Tips to Reduce Demand Charges

What Are Demand Charges?

To learn how to reduce your peak demand charges on your electric bill, here are 5 tips to save money and lower operating costs. But first, you need to understand demand charges. For business owners, your electricity bill is comprised of two components: energy consumption and demand charges. Energy consumption is the total amount of electricity used, which is measured in kWh. The other half of the electric bill, demand charges, are measured by kW (kilowatt “kW”). Green Charge Networks provides energy storage solutions to empower businesses to reduce demand charges. Hence, energy savings can be calculated if you understand the difference between a kW (Demand Charges) and a kWh.

Energy Bill Charges Diagram

Tip #1: Understand Time of Use (TOU) Pricing

It used to be that U.S. electric utilities charged customers a flat rate for their energy usage no matter what time of day usage occurred. That has changed, at least in 16 U.S. states and the District of Columbia, with deregulation that began back in the 1990s.

California was the first U.S. state to deregulate its power market. Others have followed. Today, region-wide independent system operators (ISOs) manage the transmission of electricity across large territories of the U.S. according to short-term, system-wide forecasts, minute-by-minute changes in demand and supply, and the decisions made by owners of generation capacity to supply or withhold electricity at ISO bid prices. These include ERCOT, Texas’s grid operator, and PJM which is responsible for wholesale transmission of electricity across 13 eastern states and the District of Columbia, as well as CAISO, which is responsible for assuring a flow of affordable electricity to meet demand in California.

Along with deregulation came the introduction of “time of use” (TOU) pricing,” envisaged as a means to make electricity market pricing, along with supply and demand, more rational and efficient.

As a result, large consumers of electricity in deregulated markets, such as commercial and industrial businesses, are subject to so-called demand charges that are based on usage during times of peak demand. Hence, on a “time of use” rate, you can lower your electric bill by shifting when you use energy to partial-peak and off-peak hours.


Tip #2: Look at Your Utility Bills for Demand Charges

With electricity consumption on the rise and utilities struggling to keep pace with market and regulatory changes, demand charges can account for a significant portion of business users’ utility bills – at times between 25-50 percent. Furthermore, in contrast to rates outside of peak periods, demand charges have been rising steadily, year after year.

It’s important to note that when it comes to demand charges, utility customers are charged for power usage – the rate at which they use energy – as opposed to energy – the amount they use. Hence, during hours of peak demand, large consumers incur demand charges per kilowatt (kW) (power) as opposed to kilowatt-hour (kWh) (energy).

Ontario was the first jurisdiction in North America to introduce TOU pricing of electricity for all residential and small business electricity customers. The following chart shows the ratio of peak to non-peak rates in Ontario over a seven-year period.

ratio of peak to non-peak rates in Ontario


Tip #3: Find Technology to Help Reduce Your Demand Charges

Reducing, or “shaving,” peak power demand not only lowers utility bills, but it reduces strains on the power grid. By intelligently storing electrical energy generated by clean, renewable energy sources such as solar photovoltaic (PV) systems, users can also lower their carbon footprints.

Since 2009, Green Charge Networks has developed intelligent energy storage solutions based on state of the art lithium-ion (Li-ion) battery technology coupled with sophisticated real-time analytic software. This combination of innovative technologies is enabling a growing range and number of businesses, municipalities and educational organizations in California and New York to reduce peak power demand, overall energy costs, grid strains and protect the environment.

As with any disruptive, and ultimately beneficial technological innovations, government and public support is instrumental in enabling intelligent energy storage. For the first time in U.S. power industry history, California in 2013 opened up its power sector to energy storage.

Recognizing the advantages, benefits and multiple uses intelligent energy storage solutions offer, state government legislation – AB 2514 – requires California’s investor-owned utilities to acquire 1.325 gigawatts (GWs) of power storage capacity by the end of the decade. That includes energy storage installed both on the utility and customer sides of the electric meter.

Again, other states are following suit. Governments in Hawaii, New York, Puerto Rico and Texas, for example, have all launched energy storage initiatives and programs.

Coincidentally, technological advances and improvements continue to come hard and fast. In addition, we are innovating on the financing side of the energy storage business as well, working to make intelligent energy storage solutions as affordable and accessible as possible.

Our Power Efficiency Agreements (PEAs), for example, enable businesses and public sector organizations, such as municipalities and high school districts, to install the GreenStations at no upfront cost. Similar to Solar PPA, Green Charge has introduced the first of its kind pay-for-performance PEA contract. Under the PEAs, our customers and our company share in resulting monthly energy savings, as well as benefit from an enhanced power grid and less in the way of environmental degradation.

Tip #4: Couple Energy Storage and Solar PV to Save Money

The cost savings, environmental and social benefits of making greater use of intelligent energy storage solutions can be multiplied when complemented with solar PV systems. As the following graph from California IOU SCE (Southern California Edison) and the DOE’s NREL (National Renewable Energy Laboratory) shows, solar PV electricity generation can offset and shave peak grid power demand.

PV Generation Peak Load Shift Impact

The capacity for solar PV generation to offset and shave peak power demand can be enhanced by coupling PV systems with intelligent energy storage solutions such as the GreenStation.

Tip #5: Couple Energy Storage and EV Charging to Save Money

Taking another step in the drive to build a sustainable, environmentally friendly energy infrastructure for the 21st-century, solar PV and intelligent energy storage solutions can be integrated with EV charging stations. The vast bulk of the energy we obtain from burning oil and derivative products is used for transportation. By “electrifying” our cars and trucks, we will go a long way towards assuring this and future generations benefit from making the transition to clean, renewable energy resources. Intelligent energy storage solutions are an integral and key enabling part of the mix.