In the United Kingdom, electricity bills for businesses often include peak demand charges, which can significantly impact operational costs. Understanding these charges and implementing strategies to mitigate them is crucial for maintaining competitiveness and profitability.
What are peak demand charges?
Peak demand charges are fees levied by electricity suppliers based on the highest level of power a business consumes during a specific period, typically measured in kilowatts (kW).
Unlike standard energy charges that account for the total energy consumed (measured in kilowatt-hours, kWh), peak demand charges focus on the maximum power draw during peak times.
This pricing structure incentivises consumers to modify their power usage behaviours, reducing immediate costs and alleviating strain on the electrical grid during high-demand periods.
How are peak demand charges calculated?
Electricity suppliers monitor a business's power usage over time, identifying periods when consumption spikes.
The highest recorded demand within a billing cycle becomes the basis for the peak demand charge. This method ensures that businesses contributing to peak load periods share the costs associated with maintaining the infrastructure required to meet these demands.
Strategies for reducing peak demand charges
Large companies, such as, manufacturing businesses, can adopt several strategies to manage and reduce peak demand charges:
Assess energy consumption patterns
Conduct a thorough analysis of energy usage to identify patterns and pinpoint periods of high demand. Understanding these patterns is the first step toward implementing effective demand management strategies.
Shift operations to off-peak hours
Rescheduling energy-intensive processes to off-peak times can significantly lower peak demand charges. For instance, operating heavy machinery during evenings or weekends when overall grid demand is lower can result in cost savings.
Implement demand response programs
Participate in demand response initiatives where businesses reduce or shift their electricity usage during peak periods in response to time-based rates or other incentives. This not only lowers energy costs but also supports grid stability.
Invest in energy storage solutions
Utilising battery energy storage systems allows businesses to store energy during off-peak periods and use it during peak times, effectively reducing peak demand charges. This approach, known as peak shaving, helps manage spikes in energy demand and avoids expensive surcharges.
Upgrade to energy-efficient equipment
Replacing outdated machinery with energy-efficient models can decrease overall power consumption and mitigate peak demand. Energy-efficient equipment often operates more smoothly and consumes less power, contributing to lower demand charges.
Utilise on-site renewable energy sources
Investing in on-site renewable energy generation, such as solar panels or wind turbines, can supplement grid electricity usage, especially during peak periods. This reduces reliance on the grid and can lead to substantial savings on demand charges.
Engage in load control programs
Some utility companies offer load control programmes that allow them to temporarily reduce a business's power consumption during peak periods in exchange for financial incentives. Participating in these programmes can lead to direct reductions in peak demand charges.
Peak demand charges represent a significant component of electricity costs for manufacturing businesses in the UK. By understanding how these charges are calculated and implementing targeted strategies such as, shifting operations to off-peak hours, businesses can effectively reduce their energy expenses. Proactive management of energy consumption not only leads to cost savings but also contributes to a more stable and efficient electrical grid.
If you're looking to save money on your energy bills then why not get in touch today? The relationships Resolve Energy has developed with over 24 of the UK’s biggest business energy suppliers allows our energy experts to source the best business energy rates available for your company right when you need them. Request a free quote today and start saving money on your energy.
