Peak demand rates are charges that are added to some electricity bills when the demand for power is highest. This usually happens during the morning when people are getting ready for the day and in the evening when people are returning home from work. The peak demand charge reflects the single highest demand measured over the billing period.
The peak demand charge is in addition to the standard energy charge, which is based on the amount of energy used measured in kilowatt-hours (kWh). The peak demand charge is based on the highest demand for power, measured in kilowatts (kW). To balance with the additional demand charge, the kWh rate is typically reduced. This billing system is designed to encourage reducing demand during peak periods.
It's important to note that when demand charges are implemented and the energy rate is reduced, the ability for solar energy to reduce the bill is also reduced to the same degree as the energy rate.
To reduce the peak demand charge, you can install a devices such a demand controller or a smart breaker panel. These devices automatically turn off certain appliances when the demand for power is high. If billed for peak demand but a demand controller is not installed or not properly configured, your bills may be higher than normal unless you manage your power use yourself every day by being mindful of when you use certain appliances. However, since the demand charge is based on the highest single peak over a whole month, just one unusually high peak can compromise your efforts, so installing a control system is a good idea.
Battery power systems can also be used to reduce peak demand charges. These systems store energy and provide power on demand, reducing demand from the grid. However, not all systems have the ability, or the capacity, to reliably reduce demand during peak hours without a single allowable peak every month. To achieve reliable demand control, batteries may require charging from the grid during off-peak times in order to be ready for on-peak times. This option is not as effective for homes with all-electric heat, especially for inefficient buildings, unless the battery capacity is substantial.
Offsetting demand charges typically requires a larger investment but may not offer as predictable savings compared to a regular energy charge and solar power. If the rate you are assigned includes a demand charge and bill reduction is your primary goal, these facts all need to be considered. In some cases, homeowners can choose the type of rate they pay, or simply hope for additional rate options to emerge over time that offer better cost savings with solar and batteries.
In conclusion, understanding peak demand rates and how they affect your electricity bill is important in order to take control of your energy consumption and costs. While installing a demand controller or being mindful of when you use certain appliances can help reduce peak demand charges, battery systems can also play a significant role in reducing these charges. It's important to consider the investment, goals, and potential savings when deciding which solution is best for you.