The discussion of demand follows a link with Electricity. It is clear as there are bills to pay. However, we should not ignore the additional charges. Demand charges are one such kind. Yet, let us not forget the different types of demand charges. Here, we need to be sure of different demand charges. These charges follow different rates with regions.
Now let us discuss the definition. It stands for the increased electric rate. Moreover. it explains the rate and power. The rate that is paid for the power being used. It occurs during the peak demand period. Therefore, we need to be sure of the power and peak demand period. Now, the question arises, what is the peak demand period? It is the duration at which consumer demand for electricity is at the highest.
Energy Consumption in Demand Charges
Demand is clear in the study of electricity bills. Yet, this thing links with demand charges. So, to find it out we need to observe the essential parts of commercial energy bills.
Charges of Baseline
Another name for this parameter is the connection fee. Electricity owners fully understand the need for connection with the grid. So, to remain a part of the grid electricity users must pay this fee. It is also called as a set fee
Usage Charges
Another name for usage charges is the load factor. It describes the number of things like the electrical equipment and consumed electricity. It also contains your daily use and the timings. In other words, it offers the usage of energy appliances for specific durations. However, the costs will be different in different timelines. Here, an important fact about usage is also present. We definitely need to follow up on the usage
Now, let us follow the discussion on energy consumption. It is an important element of bill-in-demand charges. Here, the charges vary. Yet, the measurement of consumption is in kilowatt-hours. This calculation helps to measure the amount of consumed energy . But, here this measurement links to the billing period.
In other words, you come across the charges of electricity. Especially those that you had consumed. However, you should not worry about charges. It is a fact that your geographical location defines your consumption charges. But, it is not much costly. The amount is as little as $0.03- $1.00. So, just focus on the rate as per your location.
Calculation of energy consumption in demand charges
Let us follow an example to explain the concept of energy consumption. Suppose you consumed 12,000 kWh of energy in your monthly bill. Yet, the rate as per your location turns out to be $0.15/kWh, therefore the calculation will be as:
12,000 x 0.15 = $1800
In this way, you can easily calculate your consumption of energy. Here, the demand charges act just like your energy being consumed.
How to calculate the commercial electricity Demand Charges?
The calculation of demand charges works on specific methods by companies. Here, the basic step is the same. But, the rates are different for each US State. So, there we can observe some changes. The companies calculate your demand charges based on 15-minute gaps. This duration is followed on a condition. It follows when an individual uses the highest amount of electricity. Yet, due to this high interval a demand charge is calculated. In other words, companies fully check your monthly bills. Here, they see the time. The duration where you were using more electricity. So, following this time, companies multiply the value by a certain rate of electricity as per the region. This method helps to calculate demand charges.
Types of Demand Charges
Peak Demand Charges
The charges that are linked with highest demand during a billing period. Such charges occur when the energy retailer charges an extra fee. Especially, for the highest amount of power consumed. There is no particular duration for that. However, commercial applications have this charge on monthly bills.
Ratchet Demand Charges
It is a billing method used by electric utilities. There, the companies charge for peak demand. Yet, the customers are commercial and industrial-based. The process involves the setting of a minimum demand charge. It exists for each month depending on the highest demand of customers. Basically, it shows the month where the customer is charged. So, even if the peak demand is lower customers will still be charged. Let us clarify this concept by an example. Suppose, the highest demand of customers in 11 months is 1000 kW. Now the ratchet demand for utility is 80%. Here, the minimum demand charge will be of 800 kW. However, even if the customer’s demand is 600kW the charge will be 800kW. We should be certain of factors like an annual peak. It shows the highest monthly demand for a year. This is how the annual peak helps to ratchet the monthly demand peaks for the next months.
Purpose of Ratchet Demand Charges
The basic purpose is to reduce peak demand. It helps the customers to reduce their peak demand. It is because customer’s peak demand demand charge depend upon each other. Higher the Customer’s peak demand higher will be the actual peak demand. So, if the customers reduce their peak demand they can easily save money.
Time-of-use Demand Charges
It is similar to peak demand. But, here the difference lies in highest demand during specific durations. It explains the particular time at which energy usage is high. So, we then consider this duration as time-of-use
How can Demand Charges be lowered?
There are many ways in which we can reduce demand charges. So, let us discuss some of the essential factors.
