Heat Waves, Hurricanes & Higher Bills: Preparing Your Business for Summer

Summer energy costs aren't just driven by higher temperatures. Learn how heat waves, hurricanes, grid constraints, and peak demand can impact your business, and discover practical strategies to reduce risk, control costs, and stay ahead before peak season arrives. 

Transcript

Jennifer Ford, Host 0:01

Welcome back to Pilot Unplugged, Ask Me Anything. I'm Jennifer Ford, and I'm so excited you're here for episode three. If you're new to the show, here's the quick version. This is our open door series where we take your real questions about energy markets strategy, sustainability, and how we work with businesses and answer them honestly. So today is a big one because it's summer and down here in Texas, it is hot. So if you work in any kind of commercial or industrial facility, you already know what that means for your energy bills. Before I bring in our guests, though, let me say a quick word about who we are because we have a lot of folks joining us today from different industries across the country. So here at Pilot Energy, we've been helping large commercial and industrial organizations navigate energy markets since 2001. We just passed our 25-year anniversary. So cheers to us. So that includes everything from running competitive procurement events across dozens of suppliers, analyzing your utility data, managing demand strategy, and building sustainability plans. The goal here, though, is always the same: help you take control of your energy costs and actually understand what's driving them. So today I'm joined by two of our best. First, Elizabeth McCabe, one of our energy advisors, is joining us out of the beautiful New York. Elizabeth has a PhD in atmospheric science, a background in offshore wind and renewable energy systems, and she combines that deep technical foundation with really practical market insight. Elizabeth, thank you so much for joining us.

SPEAKER_02 1:44

Thank you, Jennifer. I'm really happy to be here today. I always love these conversations because I feel like the questions and discussions are always so much more interesting than what ends up in the slide deck.

Jennifer Ford, Host 1:55

Yes, yes, definitely true. And also joining us is Ricky Hopp, our VP of Energy Advisory and Marketing, who's joining me out of Houston, Texas. Ricky has been advising commercial and hospitality clients for years on procurement, demand strategy, and market exposure. And Ricky just co-authored one of our thought leadership article pieces that we put out this quarter on the hidden cost of summer and peak demand in hotels. So this topic is very fresh. Hi, Ricky.

SPEAKER_00 2:26

Hi, Jennifer. Thanks for having me. Uh, this is honestly one of my favorite things to talk about right now, just because the gap between what most operators know about their energy costs and what's actually driving them is massive. So, yeah, very happy to dig in on this.

Jennifer Ford, Host 2:42

Perfect. Okay. Well, we received four great questions from our audience around the country this go round. And we're going to dig into all of them. So let's get started. Our first question comes from Angela, the director of engineering out of Tampa in Florida. Her question here every conference I attend seems to have someone talking about solar panels, battery storage, or microgrids. It's difficult to tell what's a worthwhile investment versus what's simply getting a lot of attention. How should companies evaluate whether solar, battery storage, or both actually make financial sense for their facilities? So this is such a really good question. And honestly, I feel like I could go to any industry event right now and hear this exact debate on happening in the hallway somewhere. Ricky, I know you've attended several conferences lately. So how about you kick this one off?

SPEAKER_00 3:40

Yeah, absolutely. And Angela, I really feel this question. Um, because the honest answer is it depends. And I know that's not what anyone ever wants to hear, but it's genuinely true. And here's why. Um, solar and battery storage are two different tools solving two entirely different problems. Solar reduces your daytime electricity consumption, it's generating power when the sun is shining, which offsets what you'd otherwise pull from the grid during the day. Battery storage, on the other hand, is about shifting when you're pulling from the grid. So you charge the battery during off-peak hours and then you discharge it during the expensive peak window. But the mistake we see constantly is companies just bundle these together as one green upgrade like package. But the financial case for each one is totally different depending on your market, your tariff, and your actual load profile.

