We all are experiencing change in the world – change in even the mundane activity of understanding and paying our electric bills. The change is driven by many things, like the deregulation of the utility industry in many states, new environmental rules for power plants, an emphasis on renewable energy generation, unbundling of bills, and new rates that target “Time of Use”.  Electric utilities now must navigate new regulations and operating rules as well as increased operating costs. One way for them to address increased costs is to generate new revenue.

You may have an electric utility that previously billed you a flat rate or a stepped rate  tied to the consumption of electric energy in kilowatt hours (kWh).  That is changing rapidly.  The utilities on the West Coast have discovered that as they loose revenue from customers generating their own energy with solar or other forms of renewable energy, they can make it up by charging what is called a Demand Charge, based on the peak power in kilowatts (kW) that is consumed during any 15-minute period in a billing cycle.  That means if you normally use about 200 kW during a month but have a one-time spike of 300kW, even if only for a few seconds, then you will be charged a significant “demand charge” rate multiplied by the peak in kW. The theory is that the Utility must maintain dedicated generation capacity to satisfy any demand.  Since it costs money to maintain reserve generation, such as a running an unloaded turbine or engine generator, they pass the “costs” on to their customers. I have seen demand charges that comprise as much as 40% or more of an electric bill.  So, if you cut your energy consumption by 50% with a solar system but do not change the peak demand, then you may only experience a 30% reduction in your electric bill. This can be a shock to the uninformed.

Consequently, it is no longer sufficient to cut the consumption of kWh to save money on electric bills. You must also be attentive to power spikes; for example, not turning on multiple motors at the same time. Unfortunately, maintaining human vigilance 24/7 to prevent the unwise use of power is a big challenge.  However, there are automatic ways to manage and control power spikes. We will discuss a promising technology to address spikes and demand charges in Part 2.

Reducing Electric Energy Costs with Breakthrough Energy Storage

Electric energy is increasingly becoming a large cost factor for commercial and industrial facilities.  Deciphering electric bills can be a challenge as they are generally broken up into two types of energy – energy charges and demand charges. Energy charges are calculated on how much electric energy in kilowatt hours (kWh) is consumed during the billing period, typically a month. Demand charges are calculated based on the highest peak power in kiloWatts (kW) taken from the grid during any given 15 minute interval over the billing period.  A 30 day billing period has 2,880 intervals. The utility rates for both of these charges are frequently determined by the month and day of the year as well as the time of day that the energy and power are consumed.  It is not unusual for the demand charges to be more than one-half of the total bill.  This means a utility customer can reduce his utility costs by controlling when and how much energy and power is used.

Bob Parkins Renewable Energy Consultants and its partners offer a way to achieve utility cost savings with lithium iron phosphate battery systems and control technology. This new technology is superior to lead acid batteries in many respects. The system utilizes inexpensive off-peak energy from the grid (or solar energy from an on site system) to charge a battery bank.  The stored energy is then used to minimize power spikes that are the source of expensive demand charges and excessive energy consumption during peak hours.  In essence, cheaper energy is used to displace more expensive energy and reduce peak demand spikes. The system’s control system monitors energy and power use in real time to almost instantly respond to power spikes as well as “shave” peak energy usage.  The local time-of-use tariff rates are programmed into the control system to assure the battery discharges at the ideal time.

As an example of how energy storage can be used to reduce demand and energy charges, a manufacturing facility in southern California was recently evaluated. A typical monthly electric bill for the plant ranged between $16,000 and $18,000. Of this amount, 45% was due to energy use and 51% was due to demand.  An energy storage system comprising a specialized 100kW inverter and 100kWh lithium iron phosphate battery system was then simulated.  The system is estimated to reduce annual demand costs by 21% for a first year savings of $23,000. With the California Self Generation Incentive and depreciation, the anticipated return on investment is 3.6 years, and the internal rate of return is 23.2%.

If you also are experiencing high demand charges and time-of-use energy rates and want to reduce your energy bills to increase productivity and competiveness, contact us. Together with our energy storage partner, we will evaluate your situation to provide cost savings and more control of your operations.