Demand curve (electric)

Because electricity cannot be stored in transmission or distribution wires, electric providers must be prepared to service the total demand from their customers at all moments during the day. This is true for utilities in regulated states that must plan to have enough generation available to serve their customers; it is true for Independent System Operators (ISOs) that must plan to have enough generation available to serve the entire marketplace; and it is true for retail marketers that must plan enough supply to match their contracted customers’ demand as closely as possible or risk significant financial exposure for balancing costs. Thus it is important to understand individual and aggregate customer behaviors. Unlike the gas business, where transactions tend to take place on a daily basis, electricity sales and price fluctuations often occur in increments of one hour, and for balancing power, in increments as short as five minutes. So hourly and even intra-hourly usage fluctuations are important to clearly understand. A typical hourly demand curve (also called a load curve) might look like this:

Demand curve - hourly

Observe the change across the day for the various customer classes in this demand curve. The agricultural sector peaks in the early morning because farmers do their water pumping before the heat of the day. Residential usage climbs in the morning as residents wake up, falls as they go to work and school, and then climbs through the afternoon and early evening as they return home. Commercial and industrial uses are steadier during the day but fall significantly at night as many businesses close. Seasonal patterns are also important since some customers’ electricity consumption varies greatly by season. The annual seasonal demand curve for the U.S. looks like this:

Demand curve - monthly

Customer mixes and weather patterns vary significantly by region. And as more customers invest in distributed resources such as rooftop solar, storage, flexible loads, and electric vehicles, load patterns in some regions may begin to change from traditional patterns. Since electric markets are constrained to regional areas by the lack of transmission, it is critical that industry players understand the consumption patterns of each region in which they are active.