Jennifer Ford, Host 4:39

Okay, that's really interesting. Elizabeth, I know you work with clients on the technical side of this. So what do you see tripping at people?

SPEAKER_02 4:48

So I think the biggest thing that people really underestimate is how much of the financial return is actually driven by your specific market structure. And it's not super intuitive because you'd think, okay, a solar panel is a solar panel, right? It's the same no matter where you put it. But your return on that investment will be completely different if you're in a market like California versus Texas versus Ohio. For example, in markets with very high demand charges, think New York or California, where you're pairing this solar with a battery system, can reliably shave your peak. And that is genuinely compelling because we're talking about payback periods in the two to three year range at 2026 installed costs, especially when you factor in the 30% federal storage tax credit that's still available. It's a real investment in those markets. However, in a market like ERCOT, which is what we deal with for a lot of our Texas clients, there's not a conventional demand charge from the retailer. Your demand cost shows up differently through something called the 4CP, which is basically your transmission cost allocation that's set by your usage during four specific summer intervals. Same underlying principle, but it's a very different lever. And that changes the math on storage significantly. So you're looking at payback closer to eight years in some scenarios.

Jennifer Ford, Host 6:13

Okay, wow. So what I'm gathering here is the market really does matter that much when it comes to solar and battery.

SPEAKER_02 6:21

Yeah, it really does. And that's before you're even factoring in the nuances of the federal incentives. For example, that 30% storage credit I mentioned before does have a domestic content sourcing requirement. So not every project will qualify. If your project fails that test and you lose the credit, then suddenly the two-year payback period we talked about becomes a nine-year payback period. And it's a very different conversation.

SPEAKER_00 6:47

The other thing I'd say to Angela is, you know, don't let the asset decision lead, right? We always encourage clients to start with understanding their cost structure and load profile first. Because a storage system is only as valuable as the peak it's actually shaving, and a solar installation is only as valuable as the consumption that it's offsetting. So if you don't understand your own demand and when it shows up, you're sizing assets in the dark. So let's take a hotel as an example, right? Its highest demand often occurs between four and six, four and seven p.m. And that's when guests are checking in. That's when your HVAC systems are working its hardest, the restaurants are usually its busiest. And also there may be some like laundry operations that are running during that time. So a battery, if you're going to install it, should be sized around that specific demand peak because that's where it creates the most value by shaving demand charges. Solar, on the other hand, typically produces the most energy around midday, right? When that sun is at its peak. So it's peak generation may not align with the hotel's peak demand. So it can be very effective at reducing overall energy consumption, but it may not necessarily be that effective at reducing demand charges. And that's why we always encourage clients to understand their cost structure and hourly load profile first.

Jennifer Ford, Host 8:14

Okay, great information. So for Angela, the takeaway today is probably don't evaluate solar and storage as one thing. Make sure you understand your specific market and tariff and start with your cost structure before committing to hardware.

SPEAKER_00 8:33

Exactly. The technology is real and the economics can be genuinely compelling, but only in the right context.

SPEAKER_02 8:40

Yeah. And I would say that if you're at one of these conferences and someone is pitching solar plus storage package as a guaranteed win without asking you any questions about your specific market or your load profile, I'd say that's a red flag.

Jennifer Ford, Host 8:55

Okay, red flag noted. Great answer. Let's get to question two coming from Brian. He's a facilities director out of Dallas, Texas. His question: I've heard the term peak demand quite a bit lately, but honestly, I don't fully understand it. Why can just a few hours of high electricity usage have such a big impact on our utility bill? And what can companies realistically do to manage that without just disrupting operations? So I really love this question because I think a lot of people feel the same way. They hear peak demand all the time, but it's one of those things where nobody sits down and explains the mechanics of it. So, Elizabeth, let's start with you on this one. Can you break this down?

