Managing peak demand charges helps large energy users

For companies that are large users of electricity (generally over 100 MWh/yr), it is likely that they are paying a hefty charge for peak demand, according to the Ecoefficiency Group.

The group explained that every time a light or a piece of equipment is switched on it creates a demand for electricity.

There is also a customer expectation that this demand will be met 24/7 and 365 days a year. But this guaranteed supply comes at a cost.

Electricity infrastructure such as generator stations, high voltage transmission lines and distribution wires are constructed to meet the energy demands of an area. If the demand is greater than the supply, electricity providers may need to invest to upgrade infrastructure to meet customer requirements.

Distributors need to recoup such investment and the ongoing maintenance cost of a larger network, explained the Ecoefficiency Group.

In South East Queensland, 16 per cent of the network has been built to service a peak demand that only occurs for a few hours on a few days of the year.

Reducing overall peak demand means less investment in infrastructure and an overall cost reduction for the company.

As a result, peak demand charges are used by electricity retailers as an incentive to reduce peak usage and the need for more infrastructure.

Peak demand is the maximum quantity of electricity your business needs at any point in time.

It can be likened to your car’s speedometer that tells people the speed they are travelling at and is charged in $/kW or $/kVA.

The overall electricity usage is like an odometer, telling people how far they’ve driven and is charged in $/kWh.

The meters measure the demand in 15 minute intervals in a set period (usually a month).

People are charged for the set period based on the highest peak reached even if it only occurs for 15 minutes during that month.

The theory is that even though people only draw that quantity of energy from the network for 15 minutes within a month, the distributors must always have the capacity and maintain the infrastructure to cater for that demand.

To reduce demand charges, the Ecoefficiency Group suggested working out when the peaks in demand occur.

To do this people can usually request usage data from a service provider.

Most providers have online systems which can be logged into and get up to date data on usage.

If they can’t provide this, they will most likely send a data file showing energy use in 15 minute intervals.

Secondly, work out what is causing the peak.

This might be quite obvious. Equipment often causes a large spike of electricity demand at start up before reaching a steady state.

Often this occurs at the start of business each day or after lunch breaks.

An electric motor starting-up for example can draw up to five times or more the current that it draws during normal operation.

Spikes can also occur during peak periods of business activity or production or when a particularly energy intensive piece of equipment is turned on.

Spikes may even be caused by external factors such as hot weather and the demand on air conditioning or cooling units.

Sometimes it can be difficult to peg spikes down to one piece of equipment or one practice. It may just be the ongoing and fluctuating use of equipment over the day, in which case the solution may involve multiple actions.