Eliminating Peak Demand Charges

In today’s energy-conscious world, managing electricity costs is crucial for businesses striving for both economic and environmental sustainability. One significant component of energy bills in Australia—and the bane of any business—is peak demand charges.

These charges are applied based on the highest rate of electricity usage during specific periods and can substantially inflate energy costs. Understanding and managing these charges is therefore pivotal to optimising energy expenditure and boosting operational efficiency.

Defining Peak Demand Charges

Peak demand charges are incurred when a facility consumes a large amount of power in a short period, typically during high-activity hours of the day. These charges are levied to help utilities cover the cost of maintaining enough power supply to meet the maximum demand across their network. Essentially, utilities need to ensure they have sufficient infrastructure to support peak usage, which includes maintaining and operating power plants and the grid itself.

In Australia, these charges can significantly impact the energy bills of businesses. If you’re an SME – particularly in manufacturing, retail, food and beverage – you’ve likely incurred high power usage during peak times. There’s no denying that getting a peak demand charge on your energy bills can 1) raise the heart rate, and 2) put a real strain on your cash flow.

The key to mitigating these charges lies in understanding how they are calculated. Peak demand is typically measured in kilowatts (kW) and is calculated over a specific billing period by identifying the highest 15-minute or 30-minute average usage recorded by the meter.

Strategies to Reduce Peak Demand Charges

Several strategies can be employed to reduce peak demand charges, each involving a shift in how and when energy is used. Here are some of the most effective:

Load Shifting:

This involves scheduling high-energy-use activities during off-peak hours. For instance, running heavy machinery or production cycles overnight or early in the morning can help avoid peak charges.

Peak Shaving:

This strategy includes using alternative energy sources like generators or battery storage during peak periods. By supplementing your energy supply with these sources, you can avoid drawing excessive power from the grid during costly peak times.

Energy Efficient Equipment / Upgrades:

Implementing energy-efficient technologies can reduce your overall energy consumption and lower your peak demand. Upgrading to LED lighting, energy-efficient motors, and HVAC systems are typical examples. It may seem simple but reviewing the power consumption star rating of appliances and investing in the more efficient options will pay off in the long run.

Demand Response Programs:

Participating in demand response programs can also offer financial incentives. These programs involve reducing your power usage during peak periods in response to requests from your energy provider, who may offer lower rates or other benefits in return.

Peak Demand Mitigation In Action Example

Consider a local shopping centre in Brisbane. Centre management regularly finds that it is hit with substantial peak demand charges. This is due to its high energy usage during the day, particularly in the late afternoons and evenings.

In response, the centre management conducts an audit of its energy usage. The energy audit finds that implementing a combination of peak shaving and load shifting strategies can reduce charges significantly.

Firstly, the centre reschedules some of its maintenance operations that require significant power like HAVAC servicing, to off-peak hours. They also invest in the installation of a battery storage system, alongside extra solar panels on the roof to store electricity from the grid during off-peak hours and from their rooftop solar panels during the day.

This stored energy is then used during peak periods, significantly reducing the amount of energy drawn from the grid during costly peak times.

As a result of these strategies, the shopping centre sees a reduction in peak demand charges by 25% within the first year, alongside an overall decrease in energy costs by 18%.

As you may know – this kind of saving on energy alone can really transform a business’ bottom line. It just takes an investment of time and capital. But it all starts with taking stock of your current state – identifying low hanging fruit and making a business case for the more capital-intensive changes.

Why SMEs Should Conduct an Energy Audit

Peak demand charges represent a crucial aspect of energy bills that can be managed effectively with the right strategies. By understanding what peak demand charges are, why they are levied, and how they are calculated, businesses can take informed steps to reduce their impact. Strategies such as load shifting, peak shaving, and energy efficiency improvements are not just cost-effective; they also contribute to a more sustainable energy consumption model.

For SMEs in Australia and beyond, actively managing energy usage during peak times is no longer just an option—it’s a necessity for ensuring competitive advantage and operational efficiency in an increasingly energy-aware market. We provide tailored advice and solutions to SMEs in South-East Queensland to help them navigate their unique challenges and optimise their energy strategies effectively.

If you’re interested in a free initial consultation that can get your energy usage on the right track – contact us today.