Thanks to Steve Guzelimian,from Optergy, for providing us with this informative post:

Demand charges can be confusing. It is an invisible variable that can be costing big bucks when it comes to electricity bills. Even though invisible, it is not out of your control.

Most of us understand charges when it comes to Kilowatt Hours (kWh). For example, a motor has a 300kw rating, and therefore every hour it runs at full capacity, it uses 300kWh.

An electricity bill then breaks down what parts of the day that energy has been used, and the charges incurred for usage at those times. This part is simple.

Demand charges are different. Demand is measurement that defines what the maximum flow of electricity has been over a given time and is measured in kilovolt amperes (kVA).

There are two common charge models that energy companies use to charge for demand;

1. measure the kVA maximum achieved in a month
2. measure the kVA maximum achieved in a year

Both of these models punish the user as they charge for that single maximum achieved for the entire charge period. Utility companies typically charge the entire period for this maximum because they needed to have that capacity available in the electricity grid ready if a user needs it again.

Figure 1; Showing a 1-year graph of demand. Notice 879kVA being achieved once throughout the whole 1-year period.

Say you have one day of extreme heat, where all of your buildings plant runs at 100% capacity for a sustained 30-minute period and achieves your highest peak demand. Now because of this you can be charged at that peak rate for the entire month or year. Therefore, making the consequences for this one 30-minute period cost your business for a lot longer. Take a look at your bill, and usually towards the bottom it will have your peak demand charge, have you ever noticed? How much is your peak demand costing you? You need to be able to identify these situations so that you can reduce the impact they have on you.

Figure 2; Showing an example bill for a single month from the 1-year demand graph shown earlier. This customer is being charged using method number 2, the kVA maximum achieved in a year. The maximum demand being charged is 879kVA with the actual measured demand for that month being 796kVA.

The monetary impact for this once off occurrence is high, however it is easy to reduce this impact if you take control of your peak demand. This can be done with a system that has combined its energy management and building management systems. The ability to control your peak demand requires these two systems working simultaneously. Your energy management system will be monitoring you main incoming meter, which will advise your instantaneous demand. While your building management system will be running your building plant to whatever the current conditions require. Without these 2 systems talking to one another there is no way to control your peak demand. Having the capability for both these systems to communicate is extremely powerful, and allows you to control your peak demand. Once a system starts to see you reach a percentage of your desired peak, it can start adapting the operations of your building to immediately reduce your demand. This need only last for a short time, and once the demand reduces it can then return your building to normal operation.

If your building has demand limiting, instead of one moment in a month or year affecting your bills, you can control this moment and greatly reduce the effect it will have on your operating expenses. Demand limiting has the ability to reduce loads via your building management system, whether it be a binary point (on/off) such as a fan, motor or lighting or an analogue point (modulating point) such as VFD fan speed or compressor loading. Because peak demand can occur over a short time, whatever is turned off or ramped down, is only in this reduce state for a short period of time. For example, you may have multiple AC units turning on one floor, which is increasing your demand, so you can turn off your toilet exhaust fans for a few minutes while these units start up. Once they have started up, and your demand has returned to a normal state, your exhaust fans turn back on automatically. This will have zero impact on your tenants, but will have a large impact on your monthly bills. Another example would be to reset your chilled water supply temperature up half or full degree which in turn unloads the chillers compressor for a short period, then return to automatic modulation once the building load has steadied. Again this will have minimal impact on your occupants but a significant impact on your monthly bills.

Optergy is a system that can be used as a combined building automation and energy management system. It can be used from project inception, or added to a legacy building automation or energy management system. With built in applications Optergy can be used to manage the demand of your building automatically without your tenants noticing any change in building conditions. The only change you will notice is the reduction in electricity costs.

Figure 3; Showing the same customers demand profile 2 years later with demand management implemented. The maximum demand has been managed and reduced to 647kVA, a reduction in demand and cost by 26% with no additional tenant complaints.