One of the questions that I get most from commercial and industrial customers is, what is demand and what is a demand meter? They want to know what demand is and why they have it on their bill. Customers want to know what demand meters are and why they are on their buildings. They also want to know if the demand meter can be removed. I am going to attempt to break this down so that it is easy to understand. I want any commercial or industrial customer who comes across this website and has a demand meter to understand demand meters and how to calculate demand. In addition I hope they develop some tools on how to reduce their demand.
The first question is, what is demand? When commercial and industrial customers, and even some residential customers now, get their bill they typically notice two types of charges. One is KWH, or kilowatt hours, and the other is their demand, which is measured in KW, kilowatts. The KWH portion of the bill is the total amount of energy that has been consumed for the billing cycle for which the bill was calculated. In most cases, this is somewhere around thirty days. So, think of KWH as the usage over time. Demand on the other hand is the rate at which the energy is consumed. Again, the unit of measurement is KW. To help understand this better, let’s look at an example.
Suppose that one customer has 10, 100 watt light bulbs and another has only one, 100 watt light bulb. Now, let’s suppose that the first customer has a warehouse and only comes in once a month for one hour just to check up on things. If these 10, 100 watt light bulbs run for one hour, they will consume 1,000 watthours or 1 KWH for the month (10 x 100 = 1000 watts / 1000 = 1 KW x 1 hour = 1 KWH). Suppose that the second customer, with his one, 100 watt light bulb has baby chickens and does not turn the light off all month because it is required to keep his baby chickens warm all month. This one bulb would consume 72,000 watthours or 72 KWH (100 x 24 x 30 = 72,000 watts / 1000 = 72 KWH)
That is all well and good but where does the demand come into play. The first customer in the example would require a larger transformer than the second customer. His demand would be 1 KW. The demand for the second customer would be 0.1 KW. If we convert this to amps, we can see that it takes more amps to run 10 bulbs for one hour than it does for 1 bulb. If the voltage is 240v then, W = VA and 1000 / 240 = 4.17 amps for customer one and 100 / 240 = .417 amps.
Why does this matter? This matters, and the reason that these demand charges are there is to help the utility offset its cost for the infrastructure that has been built to supply each customer. If the first customer, who requires larger equipment to serve his needs only comes in once per month as in the example, it will take the utility a very long time to recoup its investment.
Another reason the utility has demand charges is because the utility pays higher demand charges when it purchases electricity. It also causes them to run their generation plants more to keep up with the demand. When a blackout happens, this is what is going on. The demand of the customers exceeds the generation capacity of the utility.
How can a customer get around these demand charges? The best way is to know the electric rates that are offered by the utility who serves you. There may be time of use rates, or coincident peak rates that may help out. These could also hurt if they are not understood. Also, some companies base who goes on a demand rate based on their KWH consumption. A standard for many utilities is about 3,000 KWH.
Once a customer goes past this many KWH in one month or in a certain number of months in a twelve month period, they will get a demand meter and be placed on a demand rate. Some companies require any customer who has three phase power to be on a demand rate. Some rates are also based off of the demand. For instance, if you are already on a demand rate and you buy more equipment and your demand goes beyond a certain threshold, you could be placed on a higher rate.
How to Calculate Demand
Demand is calculated within the meter and there are typically two ways that this is done. It is either calculated on a block or rolling scale. There are different demand intervals that also come into play. 5, 10, 15 and 30 are probably the most common. Block demand breaks down each day into what ever interval is programmed into the meter, based on the rate schedule. If it is 30 minutes, that means that the meter begins to calculate the highest demand over a 30 minute interval and that at the end of that interval it starts over. It is also important to note that this is an average over 30 minutes. So, the block demand looks at each 30 minute interval and records the highest one over the course of the month on the display and that is what the customer is charged for.
Rolling demand is a little different. Block demand uses a fixed scale, rolling demand uses a sliding scale. Think of it as looking at a line graph that has peaks and valleys. On the left side of the graph is KW and on the bottom of the graph is a monthly timeline. Using a sliding window, the width of the demand interval, in our case 30 minutes, the demand meter looks for the absolute highest 30 minute interval for the entire month.
Using Demand to Your Advantage
If you have block demand, one way to lower your demand is to start your machines towards the end of the interval and turn them off in the beginning of the interval. The other way to reduce demand is stagger the start times of equipment. Make sure that equipment does not come on at the same time. Try to space them apart and run only one at a time. For instance, two 20 KW A/C units running at the same time add up to 40 KW. Say you pay $8 per KW. If you could make sure that only one of the units ran at a time, you could save $160 per month in demand charges.
You can also change out lights and other equipment for more energy efficient models. The last example that I will give for demand is the classic speedometer versus odometer. Your demand is like your speedometer. Your KWH is like your odometer. If you go 100 mph, then in one hour your will have gone 100 miles. It will take more horsepower and more gas to accomplish this. However, if you go 10 mph and you travel that same 100 miles, you will not need nearly as much horsepower and it will take much less gas. Demand works the same way. I hope this has been helpful to someone learning about demand meters. Also, I hope you are able to reduce your electric bills.