Managing Peak Demand Pricing During Extreme Weather with Automated Energy Tools

During a January 2025 cold snap, PJM recorded its highest winter electricity demand on record, highlighting the growing challenge of meeting peak load during severe cold events. According to the International Energy Agency,  the greatest threat to our clean energy future is in fact the heavily strained and unreliable U.S. power grid, meaning changes both big and small must be made.

Not only do harsher seasonal conditions put pressure on the grid, but they also significantly impact a business’s bottom line via peak demand pricing, causing monthly utility bills to skyrocket. 

While innovative technologies are being developed to tackle these complex energy challenges, demand response (DR) is one power management solution that consumers and businesses can leverage right now to support grid resiliency and avoid unexpected electricity bills during unprecedented weather events.

Understanding Demand Peak Pricing

Demand peak pricing refers to the tendency of electricity to be consumed at a higher rate during intense weather events, such as severe cold snaps or extreme heat waves, when heating and cooling systems must work harder to maintain comfort. Due to the increased electricity demand, utility prices spike to meet supply needs, which in turn causes financial and budgetary strain from unforeseen costs. 

Demand pricing events aren’t just felt in your wallet either; they also negatively impact the environment and stability of the centralized power grid. The increased demand for electricity strains infrastructure and forces reliance on non-renewable, carbon-intensive power generation like gas and coal. 

How Can Distributed Energy Resource Management (DER) Help?

The challenges posed by severe weather and resulting peak demand pricing can be overcome by innovative DER management. One practical way to address these challenges is through automated energy reduction tools that help facilities manage usage more efficiently during peak conditions.

Automated energy reduction tools offer real-time monitoring and control of energy usage, enabling consumers and businesses to optimize energy allocation seamlessly—without compromising comfort or productivity. 

For example, some DR plan providers will allow participants to specify an electricity pricing threshold that, once surpassed, will cause their buildings to go into reduced power consumption mode, minimizing the financial impact caused by peak demand pricing events, and lowering stress on the grid when price increases result from extreme weather. 

The key feature of this technology is automation. With real-time monitoring to identify peak demand periods, DR providers can automatically adjust energy consumption to help reduce costs and ease grid strain.

Automating the Future of Demand Response

Automated energy reduction tools excel in identifying peak demand periods. They use predictive algorithms to monitor weather forecasts, energy demand trends and other factors to anticipate when peak pricing might occur. This allows facilities to prepare in advance and make informed decisions about how and when to adjust energy usage.

Demand Response Strategies

DR providers employ various strategies to optimize energy use, reduce costs, and alleviate grid strain. Here are three key approaches:

Load Shedding

• Load shedding involves the controlled reduction of non-essential energy loads during peak periods. For example, some of your appliances might temporarily reduce their energy consumption without affecting your comfort. This approach effectively lowers your electricity costs while lessening strain on the grid.

Demand Forecasting

• Demand forecasting leverages data such as weather forecasts, historical usage patterns and energy trends to predict periods of high demand. By accurately forecasting demand, we can preemptively adjust energy usage to avoid peak pricing.

Real-time Adjustments

• Real-time adjustments are crucial during extreme weather events. These tools enable immediate responses to changing weather conditions, ensuring that you're not caught off guard by sudden spikes in energy prices.

Leveraging DER Tools to Avoid Peak Demand Pricing

Peak demand pricing events are becoming more frequent as extreme weather places added strain on an aging power grid. Until broader grid modernization efforts catch up with rising demand, many regions will continue to face reliability risks during periods of extreme heat and cold.

Demand Response offers a practical and impactful way for facilities to manage these challenges. By combining DR strategies with automated energy tools, facilities can reduce exposure to peak demand pricing while supporting grid stability during high-stress conditions. Proactive energy management will play an increasingly important role in controlling costs and maintaining operational stability.