Demand, Consumption, and Post-Project Utility Rates

It’s important to understand the difference between electricity demand and electricity consumption, especially when dealing with a large-scale project scope (whether it’s commercial or residential). This information will guide the design of the project, and highlight the best post-project utility rate according to usage tendencies and cost saving goals.  

The difference: Demand vs. Consumption:

Electricity is measured and billed by utilities in two ways – electricity demand, which is measured in kilowatts (kW), and electricity consumption, which is measured in kilowatt-hours (kWh). Electricity demand represents the rate at which electricity is consumed, while consumption measures the amount of electricity that has been consumed over a certain time period. For example, a piece of equipment might demand 3kW from the grid when it’s on. The longer the equipment stays on, the more energy it consumes (kWh) over time – but the demand (3kW) remains the same. The demand rate remains constant, while the consumption amount depends on a defined period of time.

Why it matters:

Most utilities will charge for electricity demand in commercial buildings (and some large residential projects) based on peak demand, which is the highest average demand during a specific period (typically a 15-minute interval). In general, a site that sees spikes in power use - i.e. an elevated rate of demand at specific period of time - will have higher charges than one who uses electricity consistently. 

For example: a site’s demand profile is 50 kW, except for one 15-min interval when the demand is 100 kW. The utility would likely base the rate/bill calculations on 100 kW.  

Utilities operate based off elevated average demand primarily to ensure the grid can meet demand if all grid consumers were to operate at their highest average demand simultaneously. They value reliability and will produce a reserve margin based on that assumed maximum grid demand as a precaution.

Similarly, utilities often consider consumption based on time-of-use pricing, as electricity rates tend to differ given the time of day. Depending slightly on location, in the summer, peak times are generally on weekday afternoons between 2pm and 6pm. During the winter, peak times are generally weekday mornings between 9am and 12pm and weekday evenings between 5pm and 8pm. These are the time frames when utilities expect the grid to experience the highest overall demand (though, again, it does vary slightly by location and utility).  

How can this information guide project design and inform post-project utility rates?

As mentioned above, demand rates are subject to some measure of generalization and assumption. It is important to analyze a site or homeowners specific usage profile when designing a project. Understanding what periods of the day or week electricity demand is the highest will provide guidance on how to effectively manage demand, spread it efficiently over time, and shave overall usage through battery storage, EE devices, etc.

Be sure to select the most accurate post-project rate to maximize savings on a particular use case. EverBright defaults to the most common rates – consider visiting the utility provider’s website to learn more about their rates. Combine this information with usage profile insights to best optimize project design and keep customer’s post-project costs low.