peak_demand_management_101

PEAK DEMAND

MANAGEMENT101A guide to understanding demand charges and taking control of your energy bill

IntroductionTo reduce energy costs and minimize your exposure to risk (operational-

risk, budget-risk, and market-risk), while at the same time maximizing

the effectiveness of your limited resources, energy decision makers need

to focus on three points of leverage: how energy is bought, how much

energy is used, and lastly, when energy is used.

While the first two are intuitive, the when piece of the equation is often

an overlooked opportunity to drive meaningful savings. For example,

peak demand charges essentially have users pay a premium for energy

thats consumed when strain on the electric grid is at its highest,

and can represent up to 30% of your energy bill. In this guide, well explain

what peak demand is, how demand charges are calculated, and, using a

facility example, demonstrate how to actively manage your peak demand to

generate a meaningful savings opportunity for your organization.

1

Peak Demand Management 101

What is Peak Demand?In many cases, electricity use is metered

(and you are charged) in two ways by

your utility: first, based on your buildings total

consumption in a given month (kWh), and

second, on your buildings demand (kW),

based on the highest rate of consumption of

your building during the given billing period

(typically a 15-minute interval during that

billing cycle).

To use an analogy, think about consumption

(kWh) as the number that registers on your

cars odometer (how far youve driven), and

demand (kW) as what is captured on your

speedometer at the moment when you hit

your max speed. Consumption is your

overall electricity use, and demand is your

peak intensity, or maximum speed.

With residential buildings, these two charges

may appear as a combined charge (like all

tariffs, this varies), but because commercial

and industrial users have significant

variance in both consumption and demand,

these charges are often (but not always)

broken out. National Grid explains: Some

[commercial and industrial energy users]

need large amounts of electricity once in

awhileothers, almost constantly. And

because electricity cant be stored, meeting

these customers needs quickly becomes

complex and costly, requiring a vast array of

expensive equipmenttransformers, wires,

substations, and generating stationson

constant standby.

In some areas, all customers are assessed

a demand charge to cover these costs,

while in others, customers who create this

exceptionally high, or peak, demand are

then correspondingly charged more for it.

2


How are demand charges calculated? Consumption is measured at a rate based

on kilowatt hours (kWh), and demand is

measured in kilowatts (kW). To understand

how this applies to your energy use, see

the two examples following.

Note that when demand is higheri.e., using

more kilowatts and for a shorter time period

demand charges will be higher versus using

the same total amount of kilowatt hours (kWh)

over a longer time period and at a lower

intensity. Overall consumption remains the

same between the two companies in the

example, but the amount each pays varies

because of demand charges.

Lets assume these rates apply to both companies:

Electricity charge = $0.0437 per kWh

Demand charge = $2.79 per kW

Company A runs a 50 megawatt (MW) load continuously for 100 hours.

50 MW x 100 hours = 5,000 MWh

5,000 MWh = 5,000,000 kWh

Demand = 50 MW = 50,000 kW

Consumption:

5,000,000 kWh x $0.0437 = $218,500

Demand:

50,000 kW x $2.79 = $139,500

Total Charges: $358,000

Company B runs a 5 MW load for 1,000 hours.

5 MW x 1,000 hours = 5,000 MWh

5,000 MWh = 5,000,000 kWh

Demand = 5 MW = 5,000 kW

Consumption:

5,000,000 kWh x $0.0437 = $218,500

Demand:

5,000 kW x $2.79 = $13,950

Total Charges: $232,450

3


For the same amount of kilowatt hours used

i.e., at the same consumption level, albeit at

different intensitiesCompany A pays

significantly more in charges.

Depending on your rate structure, peak

demand charges can represent up to 30% of

your utility bill. Certain industries, like

manufacturing and heavy industrials, typically

experience much higher peaks in demand

due largely to the start-up of energy-intensive

equipment, making it even more imperative to

find ways to reduce this charge.

Regardless of your industry, taking steps to

reduce demand charges will save money.

Lets take a look at how one facility boosted

its bottom line by adjusting its peak

demand charges using real-time energy

data monitoring.

Facility ExampleWhether or not building scheduling and peak

demand management can help a facility

cut its energy bill depends largely on the

buildings energy use patterns and the

specific rate structure offered by the utility.

In the case highlighted in this example,

an industrial facility had a steam turbine

generator that generated electricity for

the facility.

Challenge: On-peak demand chargesBuilding owners often tweak their equipment

scheduling to optimize the trade off between

consumption and demand charges. In this

particular example, the crew had to bring the

boiler (that supplied the steam for the

facilitys turbine) offline to clean it every night.

While cleaning the boiler, peak demand shot

up 400-500 kW each night, as illustrated

in the graph on the right.

using real-time energy data monitoring, we were able to see that the facilitys cleaning schedule was causing a spike in the facilitys peak demand charge. the crew was instructed to move the cleaning schedule to outside the peak demand window, which lowered the facilitys peak demand charge by approximately $45,000 annually.

Upon reviewing the facilitys energy data,

analysts found that peak demand charges

were much higher than necessary because

the cleaning was scheduled to occur

within the facilitys peak demand window, the

on-peak hours during which peak demand

charges are most expensive. This problem

appeared to be a prime candidate for peak

demand management.

Solution: No-cost scheduling adjustmentUsing real-time energy data monitoring, we

were able to see that the facilitys cleaning

schedule was causing a spike in the facilitys

peak demand charge. The crew was instructed

to move the cleaning schedule to outside

the peak demand window, which lowered the

facilitys demand during the on-peak hours,

and thus lowered its peak demand charge by

approximately $45,000 annually.


4

Peak Demand Periods and Billed Demand

Billed Demand [kW]3,421

Demand Turbine Operated [kW]3,106

ConclusionPeak demand management is just one of many low and no-cost energy

efficiency measures that can be achieved with access to real-time

energy meter data. Without interval energy data, energy managers have

to rely on sometimes months-old data from their utility bills without

visibility into daily operations and energy use to try and track down

potential inefficiencies and anomalies.

EnerNOCs energy intelligence software is designed to provide energy

managers with powerful analytics, decision-making tools, reports,

and dashboards to ensure that you are achieving savings and driving

operational excellence at your facility.

If youre interested in learning more about peak demand management, check out

the resources below.

Understanding Peak Demand Charges (article)

Perdue Farms Learns to Control Peak Usage All Year Long with EnerNOC Demand Response (case study)

5


SummaryVisibility into real-time energy data allowed

this facility to better its consumption pattern

and peak demand charges. By making a

no-cost scheduling adjustment, they were

able to lower their peak demand charge

by $45,000 annually.

Energy managers can manage peak demand

charges by using real-time energy data to

monitor and adjust when they achieve their

peak demandand also lowering the peak

demand actually reached during a billing cycle.

Some other examples of peak demand

management include starting up the buildings

systems before on-peak hours or oper-

ating the most energy intensive equipment at

different times so all machines arent

run-ning simultaneously, which makes peak

demand lower.

About EnerNOC

EnerNOC, Inc. is a leading provider of Energy Intelligence Software

applications and services. EnerNOC unlocks the full value of

energy management for thousands of utility and commercial,

institutional, and industrial (C&I) customers worldwide by delivering

a comprehensive suite of demand-side management services

that reduce real-time demand for electricity, increase energy efficiency,

improve energy supply transparency in competitive markets,

and mitigate emissions.

For more information, visit www.enernoc.com.

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