PEAK

DEMAND
MANAGEMENT 101
A guide to understanding demand charges
and taking control of your energy bill
Introduction
To reduce energy costs and minimize your exposure to risk (operational-
risk, budget-risk, and market-risk), while at the same time maximizing
the effectiveness of your limited resources, energy decision makers need
to focus on three points of leverage: how energy is bought, how much
energy is used, and lastly, when energy is used.
While the frst two are intuitive, the when piece of the equation is often
an overlooked opportunity to drive meaningful savings. For example,
peak demand charges essentially have users pay a premium for energy
thats consumed when strain on the electric grid is at its highest,
and can represent up to 30% of your energy bill. In this guide, well explain
what peak demand is, how demand charges are calculated, and, using a
facility example, demonstrate how to actively manage your peak demand to
generate a meaningful savings opportunity for your organization.
1
Peak Demand Management 101
What is Peak Demand?
In many cases, electricity use is metered
(and you are charged) in two ways by
your utility: frst, based on your buildings total
consumption in a given month (kWh), and
second, on your buildings demand (kW),
based on the highest rate of consumption of
your building during the given billing period
(typically a 15-minute interval during that
billing cycle).
To use an analogy, think about consumption
(kWh) as the number that registers on your
cars odometer (how far youve driven), and
demand (kW) as what is captured on your
speedometer at the moment when you hit
your max speed. Consumption is your
overall electricity use, and demand is your
peak intensity, or maximum speed.
With residential buildings, these two charges
may appear as a combined charge (like all
tariffs, this varies), but because commercial
and industrial users have signifcant
variance in both consumption and demand,
these charges are often (but not always)
broken out. National Grid explains: Some
[commercial and industrial energy users]
need large amounts of electricity once in
awhileothers, almost constantly. And
because electricity cant be stored, meeting
these customers needs quickly becomes
complex and costly, requiring a vast array of
expensive equipmenttransformers, wires,
substations, and generating stationson
constant standby.
In some areas, all customers are assessed
a demand charge to cover these costs,
while in others, customers who create this
exceptionally high, or peak, demand are
then correspondingly charged more for it.
2
Peak Demand Management 101
How are demand charges
calculated?
Consumption is measured at a rate based
on kilowatt hours (kWh), and demand is
measured in kilowatts (kW). To understand
how this applies to your energy use, see
the two examples following.
Note that when demand is higheri.e., using
more kilowatts and for a shorter time period
demand charges will be higher versus using
the same total amount of kilowatt hours (kWh)
over a longer time period and at a lower
intensity. Overall consumption remains the
same between the two companies in the
example, but the amount each pays varies
because of demand charges.
Lets assume these rates apply to both
companies:
Electricity charge = $0.0437 per kWh
Demand charge = $2.79 per kW
Company A
runs a 50 megawatt (MW) load continuously for 100 hours.
50 MW x 100 hours = 5,000 MWh
5,000 MWh = 5,000,000 kWh
Demand = 50 MW = 50,000 kW
Consumption:
5,000,000 kWh x $0.0437 = $218,500
Demand:
50,000 kW x $2.79 = $139,500
Total Charges: $358,000
Company B
runs a 5 MW load for 1,000 hours.
5 MW x 1,000 hours = 5,000 MWh
5,000 MWh = 5,000,000 kWh
Demand = 5 MW = 5,000 kW
Consumption:
5,000,000 kWh x $0.0437 = $218,500
Demand:
5,000 kW x $2.79 = $13,950
Total Charges: $232,450
3
Peak Demand Management 101
For the same amount of kilowatt hours used
i.e., at the same consumption level, albeit at
different intensitiesCompany A pays
signifcantly more in charges.
Depending on your rate structure, peak
demand charges can represent up to 30% of
your utility bill. Certain industries, like
manufacturing and heavy industrials, typically
experience much higher peaks in demand
due largely to the start-up of energy-intensive
equipment, making it even more imperative to
fnd ways to reduce this charge.

