“Energy is the only controllable cost in real estate right now.” I’ve heard this from a few real...
Electric companies right now are actually paying people to use less electricity. I know that sounds absolutely bonkers.
Increased demand = increased generation costs
Why would an electric company that makes money selling electricity want their customers to use less of it? Well, this is happening right this second all around the country, and it's called demand response. The idea is really simple. A utility company has varying sources of generating electricity. Some of those sources are really cheap.
Others are a little bit more expensive, and some of them are a lot more expensive. When demand for electricity goes through the roof like on a 95 degree hot day utility company's going to have to shift from not just using the cheapest not just using the medium cost, but to using the absolute most expensive energy sources.
That means the cost of generating electricity goes up exponentially. And even worse, the demand for electricity at a very peak time could even outpace the entire capacity of an electric company, even with the most expensive sources running at full tilt. That's when you have power outages.
So to incentivize people to use less electricity at that peak window, utility companies will actually write them a check, so long as those payments are less than the cost of shifting from the low cost energy sources to the super high cost energy sources.
It’s cheaper to pay customers to use less
It ends up being a net win win. It's a really critical programming concept because the world is becoming more electric cars, which used to just be gasoline powered are now increasingly all electric heating systems and buildings which used to be fired with oil and gas are now becoming electric with heat pumps.
The beauty of demand response programs is that ultimately bringing the price of electricity down at the cost of generation brings the global electricity down for all of us as well. And in a world that's becoming increasingly electric, lower cost electricity isn't a nice to have it's a must.
Utilities will pay buildings to use smart controls that help to reduce energy use (and energy costs to buildings). Use the form below to see if your building qualifies.
