What if we told you that 30 minutes of your operations during the month could be significantly increasing your monthly energy bill? If you consider that a 20% reduction in energy consumption can have the same bottom line benefit as a 5% increase and sales, all of a sudden your electricity bills will become a lot more intriguing! At Kambo, we help lots of businesses to understand and reduce their energy bills and we have decided to share some of our knowledge about costly demand charges and how you can avoid them.
Demand charge is related to the maximum amount of power your business uses during a billing period, measured in kilowatts. Demand is what determines the total capacity required by the grid, and therefore, the electrical infrastructure for BC Hydro. When business reduce their peak load by shifting some activities to low-demand periods of the day, less electrical infrastructure is needed. An example of this would be if a business moved cleaning and maintenance operations to the evenings, rather than running them during their main day shift when other machinery and equipment has to be in operation.
What is peak demand and what does it have to do with my energy bills?
Think of it this way demand charges are the electrical equivalent of a speeding ticket. Consider consumption as your car’s odometer telling you the distance you have driven. Demand is how much you put your foot down. Speeding is the equivalent to your business peak demand period. Consumption is your overall electricity use (mileage), and demand is the hefty fine you get for speeding.
Why does BC Hydro care about my peak demand?
Some commercial and industrial energy users only occasionally need large amounts of electricity while others require it constantly. Because electricity can’t be stored, meeting demand becomes complicated and requires keeping a vast array of expensive energy infrastructure on constant standby. The idea is that the customers who create this exceptionally high demand are then correspondingly charged more for it.
Peak demand can be hard on the environment because less sustainable forms of electricity generation must be run to meet demand. For example, BC might obtain surplus power from another jurisdiction who use non-renewable methods to generate electricity. The construction of the site C damn is another example of BC Hydro needing to expand their infrastructure in order to meet increasing demand.
How is peak demand calculated?
BC Hydro charges for demand based on your peak demand, regardless of whether your peak demand lasts for five minutes or five days. Demand charge (a line item on your BC Hydro bill underneath energy charge) is related to the maximum amount of power you need during a billing period, measured in kilowatts.
The examples below use the BC Hydro average blended energy savings rate of $0.1.
BC Hydro Demand Charges:
(as at April 2017)
$11.21 per kW for Large General Service Customers
$4.92 per kW for Medium General Service Customers
Company A runs a 1000kW load continuously for 100 hours.
1000kW x 100 hours = 100,000 kilowatt hours (kWh)
Consumption: 100,000 kWh x 0.055 = $5,500
Demand:1000 kW x $11.21 = $11,210
Company B runs a 200kW load for 500 hours.
200kW x 500 hours = 100,000 kWh
Consumption: 100,000 kWh x 0.055 = $5,500
Demand:200 kW x $11.21 = $2,242
For the same amount of kilowatt hours used i.e., at the same consumption level albeit at different intensities, Company A pays significantly more.
How can I reduce my Peak Demand?
Peak demand charges can represent a significant chunk of your energy bill, here are some steps you can take to effectively manage and reduce these charges.
Step 1: Get to know your energy bill and make sure you understand your peak demand charges
We recommend familiarizing yourself with BC Hydro’s online My Hydro feature. This allows you to review your hourly energy consumption throughout the month so you can get a clear idea of when your business experiences peak demand. Once you know when your peak demand period is, you can figure out what business operations are contributing to the peak.
There is a handy Add an alert feature that enables you to sign up to receive SMS or email peak demand alerts.
Step 2: Analyse your operations
Unfortunately there isn’t a cookie-cutter solution that will help every business to manage their peak demand. The amount that scheduling and peak demand management can impact a facility’s energy bill (and bottom line) largely depends on the business size and energy consumption patterns.
Certain industries such as manufacturing and food processing typically experience higher peak demand periods than other industries, this is partly due to the start up of energy-intensive equipment and machinery. If your energy spikes at the beginning of each shift, try staggering the start up of your equipment so you slowly ramp up your energy use to try to avoid an energy demand spike.
Certain operations such as cleaning and maintenance might be contributing to peak demand, investigate whether you can change your work flow scheduling to reduce demand.
Step 3: Consider ways to reduce your energy consumption immediately
A variety of energy reducing solutions are available and the level of priority will vary from business to business. Read our post 12 Energy Productivity Hacks for your Business to get some ideas about how you can reduce your overall energy consumption. Something as simple as changing the light bulbs in your facility might help you get below the peak demand charge bracket that is costing you a premium.
Step 4: Use real-time energy monitoring
The best way to properly understand energy usage in your facility is through device-level real time energy monitoring. This allows you to accurately measure the burden each piece of equipment has on your business and how different operations impact your peak demand throughout the day/week/month.
For example, a business could identify that their cleaning schedule is causing a spike in demand charge and could move the cleaning schedule accordingly to lower energy usage at no cost to your business.
Another good example is forklift charging; it only takes five hours to charge a forklift but it is very energy intensive. Businesses can save a lot of energy putting the chargers on a timer so they only charge in the middle of the night and are ready for the morning rather than being left charging overnight until the beginning of the next shift.