What are demand charges?
If you are a commercial customer, you may notice that your bill contains both usage (kilowatt hours, “kWh”) and demand charges (kilowatts, “kW”,
or kilo-volt-ampere, “kVA” for very large services).
Why do utilities track and charge for both of these items?
Usage charges reflect the amount of total energy used at your facility. It is measured in Kilowatt Hours (kWh), or the amount of power in kilowatts (kW) multiplied by the amount of time in hours (h) that the electricity was used. A customer who uses 5 kilowatts of power for 2 hours, will be charged for
10 kilowatt hours (5kW x 2h = 10 kWh).
Demand charges reflect the additional costs of supplying the required amount of power in kW, at any given time. A business that requires large amounts of power will require more infrastructure such as larger wires, transformers, increased generation, etc. Take for example the following two customers:
Both these customers have used 100 kWh of electricity (usage), but Customer A required 100 kW over a single hour, while Customer B required only
20 kW each hour over 5 hours. This means customer A would require different infrastructure, capable of handling their much higher level of demand.
A utility must build its system to handle the highest demand a service might have, which is why they charge for peak demand; the highest point of demand in a billing cycle. The lower your peak demand, the lower your demand charge will be. Your demand is automatically reset to zero at the beginning of each billing cycle.
What causes demand?
The total demand of a service is equal to every electrically powered device operating at any given interval of 15 minutes. It can include the heating system, lighting, computers, appliances, and electrically powered equipment such as compressors, conveyor belts, pumps, etc.
For example, a restaurant’s demand at 10 am may look differently than its demand at 12pm:
Given the increased usage of the stoves, fryers, etc. at lunch time, the restaurant’s appliances will demand more electricity. The same can be seen in
the heating load. As customers enter and exit the building, allowing more cold air to enter, the heating system must work harder to maintain the desired temperature. Lighting stays the same in this case, as it is unaffected by the number of customers.
Businesses in Newfoundland and Labrador will tend to experience higher levels of demand during the colder winter months, as their heating system
will require more electricity to maintain comfortable temperatures.
How do I reduce my demand?
Demand is made up of many types of electrical equipment operating at the same time, if you can decrease any of the individual pieces you can
decrease your overall demand.
If the restaurant in the previous example were to invest in an LED lighting upgrade, they could potentially cut their lighting load in half. Optimizing their heating system and shutting down unused equipment could also reduce their peak demand. Note the differences from the previous chart:
With the additional energy saving measures in place, this restaurant lowered their demand by 3 kilowatts.
Additional demand saving tips
Lowering your demand involves looking at all the equipment that makes up your electrical demand:
- Using a programmable thermostat to set back space temperatures after business hours is a great way to save energy. You could save 10% or more on your heating costs and get $20 back with a takeCHARGE rebate. Be sure to start the space reheating early in the morning so space temperatures are back to normal before staff arrives.
- Is your lighting system out of date? Are you still using older incandescent, florescent, or metal halide lighting in your building? Upgrading to LED lighting could save you 40% or more on your lighting load and you can get money back with takeCHARGE rebates.
- Think about the times when most of the equipment is operating in your business. This is probably the time when you set your peak demand. Can any equipment be turned off at that time? Could something be rescheduled?
For more tips on lowering your usage and demand, be sure to check out our No-Cost and Low-Cost Ways to Save here. If you are considering upgrading any part of your operation, whether it’s heat, light, or equipment, be sure to contact us first. You may qualify rebates through the takeCHARGE Business Efficiency Program!