[ghouse]

The electrical grid has many different resources that can be constrained. For example, the entire grid may not have adequate supply to meet demand, a transmission line may not have adequate capacity to deliver electricity from generation to load, or a substation may not have enough transformation capacity to delivery electricity from the transmission grid to the distribution grid.

As a society (natural monopoly), we pay to meet peak demand. In fact, most of the cost of electricity (in the US, in most markets...) is not the marginal cost of generation, but the amortization of fixed costs.

My reducing the peak demand, we reduce the need to build new infrastructure that is unnecessary for all but 8755 hours a year.