SPEAKER_02 9:41

Yeah, absolutely. So I'm gonna try to make it as clear as possible because I I agree it can sometimes be an unclear difference. Um, so using a really basic example, your electricity bill is going to be split down into two different charges. If you think about it like you're driving a car on a you know, five-hour road trip, consumption, the first um charge on your bill is the total kilowatt hours that you use on the month. That can be the equivalent to the miles driven across your road trip. So that's the actual usage that you're using over the entire day. The other is demand, which is the highest rate that you're pulling, um, the highest rate of power that you're pulling at any single moment, measured in kilowatts. So you think about that like the maximum speed that you hit on your highway trip. The utility will charge you based on the peak speed, not just the total distance. So where this stings is that peak demand charge is set by a single short window, often just 15 or 30 minutes. And in some markets, that will get locked in for the entire months. Some tariffs even have a ratchet clause, which means that one summer spike can set a floor on your build demand for up to 12 months afterwards. So a bad afternoon during a heat wave in July can potentially follow you through till next spring.

Jennifer Ford, Host 11:06

Oh, wow. Okay. And Ricky, you dug into this a lot in the piece you just co-authored with Kevin Sanguti, another energy advisor, on the hidden cost of summer. Can you talk about how different markets handle this differently?

SPEAKER_00 11:22

Yeah, and this is actually the part that surprises people the most. The mechanism varies a lot by market. So, in many utility territories across PJM, the Northeast, like New York and even California, large commercial and industrial customers pay a conventional monthly demand charge, where the highest demand you set during the billing month directly affects that portion of your bill. And as Elizabeth mentioned, some utility tariffs also include the demand ratchets, meaning one high summer peak can continue driving demand charges for months afterwards. So in ERCOT, where Brian is, specifically in Dallas, there's actually no conventional demand charge from the retailer at all. But the demand cost doesn't disappear. It shows up through the 4CP, which stands for four coincident peaks. So each summer month from June through September, ERCOT identifies the single highest 15-minute interval of system-wide demand. So your facility's electricity demand during those four ERCOT peak intervals determines a significant proportion of your transmission charges for the following year. So basically, your electricity draw during those four windows determines your transmission cost allocation for the entire following year. So you don't get a monthly demand charge, but if you happen to be running hard during those four critical time periods, you're going to feel it in your transmission costs for the next 12 months. Now, PJM, it's a little different mechanism, but it also drives significant costs from peak demand, right? The grid operator identifies the five highest system demand hours each summer. And your facility's average demand during those five hours establishes your peak load contribution or PLC. This determines a significant portion of your capacity costs for the following planning year. In PJM utility territories, the same peak events also influence transmission cost allocation. So reducing load during those hours can provide multiple layers of savings. New York is similar, but instead of five events, it uses a single annual coincident peak to establish installed capacity or ICAP obligations. So your facility's demand during that annual system peak helps determine your share of capacity costs for the following year. So there's a common theme across these markets. It's not just how much electricity you use, but when you use it. Understanding your load profile is what allows you to size technologies like batteries and solar correctly and capture the greatest economic value.

Jennifer Ford, Host 14:04

Okay, so it's a bit like a gotcha that comes back later.

SPEAKER_00 14:09

Exactly. And if you don't know which time period matters in your market, you can't manage around them. That's the hidden part.

Jennifer Ford, Host 14:16

So what can Brian actually do? What are the realistic levers without disrupting day-to-day operations? Elizabeth? Yeah, I can jump in on this.

SPEAKER_02 14:26

So there's there's a spectrum here at the operational end, and this is the lowest cost starting point, kind of the easiest place to start. You have loads shifting, things like pre-cooling your building before the afternoon peak, staggering HVAC compression, compressor cycling, scheduling laundry, parking garage lighting, EV charging and pumps outside of the expensive window. These doing these things doesn't require any capital investment, just more operational coordination and awareness. From there, you can get into building automation and energy management systems. And basically, these systems will monitor your real-time usage and automatically throttle equipment before you hit a certain threshold. And then, as Ricky mentioned before, for larger facilities that are in the right markets, battery storage can actually shave that peak on the grid side. So your building won't ever feel it operationally.