Regardless of your industry, taking steps to
reduce demand charges will save money.
Lets take a look at how one facility boosted
its bottom line by adjusting its peak
demand charges using real-time energy
data monitoring.
Facility Example
Whether or not building scheduling and peak
demand management can help a facility
cut its energy bill depends largely on the
buildings energy use patterns and the
specifc rate structure offered by the utility.
In the case highlighted in this example,
an industrial facility had a steam turbine
generator that generated electricity for
the facility.
Challenge: On-peak demand charges
Building owners often tweak their equipment
scheduling to optimize the trade off between
consumption and demand charges. In this
particular example, the crew had to bring the
boiler (that supplied the steam for the
facilitys turbine) offine to clean it every night.
While cleaning the boiler, peak demand shot
up 400-500 kW each night, as illustrated
in the graph on the right.
USING REAL-TIME ENERGY DATA MONITORING, WE WERE ABLE TO SEE
THAT THE FACILITY

S CLEANING SCHEDULE WAS CAUSING A SPIKE IN

THE FACILITY

S PEAK DEMAND CHARGE. THE CREW WAS INSTRUCTED

TO MOVE THE CLEANING SCHEDULE TO OUTSIDE THE PEAK DEMAND
WINDOW, WHICH LOWERED THE FACILITY

S PEAK DEMAND CHARGE BY

APPROXIMATELY $45,000 ANNUALLY.
Upon reviewing the facilitys energy data,
analysts found that peak demand charges
were much higher than necessary because
the cleaning was scheduled to occur
within the facilitys peak demand window, the
on-peak hours during which peak demand
charges are most expensive. This problem
appeared to be a prime candidate for peak
demand management.
Solution: No-cost scheduling
adjustment
Using real-time energy data monitoring, we
were able to see that the facilitys cleaning
schedule was causing a spike in the facilitys
peak demand charge. The crew was instructed
to move the cleaning schedule to outside
the peak demand window, which lowered the
facilitys demand during the on-peak hours,
and thus lowered its peak demand charge by
approximately $45,000 annually.
Peak Demand Management 101
4
Peak Demand Periods and Billed Demand
Billed Demand [kW]
3,421
Demand Turbine Operated [kW]
3,106
Conclusion
Peak demand management is just one of many low and no-cost energy
effciency measures that can be achieved with access to real-time
energy meter data. Without interval energy data, energy managers have
to rely on sometimes months-old data from their utility bills without
visibility into daily operations and energy use to try and track down
potential ineffciencies and anomalies.
EnerNOCs energy intelligence software is designed to provide energy
managers with powerful analytics, decision-making tools, reports,
and dashboards to ensure that you are achieving savings and driving
operational excellence at your facility.
If youre interested in learning more about peak demand management, check out
the resources below.
Understanding Peak Demand Charges (article)
Perdue Farms Learns to Control Peak Usage All Year Long with EnerNOC Demand Response (case study)
5
Peak Demand Management 101
Summary
Visibility into real-time energy data allowed
this facility to better its consumption pattern
and peak demand charges. By making a
no-cost scheduling adjustment, they were
able to lower their peak demand charge
by $45,000 annually.
Energy managers can manage peak demand
charges by using real-time energy data to
monitor and adjust when they achieve their
peak demandand also lowering the peak
demand actually reached during a billing cycle.
Some other examples of peak demand
management include starting up the buildings
systems before on-peak hours or oper-
ating the most energy intensive equipment at
different times so all machines arent
run-ning simultaneously, which makes peak
demand lower.
About EnerNOC
EnerNOC, Inc. is a leading provider of Energy Intelligence Software
applications and services. EnerNOC unlocks the full value of
energy management for thousands of utility and commercial,
institutional, and industrial (C&I) customers worldwide by delivering
a comprehensive suite of demand-side management services
that reduce real-time demand for electricity, increase energy effciency,
improve energy supply transparency in competitive markets,
and mitigate emissions.
For more information, visit www.enernoc.com.