wattmatters
Solar Wizard
Demand tariffs are unfortunately confusing for many consumers. They have been a feature of industrial and commercial billing for a long time and are now creeping into residential billing.
Personally I see no real need for them when time of use tariffs are just as effective as a price signal for encouraging household consumption away from peak periods and onto off-peak periods. This is a concept most households understand. Demand tariffs not so much.
Usually as a quid pro quo demand tariffs are accompanied with a lower energy consumption tariff, or a reduced peak period consumption tariff.
The issue for utilities is the cost of networks (the transformers, poles and wires etc) is very much a function of the peak power demand. The higher the peak demand, the beefier the network infrastructure needs to be. If peak demand can be reduced, then capex on upgrading the power supply capacity can be avoided or delayed, and this has very real cost of operation implications.
As to demand tariffs though, forgive the "mansplaining"...
We are mostly used to the following sort of electricity charges:
- a fixed service fee, often a fixed daily or monthly charge. In some cases this might also cover a basic amount of energy supply.
- an energy consumption charge, expressed as $ per kWh consumed (imported from the grid).
- sometimes the energy consumption charges are billed on a time of use basis, with the $ per kWh rate varying depending on time of day, day of week and sometimes they can vary with seasons as well.
- credits for exporting energy to the grid, generally also expressed as $ per kWh (this may be at a different rate to the energy import tariff).
There might be other charges and variations on a theme but the above are the ones most are familiar with.
Then there is a demand tariff.
This is billed on your peak demand, being
i. based on the maximal average power for an interval, during the
ii. peak demand window, for
iii. the billing period.
Parsing that out:
i. Maximal average power for an interval:
An interval might be an hour, a half-hour or 15 minutes (or whatever it is defined to be in your region). It will be on the hour, half-hour or quarter-hour, e.g. 5:30-6:00 PM and not 5:37-6:07 PM.
The duration of the interval depends on the type of metering used in the region amongst other things. In my location it is based on half-hour intervals but it sounds like in the OP's region it is hourly intervals.
The important thing is demand is a power value, not an energy value.
Obviously if the interval used is an hour, then numerically the power and energy values are the same. e.g. if you consume 5 kWh during an hour, then the average power consumed during that hour is 5 kW.
But if the interval used for calculating peak demand is say 30-minutes (like it is in many states in Australia) then if during a half-hour interval you consumed 2.8 kWh of grid energy, the demand for that half hour is 2.8 kWh / 0.5 hours = 5.6 kW.
The maximal part is just picking the one maximum power value out of all the intervals.
ii. Peak demand window
Often these interval calculations only apply during specific time periods, which might typically be from some time in the afternoon through to the evening. Each utility region will have their peak demand window defined, e.g. 4PM to 8PM on weekdays. There will be many variations on how these windows are defined. So if for instance using this example you had a peak demand of 6 kW during 2-3AM and 4 kW during 6-7PM on a Tuesday, then the 6 kW demand does not count as it was outside the peak demand window. In this case the 4 kW value applies.
iii. During the billing period
Typically monthly but in some cases quarterly (even so the demand charge may still be shown as three separate monthly charges).
What this means is the peak demand is the maximum average power from one interval (within the peak demand window) during the month.
The demand tariff itself is usually expressed as $ per kW per month*.
In some places (like here) they confuse people even more by expressing the tariff as $ per kW per day, but then multiply it by the number of days in the billing period.
So by way of example:
Let's say the demand tariff is based on hour long intervals and applies to the 4PM-8PM window every day. The tariff is $13/kW/month.
Let's also say your maximum grid energy consumption for a one hour interval during the 4-8PM window for that month was 5.7 kWh. The peak demand is therefore 5.7 kWh / 1 hour = 5.7 kW.
The peak demand charge would then be 5.7 kW x $13/kW/month = $74.10 for the month.
While my own billing does not have a demand tariff, the option exists if I wish to move to a demand tariff type. Accordingly I do keep a track of our monthly peak demand and what the billing impact would be.