SPEAKER_00 15:24

Yeah, the key thing for Brian is understand your own data first, right? Look at your interval data, your 15-minute or hourly usage readings, and find out when your peaks actually occur and what's driving them. You can't manage what you haven't measured.

Jennifer Ford, Host 15:38

All right. So Brian's action plan, learn the demand mechanics in your specific market, get your interval data and start with operational load shifting before going to technology solutions. That's exactly it.

SPEAKER_02 15:54

And even modest changes, especially if you understand where to apply them, can have an outsized impact on the bill.

SPEAKER_00 16:01

And we have developed calculators to help estimate savings for peak reductions for our clients. So anyone listening can reach out to me or Elizabeth or any of our advisors to run an analysis.

Jennifer Ford, Host 16:14

Okay, great. Well, let's move on to question number three. That comes from Matt, the director of asset management out of Miami, Florida. He asks every year we hear predictions about a hotter than normal summer, an active hurricane season, or increased storm activity. Sometimes those forecasts are accurate and sometimes they're not. How much should businesses actually rely on seasonal weather forecasts when making energy decisions? At what point does weather forecasting become a valuable business planning tool instead of just something interesting to watch on the evening news? What a great question. And Elizabeth, this one has your name all over it given your background.

SPEAKER_02 17:00

Yeah, I definitely have some opinions on this one.

Jennifer Ford, Host 17:03

Okay, well, walk us through it. What's the honest take on seasonal weather forecasting?

SPEAKER_02 17:08

So the first thing that I want to say is that not all weather forecasts are created equal. For example, when NOAA releases their seasonal outlook that says we're going to have a warmer than average summer or we're going to have increased storm activity, that's just a probabilistic statement that's based on three to six month trends. It's useful as a directional signal, but it can't be used as a precise operational guide. For example, it doesn't tell you which specific days or weeks will be the hottest or when the grid stress will peak. On the other hand, shorter term forecasts, whether that's the next 48 hours, 10 days, or even out to about two weeks, have become remarkably accurate, especially when it comes to temperature extremes. There are obviously different forecast models designed for different time horizons, and each serves its own individual purpose. In general, the closer that we get to the weather event, the more confidence that we can have in the forecast. But that said, obviously no model is perfect. These are all complex based on complex numerical simulations, and the atmosphere is inherently chaotic, which means that there's always, there is always going to be some level of uncertainty. That said, while there may be minor errors in the specific timing or the exact magnitude of an extreme heat event, these forecasts are really, really excellent tools for knowing what's coming several days in advance. And the exciting part is, especially as these models have continued to get better and better, is that we can now really identify major heat events with enough lead time that businesses can actually prepare for them. That's more where weather forecasting becomes something more important than when you check on your phone to see if it's going to rain or you need an umbrella. It like really does become a valuable operational tool that help organizations plan ahead, manage energy use, and reduce their risk.

Jennifer Ford, Host 19:02

Okay, so there's a difference in time horizon. Exactly.

SPEAKER_02 19:07

Um the way I would think about it is to use the seasonal outlooks more for strategic planning and risk framing, um, but to really rely on the short-range forecasts for operational response. They're different things and they're answering different questions.

Jennifer Ford, Host 19:22

Okay, Ricky, from a procurement and business strategy standpoint, how do you use weather information with clients you're working with?

