When it comes to commercial electricity costs, demand charges can drive higher bills. Unlike standard energy charges, which are based on total electricity consumption, demand charges focus on how much power your business pulls at once. If you're not managing them wisely, they can make up 40–50% of your bill.
So, what exactly are demand charges, and how can solar energy help mitigate them? Let’s break it down—with a little help from a car analogy.
What are Demand Charges?
Think of your business’s electricity usage like a car:
Your odometer tracks total miles driven—just like your energy meter records overall electricity consumption (measured in kilowatt-hours).
Your speedometer shows how fast you're going at any given moment—just like a demand meter measures your peak energy usage (measured in kilowatts).
Here's how it works:
Utilities ping your demand meter every 15 minutes to find your highest power draw in a billing cycle.
That single “high-water mark” determines your demand charge rate—regardless of how much energy you use overall.
If your facility runs multiple machines at once (like CNCs, welders, or HVAC systems), demand charges spike, increasing costs.
For commercial businesses, this can drasticallyimpact your monthly bill—especially if peak demand happens during working hours
How Do Demand Charges Rates Impact You as a Solar Customer?
Solar power can offset a significant portion of your energy costs, but demand charges require a different strategy:
Solar reduces total energy usage, but peak demand charges remain. Even if your panels provide most of your power, if all your equipment runs at once, you’ll still see demand charges.
Depending on consumption and weather, demand charges and solar production can fluxulate. Solar works best on clear, sunny days. But if your peak demand happens during a cloudy afternoon, you’ll still need grid power—resulting in demand charges.
Your peak moment sets your rate. If you have one high-demand moment—like all equipment running simultaneously—that number determines your charge for the month.
That’s why a strategic approach to power use is essential.
Tips to Manage Your Business's Electricity Demand
Reducing demand charges is about controlling when and how power is used. Here are smart ways to keep your demand charges in check:
Slow and Steady Avoid turning all your equipment or HVAC units on at once. This can cause a sudden demand spike, setting a higher peak for the entire month. Instead, use a staged start-up approach to gradually bring systems online.
Upgrade Wisely Older office equipment and machinery can be energy hogs. Upgrading to ENERGY STAR-certified appliances and high-efficiency lighting can significantly lower power consumption while maintaining performance.
Right-Size Your Equipment Bigger isn’t always better. Using oversized machinery when a smaller, more efficient option would do increases demand unnecessarily. Evaluate your business’s energy needs and adjust accordingly.
Automate Energy Use Smart energy management systems can automatically control HVAC, lighting, and equipment operation, ensuring that power-intensive tasks are scheduled when demand is lower.
Optimize Employee Energy Habits Encouraging simple behaviors—like shutting down unused workstations, using power-saving modes, and avoiding simultaneous use of high-energy equipment—can reduce demand spikes without impacting productivity.
Use Real-Time Monitoring to Adjust Usage Modern energy tracking tools help businesses analyze demand patterns and make informed adjustments. With real-time data, companies can fine-tune operations to minimize high-demand moments.
Pair Solar with Battery Storage A battery system stores excess solar energy and releases it during peak times—helping to smooth out demand spikes.
Demand charges can drive up commercial electricity costs, but with the right approach, they don’t have to be a roadblock. When businesses pair solar with storage, demand response strategies, and smart scheduling, they can cut peak demand and save thousands over time.
At ilumen Solar, we dive deep into commercial energy bills to ensure your solar investment works for both energy savings and demand charge reduction. Want to see how much you could save? Get in touch with us today—let’s map out a solar strategy that works for you.
