation of several significant consumptions (for example, a large air conditioning system turning on at the same time as a waste crusher operates). If this occurs, it's possible to either adjust consumption processes or technically prevent these consumptions from being activated simultaneously. It is essential, however, to ensure that accidental "violations" of the set rules, concurrent activation, and thus exceeding the reserved capacity, cannot occur. For this case, the smart EMS system FLOWBOX allows you to perform automatic blocking or, for example, plan and automatically implement consumption within separate time slots (where operationally feasible).

Automatic control

(more than 30 % savings)

For this level, it is essential to use an intelligent control system. FLOWBOX has integrated functionality for this purpose, which allows measuring consumption within the current quarter-hour and continuously monitors using intelligent prediction whether there is a risk of exceeding it. At the moment when such an exceedance would threaten, it triggers a multi-level optimization (disconnecting flexible loads). For the correct setting of the automatic system, FLOWBOX can perform the necessary analysis, determine the required flexibility of consumption, and carry out a fully safe configuration. FLOWBOX's analytical tools enable the verification of the full functionality of the regulation in advance (e.g., on annual data). Thanks to such robust preparation, it is then possible to regulate a significant part.

Using FLOWBOX solutions, it is possible to utilize an effective combination of suppressing concurrent consumptions (e.g., through automated prioritization control of consumption time slots) and simultaneously make use of quarter-hour automatic control. Such a solution also brings additional benefits in optimizing the sizing of distribution, control, and protection elements.

Already at this moment, FLOWBOX enables the search for sophisticated combinations of savings opportunities through the described mechanisms and other intelligent elements, creating and controlling consumption flexibility. Consumption flexibility will be a great key to savings and, after some time, become a necessary key parameter for overall energy and cost efficiency.

Tip: Energy Calculator – Fill out the calculator to see how you fare in the field of smart energy management. You'll learn about your level of energy proficiency, understand your next strategic steps, and we'll try together to estimate how much you can save on energy annually.

Author: Radek Fiala, product manager (FLOWBOX)

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