Source: Questline

Energy bills for commercial and industrial facilities may seem confusing. If you look closely at your statement, however, you may learn a few things about the way energy is used and how you are charged for it. For example, the concepts of kilowatts and kilowatt-hours are often misunderstood. Kilowatts (kW) refer to the rate at which energy is used (demand), while kilowatt-hours (kWh) measure overall consumption (usage).

Comparing demand and usage

To understand the difference between demand and usage, it's best to use an example. A motor rated at 10 kW and operating for eight hours will consume 80 kWh. Five of these motors operating all day will use 400 kWh, which is the amount of energy the motors will use during an eight-hour period. You are charged per kWh for usage. At an average rate of 10 cents per kWh, the cost to run the motors for a day would be $40.

For this scenario, your facility is consuming power at the rate of 50 kW. This is the total rated power of the five motors. This rate of using power is also called demand. Commercial and industrial users often pay a demand charge.

Typically, demand is calculated as an average of 15-minute intervals. Your highest demand interval in any given month is your peak demand, which is the basis for your monthly demand charge.

Energy companies instituted demand charges because electricity, unlike many other commodities, must be used immediately and cannot economically be stored for later use. Energy companies must maintain excess capacity to meet cyclical periods of high or peak demand, which typically occur in the afternoon hours. Making this excess capacity available is very expensive, and customers must share in the cost burden.

Reducing demand charges

The most effective way to minimize peak demand is to understand your facility's load profile, which describes how you use energy over time, typically a 24-hour period. Once you have established your load profile, consider the following strategies for reducing peak demand:

• Adjust thermostats to reduce energy use for air conditioning and install dimmers and occupancy sensors to minimize lighting demand.
• Adjust work schedules to reduce energy use during peak demand periods, typically between the hours of 12 p.m. and 5 p.m. on weekdays.
• Install automatic sequencers on your system's power supply to prevent high energy use equipment from starting simultaneously.
• Replace older equipment with new energy-efficient equipment.
• Install an energy-management system (EMS) to coordinate energy use in your facility and minimize peak demand.
• Consider thermal energy storage systems, which store chilled water at night (when demand is low) to provide cooling during the day.

Although every facility is unique, understanding the key factors affecting your energy use can help you choose solutions that will reduce peak demand and lower your energy bill.