After my last Substack, I received a request to explain demand charges So here is my attempt, let’s talk about Utility demand charges, how they are calculated, why they are used, and the impact they can have on a customer’s utility bill.
It's easy to have a calculation whoopsie. As well as a technical background in software and energy I also worked in finance for 5 years. Preparing detailed quantitative reports for the CEO/CFO/Treasurer/Board of a large bank develops an emphasis on checking numbers. And a few memories of stuffups :)
If I understand what you’re saying, it might be clearer if you replaced ‘demand’ with ‘peak demand’. Seems like peak demand primarily impacts generation capacity, not wires and transformers so much. As a Texas residential customer it doesn’t appear I have any peak demand charges.
Tom as a residential customer, you would not be subject to a separate demand charge, it only applies to larger loads. If you look at the older demand kwh meter in the picture, you see it has a sweep hand for demand. I didn't invent the name "demand charge", that what it is called. It is a different animal than system peak demand that occurs on the grid each day. The demand a customer gets charged for can happen at any point during the day or night.
"Let’s say I have a 15-minute demand period and during that 15 minutes I use 2500 kwh. 2500/15 = 167 kw demand."
If you used 2500KWH in 15 minutes that means your demand was 60/15 x 2500 = 10,000KW or 10MW.
300KW pump is a pretty big pump.
"if I have a 200 kw-month demand charge, I will want to be using at least 4,320,000 kwh in a 30-day billing period to make that demand charge pencil out"
I'm unclear what you mean by this or what you are calculating. If the site was constant demand at 200KW - constant demand is unlikely at any site I've reviewed - it would be using 4.8MWH in a day or 144MWH in a 30 day month. Peak demand reduction is often very achievable from traditional energy efficiency and load-management. BTM solar and batteries can flatten demand completely during the measured peak period. Which is commonly particular hours in a workday at C&I sites.
David, it's generally considered impossible to achieve 100% usage, or load factor of your demand charge. Generally the target is to achieve a minimum of a 50% load factor, or demand usage to make the demand charge acceptable. An 80% load factor is considered about the max achievable.
My point was I don't understand what you are saying with the 4,320,000KWH (4.32GWH) in a 30 day period given that's about 30x higher than a site with constant 200KW load would draw. And as I said constant load at the capacity limit is unlikely. I've never seen a site with constant load 24/7 at the capacity limit. And I don't understand what you are trying to do with the 4.32GWH in 30 day "pencil out" statement.
Sounds like my math was way off on Monday. Actually, it looks like Copilot gave me the wrong formula. It gave period /kwh, which is not what you gave me. I think that's what tossed me off for the whole thing. Regardless those numbers looked odd when I did it, I should have dug deeper, my bad. Thanks it's fixed
" Let’s say I have a 15-minute demand period and during that 15 minutes I use 42kwh. 60/15x42= 68 kw demand"
That's 168KW not 68KW.
Oh good lord, I typed 168, what the ×$%@
It's easy to have a calculation whoopsie. As well as a technical background in software and energy I also worked in finance for 5 years. Preparing detailed quantitative reports for the CEO/CFO/Treasurer/Board of a large bank develops an emphasis on checking numbers. And a few memories of stuffups :)
If I understand what you’re saying, it might be clearer if you replaced ‘demand’ with ‘peak demand’. Seems like peak demand primarily impacts generation capacity, not wires and transformers so much. As a Texas residential customer it doesn’t appear I have any peak demand charges.
Tom as a residential customer, you would not be subject to a separate demand charge, it only applies to larger loads. If you look at the older demand kwh meter in the picture, you see it has a sweep hand for demand. I didn't invent the name "demand charge", that what it is called. It is a different animal than system peak demand that occurs on the grid each day. The demand a customer gets charged for can happen at any point during the day or night.
"Let’s say I have a 15-minute demand period and during that 15 minutes I use 2500 kwh. 2500/15 = 167 kw demand."
If you used 2500KWH in 15 minutes that means your demand was 60/15 x 2500 = 10,000KW or 10MW.
300KW pump is a pretty big pump.
"if I have a 200 kw-month demand charge, I will want to be using at least 4,320,000 kwh in a 30-day billing period to make that demand charge pencil out"
I'm unclear what you mean by this or what you are calculating. If the site was constant demand at 200KW - constant demand is unlikely at any site I've reviewed - it would be using 4.8MWH in a day or 144MWH in a 30 day month. Peak demand reduction is often very achievable from traditional energy efficiency and load-management. BTM solar and batteries can flatten demand completely during the measured peak period. Which is commonly particular hours in a workday at C&I sites.
David, it's generally considered impossible to achieve 100% usage, or load factor of your demand charge. Generally the target is to achieve a minimum of a 50% load factor, or demand usage to make the demand charge acceptable. An 80% load factor is considered about the max achievable.
My point was I don't understand what you are saying with the 4,320,000KWH (4.32GWH) in a 30 day period given that's about 30x higher than a site with constant 200KW load would draw. And as I said constant load at the capacity limit is unlikely. I've never seen a site with constant load 24/7 at the capacity limit. And I don't understand what you are trying to do with the 4.32GWH in 30 day "pencil out" statement.
Perhaps you could show some workings.
Fixed it, thank you! Don't do an article and discuss household budget at the same time!
David, since you are asking, let me check my math! Maybe I blew it!
You still need to fix:
" "Let’s say I have a 15-minute demand period and during that 15 minutes I use 2500 kwh. 2500/15 = 167 kw demand."
If you used 2500KWH in 15 minutes that means your demand was 60/15 x 2500 = 10,000KW or 10MW."
Sounds like my math was way off on Monday. Actually, it looks like Copilot gave me the wrong formula. It gave period /kwh, which is not what you gave me. I think that's what tossed me off for the whole thing. Regardless those numbers looked odd when I did it, I should have dug deeper, my bad. Thanks it's fixed