This is what our monthly peak demand has looked like over the past year and a bit:
* I had originally incorrectly typed $ per kWh per month.
Personally I see no real need for them when time of use tariffs are just as effective as a price signal for encouraging household consumption away from peak periods and onto off-peak periods. This is a concept most households understand. Demand tariffs not so much.
Usually as a quid pro quo demand tariffs are accompanied with a lower energy consumption tariff, or a reduced peak period consumption tariff.
The issue for utilities is the cost of networks (the transformers, poles and wires etc) is very much a function of the peak power demand. The higher the peak demand, the beefier the network infrastructure needs to be. If peak demand can be reduced, then capex on upgrading the power supply capacity can be avoided or delayed, and this has very real cost of operation implications.
As to demand tariffs though, forgive the "mansplaining"...
We are mostly used to the following sort of electricity charges:
- a fixed service fee, often a fixed daily or monthly charge. In some cases this might also cover a basic amount of energy supply.
- an energy consumption charge, expressed as $ per kWh consumed (imported from the grid).
- sometimes the energy consumption charges are billed on a time of use basis, with the $ per kWh rate varying depending on time of day, day of week and sometimes they can vary with seasons as well.
- credits for exporting energy to the grid, generally also expressed as $ per kWh (this may be at a different rate to the energy import tariff).
There might be other charges and variations on a theme but the above are the ones most are familiar with.
Then there is a demand tariff.
This is billed on your peak demand, being
i. based on the maximal average power for an interval, during the
ii. peak demand window, for
iii. the billing period.
Parsing that out:
i. Maximal average power for an interval:
An interval might be an hour, a half-hour or 15 minutes (or whatever it is defined to be in your region). It will be on the hour, half-hour or quarter-hour, e.g. 5:30-6:00 PM and not 5:37-6:07 PM.
The duration of the interval depends on the type of metering used in the region amongst other things. In my location it is based on half-hour intervals but it sounds like in the OP's region it is hourly intervals.
The important thing is demand is a power value, not an energy value.
Obviously if the interval used is an hour, then numerically the power and energy values are the same. e.g. if you consume 5 kWh during an hour, then the average power consumed during that hour is 5 kW.
But if the interval used for calculating peak demand is say 30-minutes (like it is in many states in Australia) then if during a half-hour interval you consumed 2.8 kWh of grid energy, the demand for that half hour is 2.8 kWh / 0.5 hours = 5.6 kW.
The maximal part is just picking the one maximum power value out of all the intervals.
ii. Peak demand window
Often these interval calculations only apply during specific time periods, which might typically be from some time in the afternoon through to the evening. Each utility region will have their peak demand window defined, e.g. 4PM to 8PM on weekdays. There will be many variations on how these windows are defined. So if for instance using this example you had a peak demand of 6 kW during 2-3AM and 4 kW during 6-7PM on a Tuesday, then the 6 kW demand does not count as it was outside the peak demand window. In this case the 4 kW value applies.
iii. During the billing period
Typically monthly but in some cases quarterly (even so the demand charge may still be shown as three separate monthly charges).
What this means is the peak demand is the maximum average power from one interval (within the peak demand window) during the month.
The demand tariff itself is usually expressed as $ per kW per month*.
In some places (like here) they confuse people even more by expressing the tariff as $ per kW per day, but then multiply it by the number of days in the billing period.
So by way of example:
Let's say the demand tariff is based on hour long intervals and applies to the 4PM-8PM window every day. The tariff is $13/kW/month.
Let's also say your maximum grid energy consumption for a one hour interval during the 4-8PM window for that month was 5.7 kWh. The peak demand is therefore 5.7 kWh / 1 hour = 5.7 kW.
The peak demand charge would then be 5.7 kW x $13/kW/month = $74.10 for the month.
While my own billing does not have a demand tariff, the option exists if I wish to move to a demand tariff type. Accordingly I do keep a track of our monthly peak demand and what the billing impact would be.
This is what our monthly peak demand has looked like over the past year and a bit:
* I had originally incorrectly typed $ per kWh per month.
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