Peak Demand

Utility power companies incur several costs associated with providing power to their customers, including peak demand costs. The cost of generating and supplying electricity increases during peak times, typically at the start and end of the day and during the middle of the day in the summertime.

Peak demand charges may be added to power bills on certain days and timeframes, depending on the utility provider and their rate plan. For bills where a peak demand charge applies, the energy charge (kWh) is reduced proportionally in exchange for the additional demand charge (kW). This system encourages limited power use during peak times (and encourages power use during off-peak times).

The peak demand charge for each month is based on the single highest demand event occurring within the applicable peak demand times. High power demand occurs when larger appliances, such as ovens, clothes dryers, water heaters, or any electric heating items, are used simultaneously. Demand can be mitigated by using one appliance at a time or by utilizing a battery system.

This is a billing summary for a Black Hills Energy account with a Demand Charge. The total energy charge (including the cost adjustment) is $177.22. The Demand Charge for a 10 kW peak ($81) is nearly 30% of the total bill. To calculate the energy rate from a BHE bill, add the price for both the energy charge and the Cost Adjustment Summary, then divide this by the number of kWh registered. In this example, the total energy charge works out to $0.064 per kWh.

The peak demand charge (kW) is in addition to the energy charge (kWh). The energy charge is based on the energy used, measured in kilowatt-hours (kWh). The peak demand charge is based on the highest demand for power, measured in kilowatts (kW). Understanding the difference between energy and power is essential to understand how billing works.

Demand Control Options

Solar power reduces demand from the grid during the daytime but cannot effectively reduce demand charges if demand charges apply during the night (they do).

A device such as a demand controller (BHE, BHEC) or a smart breaker panel can be installed to reduce power use during peak times. These devices automatically turn off circuits when the power demand exceeds a set limit. These options work well for all-electric space heating.

A battery power system is a very effective way to reduce grid demand. The battery system may be configured to reduce demand at all times or based on a schedule around peak periods. However, the load of electric space heating can easily become excessive for a battery, necessitating a look at other options.

In conclusion, understanding peak demand rates and how they affect your electricity bill is important for controlling your energy consumption and costs. Considering the investment, goals, and potential savings is important when deciding which solution is best for you.