A demand charge is a charge determined by the peak quantity of electricity consumed throughout the billing period. The demand charge is extra fees that utilities impose on industrial, commercial, or non-residential customers in order to keep a steady supply of energy.
The amount of these fees that businesses must spend on their monthly electric bills is typically quite high. They may account for more than or equal to 50% of the overall electric bill.
Demand fees may, in some cases, be more expensive than the energy component of an electric bill. As a result, the monthly electricity cost for a company is determined by both the amount of electricity used during the month and the rate at which it was consumed.
What is Demand?
Demand is the maximum energy consumption for a company during any particular billing cycle. Let’s suppose that we have two five-gallon buckets to demonstrate this point. Each container is filled with water. One gallon was added to pail 1 every minute, while five gallons were added to bucket 2 every minute.
The time it took to fill bucket number one was five times longer than bucket number two, despite the fact that we used the exact same quantity of water for both. In other words, demand for bucket number two was five times greater than for bucket number one.
This serves as an illustration of how energy demand and demand charges operate. Consider it in terms of litres per minute per period of time. Alternatively, kilowatt hours (kW-hrs) per hour.
The unit of measurement for electricity use is kW-hrs. Your energy use is tracked by the electric company at predetermined periods every 15 minutes. Every time the amount and rate of energy consumption are measured, they are done in kWs. As a result, the Demand is also expressed in kWs. For each kW of Demand that happened in that month, the electric company assesses a certain fee to its business customers.
The peak of consumption for a particular month is defined as demand. As a result, the demand charge for that month would be $2,400 if, for instance, a utility charged $24 per kW of demand charge and the monthly consumption was 100 kW.
As you can see, demand fee calculations are difficult. Not to mention, demand charges come in a variety of forms and at various prices. Which are:
- High demand
- Semi peak demand
- Low-volume interest
Also Read: What is Demand Side Management (DSM)?
What is Non-coincidental demand charge?
The highest demand for the month, regardless of when it happened, is considered to be a non-coincidental demand charge. As if this weren’t confusing enough already.
A business entity must be able to manage its demand for energy in order to reduce demand charges. This can be achieved by determining the times of day with the greatest demand for electricity and attempting to soften the load by shifting demand to other times of the day.
The generation of solar electric electricity is a practical way to accomplish this. Demand for electricity can be shifted to the daytime when solar power is being produced. This lowers the amount of grid electricity used and decreases demand fees.