4  FM quick reads on demand response

1. Understand How Rates Change To Manage Electricity Costs


Electric rates continue to rise, and to mitigate the impact, smart facility managers are examining options for controlling their usage. Care is needed, however, in the economic analysis of such upgrades. Some efficiency choices may reduce consumption more than peak electric demand, and using average electric rates to evaluate them may result in disappointment. Understanding how rates are changing may go a long way to navigating those changes.

Unlike residential electric rates that charge only for the kilowatt-hours (kWh) used each month, commercial facilities may be billed for both consumption and for how quickly they consume electricity, also known as demand. That speed of electric use is measured in kilowatts (kW), or in kilovolt-amps (kVA). Think of a kW as a kWh per hour: Your peak kW demand is the fastest rate of electricity use during a monthly billing period.

Demand charges are typically based on the highest peak kW seen each month. Depending on the tariff, that peak may either occur at any time, or be based on a time window such as 8 a.m. to 6 p.m. on weekdays. It is not, however, based on the very brief instantaneous demand spike that occurs when a motor or light is first started. Instead, it's often calculated as the highest kWh consumed in a 15-, 30-, or 60-minute period during a month. That consumption is divided by the length of the time interval to derive the peak billed demand.

This means that a single rapid usage, such as running all chillers for 15 minutes at one time during a hot spell, perhaps only once in a month, could set the peak demand charge for that month. Where a ratchet (also called "contract demand") charge exists, such a spike could also set a charge that would be levied each month for an entire year.


3.  Involve Utility As Part Of Demand-Response Decisions

The first step for managers in determining whether to participate in a utility demand-response program is to bring the local utility into the process. Programs vary by utility, as do requirements and benefits. To benefit the utility and the customer, programs must be designed to meet the operating needs of the facility.

The utility can explain participation requirements and is likely to have several years of data on energy use and metered demand for the facility. Both data sets are necessary for managers to evaluate the potential benefits of program participation.

The first indication of a facility's suitability to participate is its load profile. A relatively flat load profile is less likely to produce financial benefits for a customer than a profile with a significant difference between peak and off-peak hours. By comparison, a load profile with a large variation offers potentially large benefits.

But a facility's load profile only identifies the potential benefits from participation. Managers also need to identify and quantify individual loads the facility can curtail or shift to off-peak hours to meet program requirements. The first step in the process is to identify and quantify major electrical loads that contribute to a facility's peak demand. The next step is to evaluate each load for its potential to temporarily interrupt their operation during peak hours or to shift the time they operate to off-peak hours.

The key to successful participation in a demand-response program is support within the facility. Managers who try to take part in demand-response programs without the support of the facility's occupants are more likely to fail. When managers try to impose programs without understanding occupants' willingness to participate, everyone becomes an exception.


RELATED CONTENT:


demand response , peak demand , energy use , energy efficiency

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