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How Business Owners Can Fight Demand Charges

Commercial properties and residential properties are billed substantially differently. Here in the Mid-Atlantic states of West Virginia, Virginia, Maryland and Pennsylvania, there is one glaring difference that may not be immediately obvious on a commercial electric bill: businesses are charged for how fast they use energy in addition to how much they consume. Homes in this region pay the same rate for kilowatt-hours of electricity no matter what time of day it is or how much is available. Commercial properties and businesses, on the other hand, have to contend with a troublesome factor known as demand charges. Some power companies, especially around Eastern Maryland, even have partial-peak hours with middle-rate demand charges for certain times of day.

It is entirely possible that over half your commercial power bill consists of demand charges alone. This means that you’re not just paying for your electricity consumption, you’re also paying for a guarantee that the maximum power you may ever use will be available during all hours of the day.

Demand Charges

Peak hours and demand charges are two concepts that are permanently linked because one is a response to the other. This is primarily related to the weather, when HVACs get cranked up to combat outdoor temperatures, and to a certain extent when everyone tends to wake up or come home from work. During these times, homes and businesses alike demand far more power than usual which can result in a temporary shortage on the grid, requiring the use of very expensive “peaker plants” to generate the extra power needed to keep the lights on. Every building pulling power reduces the amount available for everyone else which starts to matter when nearly every person in the city has come home and fired up the HVAC to get the home nice and warm or cool depending on the season. Therefore, utilities bill companies based on how quickly they use that power.

In the mid-Atlantic area, demand charges are based on the highest 15-minute average usage recorded within a given month. If the facility tends to use a lot of power over short periods, the demand charges will comprise a larger part of the bill. If the facility uses power at a more consistent rate throughout the month, the demand charges will generally be a smaller part of the bill.

Peak Load Shaving

So what can a budget-minded business do in the face of rising demand charges on their power bill? While most smaller businesses simply accept the hit, many large facilities like factories and hospitals with backup generators have a clever solution: Simply don’t use as much power during peak hours and save hundreds if not thousands on demand charges every month.

Certain larger businesses and venues need backup generators for their own reasons. Manufacturing plants, for instance, need backup generators because some processes can be ruined by a blackout in the middle of a shift. Hospitals have backup generators so that their computers, life support machines, and surgery theaters stay functional even in a city-wide power outage. However, they can also use these already-owned power assets to save money on demand charges by reducing their burden on the utility grid. The power supplied by the backup generators can offset at least some of the power they use during peak hours and this is known as peak load shaving. The downside, of course, is that fossil fuel generators are dirty, noisy and cost money to run.

Reducing Your Peak Load with Solar

The good news is that you don’t actually need a backup generator to take advantage of the peak load shaving trick. In fact, this solution is much more preferable to using a backup generator because it is affordable, popular, tax-deductible, and completely green. Solar panels are a great way to generate your own power every day, directly offsetting your building’s electricity consumption.

The challenge is, of course, that solar generates power when the sun is out, sends that power directly down the lines, and that’s that. If you have a net-metering program, maybe the power company gives you demand charge discounts for putting solar power on the grid during peak hours and maybe they don’t. The real way to strategically use your solar panels for peak load shaving is by combining them with a bank of batteries. This way, you can save up some or all of that solar energy for when it will be most profitable to you, during times where you would normally be seeing hefty demand charges.

Intelligently Reducing Load from the Grid

The key to peak load shaving is to know exactly how and when to use your auxiliary power solution. Just like hospitals and factories know when to fire up the backup generators, you will need to have a grid-tied solar and battery solution that discharges during peak usage to offset the demand. Here’s how it works:

During the day, your solar panels soak up sunlight and send power down the cables. You can either route the energy directly into your batteries or send it through your building first as active power and then into the batteries. Then, during those times that the facility would be using its maximum amount of power, the batteries will discharge at a rate proportional to the demand from the utility. With enough storage you can self-power your business as much as possible to avoid logging that high peak load on your meter for which you are billed. This not only reduces your power bill and more directly increases your use of renewable energy, it also eases the burden of your power use from the local power lines. This makes more power available to homes and businesses while reducing the utility’s need to fire up expensive gas-fired peak generation plants.

Peak Load Shaving with Mountain View Solar

Are you tired of paying half your power bill in demand charges? If you’re ready to reduce your use of the increasingly expensive power grid with a solar and storage solution of your own, the savings on demand charges alone can accelerate the ROI of your solar array even more quickly than standard net-metering deals with solar by itself.

Here at Mountain View Solar, we specialize in putting together the right strategic solar plan for each business, including a complete solar+battery solution for peak load shaving at your facility. The process is pretty straightforward: our data logger records your building consumption patterns for a year, we create an energy profile, and then we install batteries to intelligently offset peak demand, guaranteed for 10 years. For more information about how to dodge demand charges with clever use of solar and battery storage, contact us today for a FREE consultation.

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