Demand Charges : 2017 Edition

by Anna Gretz
November 16, 2017
Home Battery

If you use energy… at all… you should make sure you know what demand charges are. So yeah, we’re talking to you. Demand charges are an energy construct that you can use to your advantage… if you know how. This post will illuminate the meaning of demand charges and how they are affecting California energy customers, and the wider world. We’ll make sure you know what’s going on between you and your utility company, and how you can bring your relationship to the next, most profitable, level.

Demand Charges

If you’ve looked at your energy bill lately, you may have noticed that you’re not paying a simple flat rate for the amount of electricity you use. There’s more involved in calculating how much you owe the utility company than just how much you use. They’re taking into account when you’re using electricity, too.

Your energy bill is based upon both consumption and demand.

So, what’s the difference? It’s pretty easy to understand. Let’s say it’s a hot day in CA, and you’re trying to cool down your mansion with one window air-conditioning unit. You could leave that single unit on for 5 hours straight, switching locations to cool different parts of the house each hour. Or, you could use five different air-conditioning units all at one time, and you could probably get the job done in an hour. Even though running and single A/C unit for 5 hours, or running 5 units simultaneously for an hour consumes roughly the same amount of energy, running 5 at once makes the power grid work a lot harder--it demands 5 times work work from the grid than just running one at a time.

This is the difference between consumption and demand: consumption is just the amount of energy you use. Demand is how hard you’re making your utility work to supply that energy. (If you’ve ever had a demanding child, parent, or significant other, you know what the word means.)

High demand requires utility companies to have high capacity for power generation, meaning more lines, transformers, and substations. Utilities often charge their customers “Demand Charges” to help cover these costs. Your personal Demand Charge is calculated throughout the year, depending on your highest recorded demand during any given billing cycle (or, the most electricity you were consuming all at once.)

But these aren’t the only Demand Charges that can show up on your bill. Some utilities also include Time-Related Demand Charges. In most places, these Time-Related charges have a lot to do with the scenario we just mentioned: cranking up the A/C during the hot summer season. In states like California, the very highest demand of the year happens on the very hottest days, when everyone who has air conditioning is using it all at the same time. Utilities call these time periods “On-Peak hours,” because if you graph the amount of energy use in an area, this is would be the peak of the mountain. The times of Peak Demand are the times that you have the pay the most for electricity. Peak Demand charges will show up on your bill in addition to Facility Demand charges.

And then there’s the basic Energy Usage charge, which is the amount you pay for the energy you use.

We know. That’s a lot of charges. But if you understand what they are, you can figure out how to pay as little as possible on your electricity bill. All you need is a home battery.

Using Home Batteries to Shift Time of Use

In any conversation about Demand Charges, you’ll probably hear about “Time-of-Use,” or “Time of Use Shifting.” This concept is actually pretty genius. People who have a good grasp of demand charges, and when their utility company is charging them the most for their electricity, can use home batteries to slash their utility bill.

Here’s How:

Remember how utility companies charge more for power during the times when people are using it the most? Peak Demand, they call it. Well. Households that have home batteries never have to suck energy from the grid during Peak Demand hours… ever. Instead, they store energy from the grid when it’s at its cheapest, and use battery-stored energy during Peak Demand hours, when it would cost the most. It’s like taking your own, 50-cent popcorn into the movie theater--you still get to eat popcorn during the movie, but you don’t have to pay $5 for it.

That’s how home battery owners use their battery-stored electricity to avoid high Peak demand charges… but there are more ways to use home batteries to save money on your electrical bill. One pretty obvious way is to pair it with rooftop solar. Households with both a home battery and rooftop solar basically have it made. Instead of storing energy from the power grid in their home batter, they can store electricity generated from their own solar panels, and ditch the grid all together. That means they get to use free, clean energy from the sun, even after it goes down. Pretty ideal. If you have enough solar capacity, coupled with enough battery capacity, you can cut ties with the utility company completely, and live off-grid. That means no Facility Demand charges, no Peak Demand charges, and no Energy Usage charges. No charges. Period.

Swell Energy has solar + energy storage plans starting at as low as $1 a day. If you want to start harnessing energy from the sun instead of depending only on the energy grid, contact Swell Energy today for more information.