For many businesses, “demand” is an extra line on the electricity bill that adds thousands to annual spend. Knowing more about how demand is calculated and when it is applied is critical to keeping your electricity charge as low as possible and preventing costs from blowing out.
Demand is the maximum amount of electricity, measured in either kW or kVA, required at your business premises at one time. It reflects the capacity requirement that the distributor has on standby should your business need it. Imagine that you are paying for the use of a large cup. You may not need to fill the cup often, but you continue to pay for the use of the cup. You could save a lot of money by simply switching to a small cup.
Demand is charged in different ways by different distributors. Commonly, charges are set to make electricity more expensive during peak network periods, encouraging lower use during periods of network system stress.
Most distributors charge for the maximum demand value reached during the last months’ electricity use. This is typically recorded during peak periods, Monday to Friday, excluding public holidays. It is important to understand this chargeable demand period, so that you can change behavior; either using less electricity during these demand charge periods or shifting your use outside of these periods.
Ausgrid in New South Wales have a unique method for charging for demand. Instead of looking at the last month, Ausgrid charge what’s called a 12-month rolling demand for the maximum demand value that is recorded between 2pm and 8pm on working days. Yes, this maximum value is used as a basis for demand charges for a whole year.
Empower recently worked with a bakery in Chatswood, NSW, where ovens are switched on every working day from 1:30am to 10:30am. However, on one particular day in April, during Easter, the business was busy with orders so decided to run one oven for an additional hour in the afternoon to increase production. This decision cost the business over $3,000 in additional demand charges over the next 12-months. Now that the business owner is aware of this, next Easter he will run the oven before 2pm so that he does not incur this additional charge.
Feel free to contact us if you would like help unravelling demand charges on your bill.