SPEAKER_00 19:30

Yeah, everything Elizabeth said is very valid in the way we have our risk management lens. Um, so when you have probabilistic signals pointing towards a hotter than normal summer, like we've been seeing more consistently in recent years, that's a meaningful input into your procurement strategy. But it's effective usually many months before your delivery period. So if you're on an index price product contract and a hot summer is likely to drive up spot prices, maybe that's the year you lock in more of your volume at a fixed price. But that said, we usually advise on avoiding shorter term spot purchases unless absolutely necessary due to increased volatility. Our typical portfolios are hedged through diverse purchases many months before a term begins to avoid abnormal price fluctuations. But alternatively, the short-term weather forecasts that Elizabeth mentioned are incredibly helpful for us in advising clients in ERCOT, PJM, New York, California, uh basically anyone who is managing those coincident peak risk, right? We're tracking weather forecasts closely in June through August because those peak intervals almost always happen on extreme heat days. And when the forecast shows a heat dome coming, that's a signal to position and make sure any load shifting strategies are ready to deploy. But it's important to know that we've planned alongside our clients how to mitigate demand on the peak events months prior to the event. So that when the events do occur, the plan is already in place, whether it's pre-cooling load, ensuring backup generation is ready to ramp on, or if certain other equipment can run idle or be turned off.

SPEAKER_02 21:18

Yeah, and for Matt specifically, especially being in Miami, hurricane season forecasts matter too and can be used in a very similar way. An active hurricane season forecast doesn't actually tell you whether your facility will be in a storm's path or how many storms to expect that summer. What it does tell you is that you should have continuity plans, backup generation assets, and contract clauses reviewed before we go into the season, not after a storm is named and the market is already reacting.

SPEAKER_00 21:47

Good point.

Jennifer Ford, Host 21:49

Yeah, that that's a really important reframe. Uh, using the forecast as a trigger for preparation rather than prediction.

SPEAKER_02 21:57

Yeah, and I think this goes back to like the cool. Of what we're trying to say is that the forecast doesn't have to be precise to be useful. Even knowing that there's an elevated probability of above normal heat is enough to justify reviewing your peak demand exposure and making sure that you have load management strategies in place. And for hurricanes, similar to temperature forecasts or any really severe weather, the short-term forecasts can be extremely helpful in determining whether your facility might be in a storm's path. And again, provide you the lead time that you need to put these continuity plans you've made months before in motion.

SPEAKER_00 22:35

And just to reiterate something I mentioned earlier, the businesses that get the most value from weather signals are the ones who've already built the infrastructure to act on them. Like demand response enrollment, load shifting protocols, procurement optionality. Then when the signal comes, they're not scrambling.

Jennifer Ford, Host 22:54

So Matt's takeaway here use seasonal forecasts for strategic positioning and risk review, short range forecasts for operational readiness, and make sure the infrastructure to act is already in place before you need it. Yeah, I think that's well put. Great question, Matt. Okay, going on to next uh our last question, last but not least, number four comes from Brian, a regional facilities manager out of Oklahoma City, Oklahoma. His question we've heard demand response can reduce costs, but we're hesitant because we can't disrupt operations. How does it actually work? Now, this is a really common hesitation. And honestly, I think a lot of the resistance to demand response comes from a misunderstanding of what it actually requires. So, Ricky, let's start with you on this one.

SPEAKER_00 23:48

Yeah, absolutely. Um, and Brian, you're you're not alone in this. We hear uh the hesitancy all the time, and I think it comes from people imagining that demand response means someone calling them up and just saying, turn off everything. And that's not really how it works. But here's here's a little bit more of like the actual structure. Demand response, it's a contractual relationship with the grid, either through your ISO or independent system operator or through an aggregator who bundles your curtailment capacity with other customers. You're committing to reduce load when the grid operator signals a need. In exchange, you're paid for that capability, both for being enrolled and for actually performing when called.

Jennifer Ford, Host 24:33

So it's like being on a team and you get paid to be available, not just act.

SPEAKER_00 24:40

Exactly. And the frequency of dispatch events is much lower than people expect. In a typical year, you might get called a handful of times, sometimes even fewer. The grid operator isn't pulling that lever constantly, they're saving it for moments of real stress.

