Demand management

Look beyond kWh for deeper savings

As utility tariffs grow ever more complex, building managers have responded, quite reasonably, by ignoring the fine print in their utility bills and using aggregate figures such as dollars per kilowatt-hour (kWh) to track building performance. Widening the view a bit to include demand charges can point the way to big savings.

Peak demand management alert diagram

What are demand charges?

Increasingly, commercial customers are charged not just for the total amount of electricity use, 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.

Utilities levy demand charges to 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 way to make the second building bear the costs of increased burden on the grid.

Why care about demand costs?

There are at least two reasons demand costs 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 thanother 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. Now, the availability of fine-grained energy data opens a window on minute-by-minute building performance, allowing savvy facility managers to reduce costs through targeted efficiency measures.

How to manage demand

Utilities differ in how they levy demand charges, but typically they charge based on the single highest demand reading over the course of a billing period. The first step in managing demand, therefore, is to accurately predict when a demand peak is likely to occur. Gridium’s Snapmeter service uses historical energy, weather, and billing data to help you identify demand peaks in advance.

The second step is putting in place low-cost demand curtailment procedures on days of possible peaks. These include measures such as shutting off architectural lighting, adjusting temperature setpoints, and reducing plug load.

The third step is to test your curtailment procedures using tools like Snapmeter to determine whether your efforts are actually succeeding in dropping kilowatts from your demand peaks. At $30 per kilowatt, these measures are likely to pay off handsomely.

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