Electricity purchases from “the grid” usually contain two sets of charges that together determine how much you pay.
The two charges match the two related aspects of electricity: (1) use (energy, measured in kilowatt-hours, abbreviated kWh) and (2) demand (power, measured in kilowatts, abbreviated kW). Put these together: Demand is the rate at which you use electric energy.
The units for the two aspects hint at the relationship, which may be easier to remember if you think about taking a trip in a car. You can track the total trip distance on the odometer and at any instant you can look at your rate of speed on the speedometer.
Rate of speed is like demand (rate of energy use) ; total distance for a trip is like total energy over a time period.
If a rental car company charged you for the peak speed you drove while renting the car as well as the total miles, your rental bill will start looking a lot like a commercial electric bill. If the rental car company added “congestion pricing”, charging you more for use of the car during rush hour periods, your car rental bill will look even more like many commercial electric bills.
Utilities charge for demand because they have to have generating capacity for peak times, 24 hours a day, 7 days a week. That calls for power plants and infrastructure that has to be ready for the hot days in summer when all our buildings are using energy for air conditioning as well as lights, computers, and other equipment.
The Bottom Line For almost all U.S. commercial buildings, total electric energy use does not drive total electric energy costs in direct proportion to use. The monthly electric bill typically will include an item for peak demand. The item usually is based on a short time period–quarter hour, half hour, or hour–during the billing cycle when your rate of energy use was highest. In many cases, time of day matters, too, with a kWh of energy costing more during the day than during the night. As electrical grid technology evolves and utilities deploy “smart meters”, your costs for energy use will more closely track the short-term costs of generation. In turn, this will affect the bill that you will pay.
Each utility in the U.S. has its own tariff or billing rules and is on a different path to implementing new technology and billing structures. While the billing structures take a little bit of work to understand, this work is the first step to defining possible savings that do not usually take capital. You may be able to shift electric energy use to reduce the peak demand or to avoid costly daily periods. This can reduce your bill, sometimes by 5 to 10% or more.
Have you included study of relevant electric rates in your Energy Stewards Action Table?
How does ENERGY STAR®’s Portfolio Manager handle demand? It doesn’t. Portfolio Manager focuses only on energy and total dollar costs; it does not address peak demand levels or varying costs related to time of day or season. In our most recent conversation with EPA about demand earlier this year, they said have no current plans to include demand in Portfolio Manager.
Still, tracking peak demand is a good step because monthly peak demand tends to be a sensitive indicator of overall electric energy management–the peak monthly values reflect changes in technology and management skill.
We’ve decided to diverge from Portfolio Manager in handling monthly peak demand. We have outlined a way to include graphs of monthly peak demand. The graphs should be available in the next round of upgrades to Energy Stewards, available by mid-summer 2011. Users will have to upload monthly peak demand data to Energy Stewards for specific meters to take advantage of this feature.
Going beyond monthly data Getting and studying daily or shorter period demand profiles are the next steps to understanding patterns of use and opportunities for saving.
Here’s a picture of a 15-minute demand profile at a municipal office and service garage, 27 January 2011–every 15 minutes of the day, the plot shows the average power used at the facility.
Want to learn more? Here is a short article I wrote that takes apart a simple electric bill, illustrating demand and use components. And here is a link to a thoughtful summary by a staff engineer at the U.S. Forest Service that describes how Forest Service managers can reduce costs by knowing when and how electricity is used.