Lawrence Berkeley National Laboratory

Peak power demand issues have come to the fore recently because of the California electricity crisis. Uncertainties surrounding the reliability of electric power systems in restructured markets as well as security worries are the latest reasons for such concerns, but the issues surrounding peak demand are as old as the electric utility system itself. The long lead times associated with building new capacity, the lack of price response in the face of time-varying costs, the large difference between peak demand and average demand, and the necessity for real-time delivery of electricity all make the connection between system peak demand and system reliability an important driver of public policy in the electric utility sector. This exploratory option paper was written at the request of Jerry Dion at the U.S.Department of Energy (DOE). It is one of several white papers commissioned in 2002 exploring key issues of relevance to DOE. This paper explores policy-relevant issues surrounding peak demand, to help guide DOE's research efforts in this area. The findings of this paper are as follows. In the short run, DOE funding of deployment activities on peak demand can help society achieve a more economically efficient balance between investments in supply and demand-side technologies. DOE policies can promote implementation of key technologies to ameliorate peak demand, through government purchasing, technology demonstrations, and improvements in test procedures, efficiency standards, and labeling programs. In the long run, R&D is probably the most important single leverage point for DOE to influence the peak demand issue. Technologies for time-varying price response hold great potential for radically altering the way people use electricity in buildings, but are decades away from widespread use, so DOE R&D and expertise can make a real difference here.