January 18, 2018

Peak Demand Charges: How They Work and How to Reduce Them

Peak Demand Fact Sheet

Understanding exactly what peak demand charges are, how they’re calculated, and what you can do to reduce or eliminate them, can be confusing.

Believe it or not, your energy utility’s peak demand charges account for up to 70% of your company’s energy bill.

The good news is, there are ways to reduce or even eliminate those charges.

Here’s the difference between the two types of charges on your company’s monthly energy bill:

  • Consumption charges are the total amount of energy in kilowatt-hours (kWh) used, multiplied by your utility’s cost per kilowatt-hour for this energy ($/kWh). This is your company’s total energy use during the billing period.
  • Demand charges, which account for 25-70% of monthly energy costs for commercial and industrial businesses, are based on “time of use” pricing. Your utility provider charges your company more for energy used during times of peak demand—for example, during summer daylight hours when most businesses are in full operation.

Consumption and DemandHow To Reduce Peak Demand Charges

One effective way to significantly reduce peak demand charges is through the use of on-site power. Simply put, distributed generation or on-site power is non-grid supplied power that is instead produced at the site of your business. On-site power generation options, such as Combined Heat and Power (CHP) and solar, can generate a significant share of a facility’s power needs, reducing the risk of utility pricing volatility (like peak demand charges) and providing long-term savings in electricity costs.

By generating your own on-site power during peak demand periods, you can meet your facility’s energy needs and offset—or even eliminate—the amount of energy your facility draws from your local utility during these peak demand periods.

GEM Energy is an on-site power resource for all types of organizations. For those who are ready to explore this efficient and reliable source of energy, on-site power engineers are available for consultations.

Download the Peak Demand Fact Sheet to learn more about how to reduce or eliminate peak demand charges on your company’s energy bill.

For more information or to talk with an on-site energy solution expert, call 866.720.2700 or email onsitepower@gogemenergy.com.

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