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Ask an Expert-Tips to Reduce Peak Demand

"Can you explain demand charges as they apply to an electric bill? What are some techniques to reduce demand charges?"

The demand meter records your highest electricity usage level each month, over a 15-minute interval. There are many factors to consider when working to reduce your peak demand costs and this article addresses the basics.

A key factor is understanding when your peak demand occurs.  For instance, if your peak energy usage period is during the daytime, reducing your lighting load at night will have no impact on reducing your kilowatt (kW) peak demand. It will, however, reduce your overall kilowatthour (kWh) usage and, therefore, lower that portion of your electric bill. For better decision-making, the difference between kW and kWh needs to be understood. Briefly, kWh is the quantity of energy consumed, kW relates to the rate at which that quantity is consumed.

To give an example, a machine shop that has one 50 hp motor that it runs for only about two hours each day may consume the same amount of electricity as a retail store that has its lights on for 16 hours each day. The utility must have 44 kW of capacity available to serve this motor at the machine shop, and perhaps only 6 kW (60 light bulbs, 100 watts each) of capacity available to serve the retail store. In this hypothetical case, both the machine shop and the retail store use the same quantity of electricity, say 100 kWh each day. But the utility power plant must be ready at any time to supply the 44 kW of capacity to power the 50 hp motor, more than 7 times the instantaneous power requirements of the retail store.

Therefore, the utility charges a peak demand charge to the machine shop to cover the cost of supplying that large block of energy, even though it is only for a relatively brief period of time. The concept of a "demand charge" was introduced to treat consumers more equitably, meaning that those who require excessive peaks of power during certain hours, and very little power during other hours, contribute their fair share toward the utility's installed capacity.

Reducing Demand Charges

Many strategies are effective for reducing peak demand in nearly every type of commercial and industrial facility. The first step in this process is to become familiar with your facility's load profile, and to understand which facets of your operation are causing the peaks in the demand curve. This will provide guidance as to how to stagger your electrical load.

There is certainly an equipment change out approach to increase the efficiency of the motors, chillers, and other process equipment that may be contributing to the high-energy use, but the timing of these capital investments can sometimes be difficult. It is also possible to approach the situation by changing the operating practices of your facility and workforce, and this can sometimes be done with minimal capital investments. It is interesting that this can often be accomplished without having a significant impact on production.

The key issue is to first understand your load profile, and then to become familiar with the different operating strategies that can be employed to cut demand. The following are some specific recommendations that may help you get started:

  • Establish the facility's load profile so that the high-energy use equipment is identified.
  • An Energy Management System (EMS) can be used to ensure that certain equipment at the plant will not peak and/or operate at the same time as other equipment.
  • For water pumping operations (wastewater facilities, pipeline operations, hospitals, and so on), instead of trying to pump all of a material in a short period of time with a high horsepower pump, use a smaller pump and accomplish the task over longer time periods.
  • Consider variable speed drives to reduce overall motor operating load. If there is variation in the load, and the motor continues to operate at constant speed, energy is wasted. Process motors, blower fans, condenser fans, evaporator fans, pump motors, and the like can all be candidates for variable speed drives. Visit for available cash incentives to help you upgrade.
  • Only use compressed air if the task cannot be accomplished by other means. Compressed air is an expensive application.
  • If the compressed air load is over 150 horsepower, airflow audits and evaluations can lead to reducing the overall compressed air requirements by as much as 50%.
  • For compressed air generation (as in plastics facilities, extrusion, or any organization with pneumatic tools), employ smaller horsepower compressors (run them continuously) and store the compressed air in receivers to be used during peak times of the day.
  • Consider energy storage systems for producing chilled water and ice at night, so that the cooling capacity of the chiller can be tapped during the heat of the day when it is needed.
  • For companies that have welding operations (or other equipment with high power needs), install automatic sequencers on the welding system's power supply that will prevent welders from firing simultaneously.
  • Backup generators can be used for peak shifting to handle large electrical loads that cannot be shifted away from peak operating periods.
  • Use slower-charging battery chargers for forklifts. Many battery chargers will charge a battery in a short time period but most applications do not require a "fast charge." Instead, ensure that the charging takes place over an entire shift (or two shifts), so as to spread the load.

Every facility has its unique energy-consumption profile, so there is a myriad of solutions to reduce peak demand. Once the facility energy manager understands the key factors that are affecting the energy bill, steps can be taken to target and reduce or shift those high-energy users.

Please note—You can use our Ask an Expert service any time. Simply click on the Ask an Expert link at the top of every issue of energy connections.

DISCLAIMER: The content of this answer, including pricing information and reference to governing laws and regulations, was current and accurate at the time the answer was written. The content of this answer is being provided as an example of questions posed to and responses provided by the Ask an Expert service. In addition, the use of trade, firm, or corporation names or products is for the information and convenience of the reader. Such use does not constitute an official endorsement or approval by Questline—A division of Questline, Inc. or our clients of any product or service to the exclusion of others that may be suitable.
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