Peak demand charges can make up a whopping 40% of your electricity bill. Yep… you heard it right… the maximum amount of energy used during a 15 minute period throughout the month determines almost half of your bill!
While building operators play a vital role in taking control of peak demand charges, the reality is that for many resource-constrained teams, without the right data, efforts to mitigate these costly charges often fall short.
With temps already heating up, here’s a quick primer on demand charges and four ways to prevent demand-charged bills from catching you off-guard this summer.
First, what are demand charges?
Increasingly, commercial customers are charged not just for the total amount of electricity used, but also for the rate of use. Paying for the amount of electricity use is like paying for the gas in your car. As you put fuel in the tank, the numbers on the pump tick up. Paying for demand, on the other hand, is like having a speed gun constantly pointed at you. At the end of the month you have to write a separate check for the fastest you drove (consider it a speeding ticket for buildings). But, depending on your tariff, how fast you drove during the on-peak period might cast a shadow over your bills for a full 12 months.
Recently, as stress on the grid has grown, utilities have levied and increased demand charges to help defray the cost of transmission infrastructure. Two buildings might both use 100,000 kWh over the course of a billing period, but the first has steady demand of 140 kW and the second has spiky demand that at times hits 500 kW. The demand charge is a way to make the second building bear the costs of its heavier burden on the grid.
Why should I care about demand charges?
There are at least two reasons demand charges matter: the first is that they add up. Take a look at your bill from last August (demand charges tend to be higher in summer months). The demand charge probably makes up anywhere from 25 – 50% of your bill. That is a lot of money to hide in a blended average rate. And demand charges have been rising faster than other energy costs, as utilities seek to relieve strain on the grid.
The second is that demand charges can be reduced through low-cost operational improvements. Before smart meters, it was tough to know when you were going to hit a demand peak. Today, the availability of fine-grained energy data opens a window into minute-by-minute building performance, allowing savvy operations teams to reduce costs through targeted efficiency measures.
So what can I do about them?
Demand charges are a costly reality, but there are some simple things building operators can do to keep your energy usage under control to reduce the likelihood of setting your peak (and/or getting shocked by the bill!).
1. Set up the right level of monitoring.
An old adage in the smart building industry is “you can’t manage what you don’t measure.” Operations teams rely on detailed energy performance dashboards and reports in order to identify periods of peak demand and potential excessive energy usage. But costly submeter data isn’t necessary; Gridium’s AI-powered analytics provide a clear picture of energy performance, with no hardware required and at a much lower cost than real-time monitoring platforms. By tying historical usage in with local weather data Gridium proactively predicts and alerts the building team to upcoming demand curtailment opportunities.
2. Know the (demand) forecast.
Sure, the 10-day weather forecast calls for a heatwave, but what does that mean for your building? The kind of forecast you really need employs predictive analytics to anticipate peak demand periods. As an example, Gridium analyzes historical energy, weather, rate structure, and billing data to help you identify demand peaks in advance (check out this overview of demand forecast charts). We then arm customers with this information (via a weekly email straight to their inbox) so they can implement proactive energy-saving measures, such as pre-cooling, staggering loads, or pre-heating the building, to minimize peak demand charges.
3. Get smart about load shifting.
Clear visibility into energy performance enables building teams to optimize load shifting strategies. For instance, to avoid peak demand charges, we recommend that operators schedule energy-intensive operations, such as HVAC systems and equipment, to off-peak hours. By adjusting the timing of these loads based on demand forecasts, the teams can reduce energy usage during peak periods, resulting in substantial cost savings.
4. Be proactive about curtailment.
Another basic, but key, strategy is to put in place low-cost demand curtailment procedures on days of possible peaks. These include measures such as shutting off non-critical lighting, adjusting temperature setpoints, and reducing plug load.
By simply looking at the weather forecast, a team that is in touch with their building systems can plan around upcoming weather to mitigate and curtail demand.
Finally, you’ll want to test your curtailment procedures (using tools like Gridium) to determine whether your efforts are actually succeeding in dropping kilowatts from your demand peaks.
“Gridium helps my team hit our annual energy savings target. Peak demand charges and anomalous use patterns are now easier to control,” confirms George Lesko, the former Regional Engineer at Douglas Emmett. Through a proactive, data-driven approach, building operations teams can successfully manage and reduce energy consumption during peak demand periods, preventing those dreaded summertime “speeding tickets” (at least, the building kind).
Want to see for yourself how Gridium’s software can help you prevent costly demand charges? Contact us below for a 1:1 demo.
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