Coincident peak demand is the demand of a customer or group of customers at the time of the electric or gas system’s peak demand. The importance of coincident peak demand is that it measures how each customer or group of customers contribute to the overall peak demand of a system. For example, the electric coincident peak demand determines the necessary amount of generation capacity required to be available to ensure that the electric grid can meet peak demands.
In the above graph, the system peaks at 6 p.m. So, the coincident peak demand associated with each customer class is the demand at that time. For the residential customers this is about 8 GW, for commercial customers it is about 3 GW, and for industrial customers it is about 5 GW.
Coincident peak demand is often used by utilities and regulators to allocate costs to both electric and gas customers when setting rates for service. Because the cost of service is highest at the time of the system’s peak demand, it is considered appropriate to allocate peak-related costs based on coincident peak demand. To ensure that price signals about the cost of usage during coincident peaks are sent to users, some utilities and wholesale power providers base monthly demand charges on usage during the hour of the coincident peak. To reduce overall system costs and give customers tools to reduce their coincident peak, demand side management (DSM) programs often focus on reducing demand during this time period.