Michigan faces challenges in the coming years, including a projected 2,000 megawatt (MW) increase summer peak demand in the Lower Peninsula from 2017-2026.  In Michigan, as in many states, demand for electricity can spike during just a few hours a year. Typically, 10 percent of our electric system capacity is built to meet demand in just 1 percent of hours during the year. This comes at a significant cost to consumers. Resource constraints in the Lower Peninsula are largely driven by weather, making peak demand events predictable — and therefore good candidates for management. 

This report, prepared for Advanced Energy Economy Institute (AEE Institute) by Demand Side Analytics, LLC and Optimal Energy, Inc., evaluates the benefits and costs of demand reduction strategies, and the feasibility for utilities to procure the resources to meet demand reduction goals over 10 years.

The report examines potential for savings from demand reduction under three different market scenarios.  The demand reduction approaches analyzed in the paper include demand response ; “connected thermostat” programs, and time-varying rates. Net benefits for electric ratepayers — total savings minus costs — range from $53 million to $1.2 billion, with the middle scenario producing net savings for consumers and businesses of $482 million over 10 years, compared with spending on additional power generating capacity.