Installing efficient equipment
This era is all about technology. However, we cannot ignore the use of appliances. These are important in our daily life. But, there are demand charges and higher rates of electricity to use. Yet, how to avoid such expenses?. Here, the answer is pretty simple. It lies in the form of using the latest technologies. For example LED bulbs, inverters, and Solar appliances. Here, you can easily reduce your demand charges. There is a huge use of many electrical appliances in summer. In winter we experience lesser use than summer season. But, if you become efficient with resources then you can have control over any kind of charges.
The factor of Peak Shaving
It is basically a demand response strategy. It helps to reduce the electric demand of a customer. Yet, this process is followed especially in peak load. Common methods include reducing consumption, shifting peak hours and using on-site storage. Its important use is in the form of controlling demand charges. Such charges are evident in the form of highest demand during billing period. Reduction in demand charges is a quick way to save bills. There are many important ways to apply demand charges. Many of the common ways are:
Temporary reduction of Load
It includes the lessening of consumption. So, we do so by switching off unnecessary equipment. It also contains the closure of appliances in peak demand hours.
Shifting of Load
We come across the shifting of consumption to off peak hours here. For example, running laundery or dishwashers. It specially follows for battery energy storage systems. We can easily understand this concept by the infographics as below.
Generation of load on-site
In this process all that we observe is the energy generation of renewable equipment. Food example, solar panels or wind turbines. Further, it includes the customer’s demand. Especially the one accounting from the grid for electricity.
Storage of Energy
This term involves the installation of battery storage systems. Particularly, the storage accounts for storing electricity in off peak hours. However, the use of stored electricity is followed for peak demand hours.
An aspect of load shifting
As the name shows, this factor explains the shifting of energy timings. Here, shifting of energy usage takes place. We experience a change in the timelines of demands. There is an overlap of high demand with low demand. So, to perform such tasks we use battery energy storage systems. Here, the abbreviation is BESS. These systems help to reduce demand charges by charging off-peak hours. Furthermore, there is discharging during peak hours.
Impact of Solar on Demand Charges
Solar plays a valuable role in reducing demand charges. There are many factors involved in it. However, the reliable ones include size of the solar system, demand of the day, and demand charge structure. Commonly solar works by electricity generation in the daytime. It especially considers the demand of customers in the daytime. However, there is the impact of solar varies with a specific time. During off-peak hours solar energy will have a lesser impact on demand charges. For example, a solar owner will not have any savings for demand charges. This is because there is the highest demand during the day. Utilities demand charge structure can also impact the demand charges. It includes the customer’s average demand during the billing period. Moreover, the other process includes the peak demand of a customer. Yet, it is certain that customers with average demand save more than the ones with peak demand. Hence, we come across the fact that solar significantly impacts the peak demand charges. But, we should consider the factors and peak time during the day. Moreover, there are some additional things like below.
Solar System Size
Large solar systems will have a greater impact as compared to smaller systems. Therefore, the systems with small sizes can provide greater savings
Time of Usage
Solar energy during off-peak hours impacts less than during peak hours. Therefore, the peak durations show their impact with different timings.
Structure of Utility Demand Charge
Utilities based on average demand show a greater impact as compared to utilities with peak demand. So, there is a greater need to follow the structure of utility.
Load Profile of the Customers
It shows the electricity consumption of customers. There is an important role of timings here. The load profile of customers with the highest demand in a day has more savings. Yet, the ones with night-based highest demand shows lesser savings.
Why do utilities go for Demand Charges?
Utilities use such charges under a specific condition. It relates to energy use. However, there should be an equal distribution of electricity. Therefore, utilities need to fulfill the energy needs of every customer. The charges are for those who use electricity more than required. Let us have a look at some of the advantages.
Recovering the Costs
It includes the costs recovery and maintenance of infrastructure. Utilities have to follow investment for expensive equipments. Especially, the items like power plants and transmission lines. It is followed to meet all of the needs of customers. However, it works to help dring peak demand periods. Demand charges have a purpose. It follows the idea that cost recovery is done for customers who cause peak demands. Such charges also encourage customers to decrease peak demand by two ways. One is shifting consumption to peak hours while other is investment in energy efficiency. Due to these methods, we can reduce the pressure on grid.
Promoting Renewable Energy Sources
Demand charges aim at making it easy for customers. Therefore, they help to promote renewable energy sources. Common purpose is to help with installation of solar panels or wind turbines. It helps to reduce the dependency on fossil fuels. Further, we come across the improvement of air quality.
Conclusion
This article provides all of the proper details involving demand charges. Many of the important terminologies help to consider a better result. Especially the idea with the calculation. So, we can easily understand the overall process through this blog.