SPEAKER_02 24:56

I'll add to this here is that that what Ricky mentioned before is really the critical piece that changes the conversation for most facilities. You don't actually have to turn off your operations. What you're actually doing goes back to what we talked about earlier in this discussion is that you're pre-positioning flexible load. Again, that could be pre-cooling your building before a likely dispatch window and then easing up on HVAC during the event, or shifting any non-critical equipment, pumps, lighting, EV charging outside of that dispatch window, or maybe you have backup generation or battery storage and you can dispatch those resources during the event. So your operational load really never changes at all.

Jennifer Ford, Host 25:38

So for a facility that can't reduce its core production, there's still a path.

SPEAKER_02 25:43

Oh, absolutely. And in fact, that's a large part of what we help clients figure out is basically identifying where the flexibility actually lives in their facility without ever having to touch their critical systems.

SPEAKER_00 25:56

Yeah, and I want to just address the concern we hear all the time. You know, what if we can't disrupt operations? You know, the good news is that demand response programs are designed with operational flexibility in mind. If you're dispatched and can't fully curtail, most programs have established non-performance provisions. But the key is to enroll only the amount of load you can reliably reliably reduce. So that's why we spend so much time understanding a facility's operations up front, right? When the program is sized appropriately, facilities can earn meaningful revenue while minimizing operational risk.

Jennifer Ford, Host 26:32

There's also a sustainability dimension here that I don't want to skip over.

SPEAKER_02 26:39

Yeah, and this is something that I find genuinely interesting. The hours when the grid calls for demand response are almost always also going to be the highest emission hours. That's when the most expensive, least efficient, highest emitting peaker plants are coming online. If you're able to curtail or shift load during those exact intervals, you're not only cutting your cost, but you're also cutting your carbon footprint simultaneously.

SPEAKER_00 27:04

That's such a good point, Elizabeth. Um, the US Department of Energy has actually identified demand flexibility as a core tool for both grid reliability and system cost reduction. So when your facility participates, you're contributing to something larger than your own bill.

Jennifer Ford, Host 27:20

Okay, so Brian's takeaway: demand response is not turn everything off. It's a structured program where you're paid for pre-position flexibility, dispatch events are infrequent, and for most facilities, there's a way to participate without ever touching core operations.

SPEAKER_00 27:37

Yeah, and the first step is just an honest assessment of where the flexibility is in your facility, which is something we help clients do all the time.

Jennifer Ford, Host 27:45

Okay, wonderful. Well, y'all, this has been a really great conversation and honestly, exactly what this series is supposed to be. Real questions and real answers with our real energy experts. So, Elizabeth, Ricky, any final thoughts heading into summer?

SPEAKER_02 28:03

My advice is simple, I would say. Don't wait until August to think about your summer energy costs. We've already seen grid operators issue several load advisories earlier this season, and forecasts are continuing to suggest that some regions will see record-breaking demand this summer. Even this week, parts of the Northeast are under extreme heat watch as temperatures are forecasted to approach well above normal. It's just also this reminder that our electric grid is becoming more constrained as we're seeing demand continue to grow. So I would say that now, if not already, is the time to review your interval data, make sure you understand your demand profile, and make sure that your strategy is ready before the hottest um summer days arrive. Because when the peak season does hit, the grid doesn't wait. And you don't want your energy strategy to either.

SPEAKER_00 28:56

Yeah, I'd echo that. Um, and if you want a deeper read on the demand and procurement side of all of this, you know, we just published a thought leadership article called The Hidden Cost of Summer. And it covers the market mechanics, the asset economics, and the decision framework in a lot more depth. So, you know, I think you can find it on our social and our website at pilotenergy.com.

Jennifer Ford, Host 29:18

Well, thank you all so much. And a huge thank you to everyone who submitted questions for this episode. Please keep them coming. If you're in an energy-intensive industry and you have a question you love answered on the show, please send them our way. We'll be continuing the series with more industry-specific conversations. And we have some great guests lined up too in the coming months. So stay tuned. Until then, I'm Jennifer Ford. Thank you for listening to Pilot Unplugged. Ask me anything. And remember, you can always find us powered online at pilotenergy.com. Stay cool this summer.