When your business pays for energy, you pay for the amount of electricity you use twice: once for what you actually consume, and again for when you use it. Here’s how demand charges work – and how to manage your business’s energy consumption to minimise your energy bill.
Demand charges are essentially a fee that factors in when your business consumes energy. Use of energy during peak times can put extra pressure on the electricity network – for example, when offices all open in the morning, or during a cold evening when heaters are in use.
Using demand charges, energy distributors charge for the additional strain they put on the electricity grid. This provides a financial incentive for businesses to change their energy usage where possible, to take advantage of lower peak periods and the strain they may be causing to the grid.
How do demand charges work?
Demand charges are measured based on the amount of kilowatts (KW) your business draws from the electricity grid. It’s an additional amount charged on top of your usual energy usage and is based on your business’s maximum demand for electricity during any given month.
“With some companies, if you reach a spike just one day of the year, they will actually bill you at that peak demand for the remainder of the year,” explains Laura Manerowski, senior C&I account manager at Zembl.
That said, demand charging parameters vary between distributors and they can be applied in different ways, such as:
- During peak periods, eg. 3pm to 9pm
- For the maximum amount of electricity your business draws during the billing period
What’s the point of demand charges?
In a nutshell, they’re designed to ensure the grid doesn’t get overloaded with too many businesses trying to consume too much energy at the same time.
These charges impact business' electricity costs, but the benefit is that they allow you to pay less for energy that is consumed during a low-peak period.
If possible and practical, you can retool your energy use to use less energy during peak demand periods, and more energy during low peak periods. This helps to ensure more even distribution across the network and importantly, reduces your energy bill.
Some ways to achieve this might include:
- Review temperatures to ensure your air conditioning system isn’t working too hard; changing it by 1-2 degrees can make a big difference.
- Setting timers or using automation to adjust energy usage when spaces are not in use.
- Reminding staff to turn off lights when leaving a room.
- Use fans during summer instead of air-conditioning.
- Adjust air-con and lighting on days when staff are working from home.
- Turn off appliances during periods of office closure eg. Christmas holidays.
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