Demand Charge Reduction for Industrial and Commercial Facilities
On many commercial and industrial tariffs, demand charges are a large part of the bill. The charge is set by your single highest 15- or 30-minute interval in the billing period, so one short spike can set the cost for the whole month.
How a demand charge is set
The utility measures your highest interval of power use in the billing period and bills it at the tariff's demand rate, in dollars per kilowatt. Many tariffs include more than one demand component, such as a facilities charge that applies all day and a peak-period charge that applies only in set hours. Some tariffs add a ratchet that keeps a high month's demand in the bill for the months that follow. Some regions also price capacity from your load during a few system peak hours, so check how your market does this.
A simple illustration
This example is illustrative and uses an assumed rate, not your tariff. Suppose a plant's highest interval is 2,000 kW and the demand rate is $15 per kW. The demand charge is 2,000 x $15 = $30,000 for the month. If that peak is a single 15-minute event, and moving or staging load lowers it by 200 kW, the charge falls by 200 x $15 = $3,000 for the month, or $36,000 over twelve months. If a ratchet applies, the saving can depend on how the tariff treats the following months. The point is that the charge responds to a few intervals, not to total consumption.
Ways to lower it
- Load shifting: moving flexible loads such as chillers, compressors and batch processes away from the peak interval.
- Staging: staggering equipment start-up so that loads do not stack on top of each other.
- Battery storage: discharging during the peak interval to cap demand. Whether it pays back depends on the tariff, the load shape and the incentives available.
- Demand response: being paid for reducing load in defined events, where programs exist.
- Power factor and other tariff terms: some tariffs add charges or credits that can be managed separately from demand.
What decides which option fits
- How sharp the peaks are. A short, rare spike is often cheaper to manage with scheduling than with equipment.
- Whether the load is flexible. Process loads with fixed schedules leave less room than building loads.
- The tariff. Ratchets, time-of-use periods and the number of demand components all change the answer.
- The incentive calendar. Federal, state and utility programs have deadlines and component rules that affect storage economics.
How we approach it
We find the intervals that set your charge, test each option against your own tariff and load data, and report whether it pays back. For storage, we check the incentive deadlines and component rules before anything is priced. We use your interval data, so the result reflects your facility and not an industry average.
What we need
Recent bills and, where available, 15-minute interval data from your utility, along with a description of which loads can move and when.
Common questions
Is a demand charge the same as a peak-hours charge?
No. A demand charge is based on your highest interval. A peak-period or time-of-use charge applies to energy used during set hours. Some tariffs have both.
Do I need a battery to reduce demand charges?
Not always. Scheduling and staging cost little and often come first. Batteries make sense when peaks are sharp, the loads cannot move, and the tariff and incentives support the cost.
Can you control my equipment?
No. We provide analysis and recommendations. Changes to your operations and equipment remain with you.
First step
The first step is a no-cost forensic analysis of your bills and data.
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