Downgrade Costly Demand Charges with Solar or Storage

By: Pivot Energy

July 25 2022

Rooftop solar system

Rising electricity prices. Extreme weather like hurricanes and wildfires. Global supply shortages.

In recent years, U.S. businesses have been increasingly forced to contend with unpredictable and volatile conditions that often lead to increased operational costs and challenges. Especially for manufacturing and other facilities that require large volumes of electricity for standard operation, monthly utility bills can be nearly crippling. In fact, the average electricity bill for U.S. industrial customers can reach tens of thousands of dollars every month.

Onsite solar energy production can not only cut down on an organization’s overall grid-purchased electricity, but it can also further reduce utility bills by strategically reducing the facility’s daytime electricity “peaks” or spikes in demand. A battery energy storage system boosts these savings by affording the flexibility to shave peaks at any time of day or night.

So, how exactly can reducing electricity demand peaks with solar and storage reduce operational costs? Read on to learn about demand charges and how targeting them can unlock savings of up to hundreds of thousands of dollars a year.

 

What are demand charges?

A demand charge is a component of your utility bill associated with your highest period of electricity consumption in a given time period (15 to 30 minutes, to an hour, etc) depending on your given utility. Demand charges vary by building size, location, and utility, but if your business has “peaky” electricity consumption that rises and falls throughout the day, your monthly demand charges are probably inflating your electricity costs. For some, demand charges can account for as much as 70% of your electricity bill!

While most demand charge rates fall between $2 and $15 per kilowatt (kW), some reach above $30 per kW. That means that if your maximum monthly demand charge is 1,000 kW, you’ll pay a whopping $30,000 for your demand charge alone.

A key problem that most facilities face is the inability to shift or reduce electricity consumption to minimize peaks in demand and therefore reduce demand charges. In some cases, operations are scheduled and machinery must run at specific hours; in others, operations simply run all day and night. The good news is that both onsite solar and energy storage can provide this key operational flexibility.

 

Reduce daytime demand charges with onsite solar

It’s well known by now that an onsite solar system can reduce a facility’s overall utility bill by supplying clean electricity when the sun is shining. However, did you know that solar can also be incredibly effective at reducing daytime demand charges? If your electricity consumption reaches a high point when the sun is shining, you can “shave” or reduce this peak by instead consuming your produced solar energy at that time. By shaving these utility demand peaks, solar helps to lessen your exposure to expensive daytime demand charges.

The first graph below shows how solar production can help flatten costly peaks throughout the day. Instead of having to pay a high demand charge for a demand peak around 2:30 PM, you pay less for lower demand peaks earlier and later in the day.

Graph showing energy demand reduction through solar

However, solar peak demand shaving can only help you when the sun is shining. If your peak demand is around 8:30 PM as shown in the second graph below, the sun has already set so your solar production cannot offset this peak.

Graph showing peak energy demand after sunset

So, what if your facility’s electricity consumption spikes when the sun isn’t shining? That’s where battery energy storage comes in.

 

Reduce demand charges anytime with energy storage

Unlike solar, a battery energy storage system can shave your energy consumption peaks - and thus reduce your costly demand charges - day or night. It accomplishes this by storing electricity when your demand is low, and dispatching it to offset your utility demand peaks. This greater flexibility enables you to strategically target your highest demand peaks, which directly translates to better savings.

It’s important to note that energy storage typically makes the most economic sense if your facility’s demand charge is $15 per kW or higher. However, because energy storage can help you cut operational costs in other ways, your facility may benefit from a system regardless of your demand charge.

 

Downgrade demand charges today

If your facility is struggling with high utility bills, it may be that your “peaky” electricity consumption and high demand charge have joined forces to amplify your electricity costs. Onsite solar production directly reduces your daytime demand charges by reducing the electricity that you draw from the grid. Energy storage takes your savings to the next level by shaving your demand peaks day or night, rain or shine. With the operational flexibility afforded by solar and storage, your facility can finally target those pesky demand charges - leading to significant long-term energy savings.

Ready to downgrade your demand charges and unlock utility bill savings? Contact Pivot Energy to get started today.