Plants use a lot of electricity and it’s getting more costly, but harvesting worthwhile energy savings involves more than turning out a few lights. If you are going to reduce energy costs, you must understand how your company is billed.

December 10, 2010

by Brett Wills

Plants use a lot of electricity and it’s getting more costly, but harvesting worthwhile energy savings involves more than turning out a few lights. If you are going to reduce energy costs, you must understand how your company is billed.

The two main drivers influencing the heft of your bill at the end of the month are the consumption and peak demand charges.

Consumption is straightforward: it’s the amount of kilowatt-hours (kWh) consumed within the billing period multiplied by the cost per kWh. For example, if company XYZ has 10 100-watt light bulbs and each one of those light bulbs is on for one hour each month, this would equate to 1 kWh of energy consumption (10 bulbs x 100 W per bulb = 1,000 W or 1 kW x 1 hour = 1 kWh). Therefore, if the price of electricity is $0.10 per kWh (roughly the price in Ontario), the consumption cost for the billing period would be $0.10 (1kWh x $0.10).

Peak demand is trickier. Demand in itself is a measure of how fast energy is consumed at any one time. Peak demand is the highest level during the billing period. In other words, it’s the largest one-time draw of energy in a given month and is measured in kW not kWh because it does not matter how long it’s drawn. So it’s the amount of kW multiplied by the peak demand cost per kW.

If company XYZ has 10 x 100 W light bulbs and each one of those light bulbs is on for one hour in the month, making sure to only have one light on at a time, the largest demand (peak demand) in the month would be 100 W. If the peak demand cost is $6.20 per kW, the peak demand charge for the billing period would be $0.62. (100 W = 100 kW x $6.20 = $0.62). So the total billing costs for the month would be $0.72 ($0.10 consumption charge + $0.62 peak demand charge).

However, if company XYZ turns on all 10 light bulbs at the same time, the largest demand (peak demand) for the month would be 1,000 W or 1 kW (10 x 100 W). Assuming again the peak demand charge is $6.20 per kW, the peak demand charge for the billing period would be $6.20 (1,000 W or 1kW x $6.20). Therefore in this scenario, the total billing costs for the month would be $6.30 ($6.20 + $0.10).

Note the dramatic difference. Give your bottom line a break and be aware of how much energy is being used at any one time. Managing energy use more acutely will drastically lower energy costs with little to no investment.

*Brett Wills is the director of the Green Enterprise Movement and a senior consultant with High Performance Solutions in Cambridge, Ont. He is also the author of Green Intentions: Creating a Green Value Stream to Compete and Win, published by Productivity Press. E-mail bwills@hpsinc.ca.*