Lowering Electric Costs Through Demand Control

With today’s focus on reducing the high cost of monthly electric utility charges, most companies automatically assume this means installing new, more energy-efficient fixtures and equipment. These can help, but for many facilities, the place to begin in cutting electric costs is not by installing a new lighting system or high-efficiency motors. Instead, it’s by taking a look at the electric utility bill—more specifically, thedemand charge on that bill.

What is a demand charge? It is the amount the electric utility charges your facility for supplying electricity at the rate it requires (demands) in order to operate. This demand rate is expressed in kW. As your facility reaches certain kW rate levels (these are set by your utility), the cost you pay per kW increases. The rule isthe higher the kW demand rate, the greater the per-kW demand charge. Your utility monitors your kW demand rate, typically in 15- or 30-minute intervals, to track your peak kW demand for the billing period. It then calculates your demand charge for the period based on this peak rate.

If there are times during the period when your kW demand jumps significantly, the demand charge on your electric bill can be very costly. Additionally, at certain times of the year, exceeding your facility’s maximum kW service level (defined in your utility contract) can send your monthly demand charge through the roof! Why is this the case for both situations? Because the utility has to allocate additional resources to meet increased demand (e.g., start a backup generation plant or purchase power from another supplier).

If your facility can control electrical operations so that its kW rate is smooth, consistent, and as low as possible—without frequent or large spikes in kW demand—it will realize two benefits: (a) reduced electric charges and (b) increased electrical capacity without upgrading your electrical system. The latter comes primarily through reviewing your processes to see if any can be staggered so they don’t run at the same time. In some cases, this has no impact on operations and helps you avoid having to add new distribution equipment in order to handle the electrical load.

To determine if your facility is a candidate for saving money through electrical demand control, look at the demand charges on your electric bills for the past half-year to year. Are your demand charges excessive compared to your kWh usage? The best way to gauge this is by looking at your load factor (also listed on your bill). During regular production operations, if your facility’s load factor is below 80% and varies widely from month to month, this indicates a lack of electrical demand control. Developing and implementing a demand control program can enable you to smooth out electrical demand, allowing you to avoid spikes in the kW rate and higher demand charges

There are many techniques for controlling electrical demand to help your facility minimize its demand charges. These range from manual to automatic— but all involve a metering system to measure and monitor what’s happening inside the electrical system. This information enables you or the electrical system’s controller equipment to take appropriate actions to avoid reaching the more costly kW demand levels. In a future newsletter, we’ll discuss a few of these methods, plus their pros and cons.

For answers to your questions on controlling demand to lower electric costs, contact D.L. Steiner, Inc.