How it Works: Understanding your Utility Bill for Commercial Users
In order to manage your building’s energy costs, it is important to understand how utility charges work. Residential electricity costs are based purely on consumption. Commercial electricity costs are based on two measures: consumption and demand.
- ENERGY CONSUMPTION: the amount of electricity in the kilowatt-hours (kWh) that the building consumes during a month. Charges are calculated as $/kWh and typically range from $0.05 - $0.20/kWh.
- ENERGY DEMAND: The peak energy use at one time in kilowatts (kW) occurring within the month, or for some utilities, during the previous 12-months. Charges are calculated as $/(Peak kW), typically range from $8-40 per kilowatt per month, and can represent 75%+ of the entire bill.
For example, imagine a commercial office building that operates five days a week. During weekdays, the building is bustling with activity: lights are on, computers and office equipment are running, and the HVAC system works to maintain a comfortable temperature. This activity results in a steady consumption of electricity, which is measured in kilowatt-hours (kWh) and reflects the building's overall energy usage throughout the month.
However, the energy demand for this building is not constant. On particularly hot days, the demand for cooling increases significantly. To maintain a comfortable indoor environment, the HVAC system might operate at full capacity during the hottest part of the day, say from 2 PM to 3 PM. This spike in electricity demand represents the building's peak energy demand, measured in kilowatts (kW). The utility company tracks this peak demand because it dictates the electric generating capacity the utility must have available to meet the building's electric demand needs.
Let's say the building's average monthly energy consumption is 50,000 kWh, with a cost of $0.10 per kWh, leading to a total consumption charge of $5,000/month. However, during a particularly hot week, the building's energy demand spikes to 250 kW, higher than any other point in the last 12 months. The utility company charges a demand rate of $25 per kW for the highest peak demand recorded during the billing period. Therefore, the demand charge for that month would be 250 kW * $25/kW = $6,250/month.
The building's total energy bill for the month is the sum of its consumption charges and demand charges, which in this case would be $5,000 (for consumption) + $6,250 (for demand) = $11,250/month.
Impact of Peak+
Now imagine installing Peak+ on this site: The Peak+ system reduces the Peak demand from 250kW to 150kW, which would result in 100 kW * $25/kW = $2,500 in savings for the month, a 22% decrease in the energy bill.
