Note: This article originally appeared on Energy Manager Today on August 12, 2014.
What’s driving your electrical energy spend? It depends on the rate that you have negotiated with your utility provider. It’s important to understand this since your electricity costs are typically six-times greater than that of your natural gas energy spend. There are typically three (3) general components to the electricity bill:
1. Consumption Charge:
Cost of generation or the kilowatt-hours (kWh) which is your consumption of power produced.
2. Demand Charge:
Cost of delivering the power to you or the demand charge which is the cost of using transmission and distribution to deliver the electricity, and
3. Other Charges:
This includes all of the other stuff, such as customer connection charges, rate riders for energy efficiency programs, and debit retirements charges.
Energy software that integrates with control systems that consume electricity can have a profound effect on your bill. The obvious reduction comes from saving kilowatt-hours. However, the less intuitive and more complex savings opportunities comes from reducing demand charges. Depending on your rate structure and who you have negotiated to purchase your electricity, but there are two common opportunities that exist: (1) peak demand reduction and (2) coincident peak demand reduction. These are similar in the fact that you are charged for using the electricity transmission and distribution infrastructure to deliver the electricity to your facility.
Think about demand as the physical size of a pipe that the city provides your home for your domestic water needs. Typically a 1-inch line is the standard line that comes into your home that provides you with sufficient flow and pressure to satisfy your water demand. A larger water line would cost your more to have installed from the city, however you would be able to use more water at any given instant (see figure below).
Demand vs Consumption
When a building’s electrical system is designed, it estimates the peak demand that it will draw when energy consumption is the highest and the electricity utility will charge you for those periods since it is demanding more of the electrical infrastructure.
Peak demand is typically defined by utilities as the electrical demand (kW) over a given 15-minute interval in a given billing cycle. The largest 15-minute interval in the billing cycle sets the demand charge on your electricity bill. This is a great opportunity for cost savings, especially with the help of energy efficiency software. Peak demand is most often set by many pieces of equipment turning on at the exact same time, thereby setting a peak. To avoid this, equipment can be staged to reduce the peak demand and keep the demand threshold at a lower value, thereby reducing the demand charge. Rate structures are set up this way to encourage this sort of behaviour. If demand is not managed, the electricity infrastructure operators need to plan to increase the generation and larger transmission and distribution lines – a costly endeavour.
In mathematics, coincident lines are lines that lie on top of each other. Essentially, they form one line. This is defined by the formula y=mx+b. The concept is similar in electricity demand – your peak demand ‘coincidentally‘ occurring at the same time of the utility’s peak demand. In other words, Coincident Peak is defined by the demand of a facility during the interval that the electricity system peaks. This is different from peak demand in that it may not occur during the same interval as the facility peak demand, however the electricity grid that your local distribution company is part of is peaking and you are billed for your contribution to the system peak. The interval is typically measured over an hour.
This actually creates an opportunity to reduce your monthly peak demand cost. However, there are a few catches. Coincident peak demand is typically set during the prior year. For example, your coincident peak charge for 2014 is billed based on your 2013 performance. Coincident peak involves external information to predict when it occurs. There are many factors that affect the occurrence of a coincident peak. Weather is a major one, but there are also other variables, such as the current state of the distribution and transmission lines.
Reducing the demand charge associated with coincident peak involves knowing what hour of the year it occurs and then reducing the demand of equipment that has the capacity to do so during that hour. This is a complex task for an operator of a building management system but is ideally suited for software that can analyse all of the internal and external inputs to reduce demand for the coincident peak periods. The software may also direct the control system to pre-cool or pre-heat spaces to allow lower demand for the coming hour – a concept known as predictive demand management. Many electricity systems define 5 coincident peak periods – 5 hours of the year which will set your demand peak for the following year. As such, there is a level of precision required to accurately select 5 or so individual hours from the 8760-hours that occur annually.