Periods of high demand strain the electric grid. Peak demand charges can also put a strain on your energy budget.

How Peak Demand Impacts Your Energy Bills


Your electric bill seems simple enough: You're charged for the amount of energy your facility uses each month, right? Unfortunately, it's a little more complicated than that.

High demand puts a strain on the electric grid, and more expensive sources of power are needed to meet that demand. Those extra costs become a part of your electric bill in the form of demand charges. Understanding energy demand and how it impacts your utility costs will enable you to take steps to reduce peak demand before it sends your energy costs soaring.

What is peak demand?

System demand on the electric grid varies throughout the year, depending on weather, the business cycle, the school year and other factors. Large power plants supply the base electrical load, which is relatively constant. Smaller peaking plants are used to meet periods of high demand. Although these units are more flexible, they're also costly to operate.

The strategy works best if the peaking units run for only short periods, typically in the summer when air conditioning needs create demand peaks. These peaking units alleviate some of the strain on the electrical system that supplies the base load.

Peak demand and your energy costs

The additional cost to supply peak power becomes a part of your electricity bill in the form of a rate structure where higher charges come into effect during these critical periods. These are called peak demand charges.

Although total energy consumption is measured in kilowatt-hours (kWh), demand meters record the rate of electric use in kilowatts (kW) over short time intervals. One energy intensive interval can result in a high demand charge.

Leveling the peaks

How do you reduce your peak demand charges? Although every facility is unique, the following are some operational and equipment strategies that may help:

  • Increase summertime building temperatures to reduce cooling demand. Allow employees to wear appropriate clothing to ensure their comfort.
  • Adjust work schedules to reduce energy use during peak demand periods, typically in the afternoon.
  • Reduce lighting demand through the use of occupancy sensors and daylighting strategies.
  • Use an energy management system (EMS) to schedule equipment and building system operations to reduce demand.
  • Use backup generators to handle large electrical loads that must operate during peak periods.
  • Install automatic sequencers on multiple units of high energy-use processing equipment to keep them from operating simultaneously.

With these measures, you can get your peak demand down to size and save money on your energy bills.

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