Electric demand refers to the maximum amount of electrical energy that is being consumed at a given time. It is measured in both kilowatts and kilovolt amperes, depending on the rate tariff. The difference between the two terms is power factor.
Another related term is kiloWatt hours, which is a measurement of total electricity used for a period of time. A 1000 watt electrical load used for one hour consumes one kiloWatt hour (kWh).
Electrical Utilities typically charge commercial and industrial customers for both consumption (kWh) and Demand (kWd or kVa).
As everyone knows, electric rates vary by state and utility company. Utilities have different tariffs for different types of customers (users). Larger users tend to get more favorable rates than small users. Some utilities offer different rate periods based on time of day or calendar periods. Others charge flat rates regardless of the time or the days. In this explanation we will use sample tariffs from two local electric utilities.
The electric utility has to be able to maintain enough generating capacity to service everyone's needs at any given time. They do this by generating the electricity themselves or by purchasing the electricity from other producers. In most cases, it is more expensive to buy the electricity from other utilities.
Large users that use varying amounts of electricity at sporadic, different periods of the day or months raise havoc with the electric utilities operation. These users are assessed demand charges (penalties) as part of their normal monthly billing. The demand charges many times exceed 50% of their total electric bill. This makes "Demand Side Control" very attractive to reduce a companies operating expenses.
Shown below are a few examples illustrating rate tariffs for a NH electric utility and a Massachusetts electric utility. In both cases, the fractional charges are rounded.
This first example will compare the cost of running a 1000 watt resistive load for 5 hours during the summer starting at 11:00 AM.
New Hampshire electric utility:
 | kWh Charge - $0.10 per kWh |
| Demand Charge - $10.00 per kWd or kVa |
| Time of Day Rate - Not applicable |
Based on the above rates and the example, the total cost would be $10.50, 5 hours times $0.10 plus $10.00 demand charge.
Eastern Massachusetts utility:
| kWh Charge - Peak = $0.04 per kWh, Off Peak = $0.03 per kWh |
| Demand Charge - Peak = $27.00 per kWd or kVa, Off Peak = $9.00 per kWd or kVa |
| Time of Day Rate - Yes - Peak = 08:30 - 20:00 |
Based on the above rates and the example, the total cost would be $27.20, 5 hours times $0.04 plus $27.00 demand charge.
For the second example, let's do an analysis on and air conditioning load. A chiller that draws 300 kWd for the first hour and then drops to immediately to 200 kWd after the first hour. The chiller runs for a total of 5 hours for only the one day during the rate period. The chiller is started at 8:30 AM, but the start time is flexible. We will assume the same rates for both utilities shown above in this example.
New Hampshire electric utility:
Based on the above rates and the example, the total cost would be $3110.00, 1 hour X 300 kWh X $0.10 ($30.00) plus 4 hours X 200 kWh X $0.10 ($80.00) plus $3000.00 demand charge.
Eastern Massachusetts utility:
Based on the above rates and the example, the total cost would be $8144.00, 1 hour X 300 kWh X $0.04 ($12.00) plus 4 hours X 200 kWh X $0.04 ($32.00) plus $8100.00 demand charge.
Because time of day rates can make a difference, let's rework this problem starting the chiller 1 hour earlier.
New Hampshire electric utility:
Based on the above rates and the example, the total cost would be $3110.00, 1 hour X 300 kWh X $0.10 ($30.00) plus 4 hours X 200 kWh X $0.10 ($80.00) plus $3000.00 demand charge.
Eastern Massachusetts utility:
Based on the above rates and the example, the total cost would be $5441.00, 1 hour X 300 kWh X $0.03 ($9.00) plus 4 hours X 200 kWh X $0.04 ($32.00) plus $5400.00 (200 X $27.00) demand charge.
Conclusion:
It is clear in the above example that a substantial savings would occur providing that the chiller could be started earlier. Normally, the client then says that the extra 1 hour of run time will cost more in the long run. At an $8.00 per hour consumption charge (200 kWh X $0.04), the argument doesn't hold up, even when extended to 31 day's. However, one unanticipated shutdown followed by a restart can destroy a whole month's worth of savings in as little time as an hour.
The above example illustrates Demand Side Management. To learn more about Demand Side Management control, click here.
For more information:
R. L. Shields Associates, Inc.
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