Within the last few years Industry has been bombarded with pressure to become “more sustainable” by adopting eco-friendly practices that reduce consumption of resources such as water and energy. A more profitable operation and lower utility costs are benefits realized when a business becomes more sustainable.
Reducing electrical energy use is an area that many businesses have seen real benefits because savings can often be had with minimal investments of time and money. Most organizations pay their power bill without much examination or question. Many times, savings can be seen by simply understanding how electrical use is billed and how demand and consumption charges are calculated. This requires an understanding of the unique nature of electrical energy as well as how it’s generated and supplied to consumers.
Consumption charge is the calculation of the total amount of electricity, kilowatt-hours (kWh), consumed during a billing period. This is, in effect, the total quantity of energy consumed. Unfortunately, this is oftentimes understood to be the only charge associated with electrical energy consumption without realizing there are other charges which must be considered.
Bills also include costs based on the highest level of electricity supplied at one time during the billing period and at the time of day it’s needed by your business. This is the demand charge.
An energy utility provider cost required to store electrical energy is very high which makes the use of battery storage impractical. In general, electrical energy that is provided to consumers must be generated nearly instantaneously. Therefore, in addition to the consumption charge, an additional cost is itemized on an electricity bill called the demand charge. Demand is the rate at which a company consumes electricity – or the amount needed to power a business at any given point in time. Therefore, total electrical energy consumption and demand are not necessarily related.
Sub-Metering & Smart-Metering
The first step in making any reductions to electrical energy use and costs is the creation of a baseline profile that details how and when energy is used at the company. Since energy costs are not only based on the total electrical consumption, when you use electrical energy is just as important as how much you use. Therefore, creating an electrical energy profile must include both the time of day energy is needed (smart-metering) and energy demand requirements by each electrical consuming piece of equipment (sub-metering). If sub-meter installation is too costly, there are other ways to estimate individual equipment demands such as using equipment rating and run-time.
Managing electrical energy costs should be as easy as managing other costs. Unfortunately, energy providers have kept an advantage by depending on consumers simply not understanding the nuances of how electrical energy is billed. The understanding “when” and “how” of electrical energy consumption will enable you to work with your energy provider and internal operations to identify areas where consumption can be reduced and costs can be cut.
Author – Matt Giron, Associate Consultant can be reached at firstname.lastname@example.org
At Alta we help our customers with energy and operational efficiency. For more information contact us.