Time of Use Pricing and Thermal Energy Storage

Time of Use Pricing and Thermal Energy Storage

An increasing number of electrical utility providers around the country are adopting variable rate systems designed to lower peak loads and associated pricing.

A typical electrical utility rate is made up of a monthly fixed service charge and a per-kWh rate for the electricity a customer uses, regardless of when that kWh is used. Increasingly, state utility commissions and PUD’s are working toward TOU rates, which charge more for electricity when it costs more to deliver due to supply and demand. If customers shift their usage to the lower cost times, they can lower their bills and utilities can see lower on-peak demand.

When properly designed and deployed, TOU rates can help customers save money by shifting their use away from high-priced, high-demand time periods to off-peak hours. TOU rates can help utilities reduce their expenditures by lowering the total peak demand they must meet while moving flexible customer demand toward periods when energy is in greater supply on utility grids.

In 2015, in response to a number of successful pilot programs, including a landmark 2012 to 2014 Sacramento Municipal Utility District (SMUD) TOU rate pilot1, the California Public Utilities Commission (CPUC) ordered the state’s three investor-owned utilities (IOUs) to transition to “default” TOU rates by 2019, requiring customers pay TOU rates unless they opt out.

San Diego Gas & Electric (SDG&E) will begin moving its customers in March 2019, and Southern California Edison (SCE) and Pacific Gas & Electric (PG&E) were given until October 2020 in order to prepare their billing systems. SMUD will begin a system-wide rollout of default TOU rates October 1, 20192.

The move towards TOU pricing is not unique to California utility districts. In fact, nationwide, IOUs and utility commissions are piloting, and implementing TOU pricing.  As a result of the move towards TOU pricing there is an increasing incentive to capitalize and maximize the use of “off-peak” power. This is where Thermal Energy Storage (TES) systems can become an attractive option to help shift loads from expensive “on-peak” hours to more economical “off-peak” rates.

Thermal Energy Storage systems function as a “thermal battery” that stores cold water chilled during evening and nighttime off-peak hours. The use of mechanical refrigeration and evaporative chillers during off-peak hours takes advantage of the lower TOU utility rates.  Storing large volumes of low-cost chilled water in direct bury fiberglass tanks is implemented to compensate for the building loads during the daytime, which effectively shifts operation costs of the HVAC system to the off-peak TOU rates.

TES systems can be designed to augment existing climate control systems, taking advantage of the existing mechanical and evaporative chiller infrastructure. In new construction, TES systems can be designed to handle up to 100% of a buildings cooling load or act as a reserve or booster for a smaller more cost-effective HVAC system.

DARCO has over 30 years of experience in the design of direct-bury fiberglass water tanks. We have worked with TES engineering firms in the research and development of such systems. Please contact us to review how stored thermal energy can help your project take advantage of TOU rate structures in your area.


1 https://www.smartgrid.gov/files/SMUD-CBS_Final_Evaluation_Submitted_DOE_9_9_2014.pdf

2 https://www.smud.org/-/media/Documents/Corporate/About-Us/Document-Library/2017-GM-Rate-Report-Vol-1.ashx?la=en&hash=7A245A4333EEAB695A3934ADBF6D5F08DD4374A8