How to use the demand charge and load factor calculator
- Enter the highest demand in kW for the billing period, the kWh used and the hours in the period.
- Enter the demand rate in dollars per kW and the energy rate in dollars per kWh.
- Optionally enter how many kW you could cut from the peak.
- Read the load factor, the split of the bill and the saving from a lower peak.
Formula
Load factor = kWh / (peak kW x hours)
Demand charge = peak kW x demand rate
Energy charge = kWh x energy rate
Saving = peak cut x demand rate
The load factor runs from 0 to 100%. A higher value means the load is steadier, and a lower one means a short spike sets the demand charge.
A 250 kW site
A site peaks at 250 kW and uses 60,000 kWh in a 720-hour month. The load factor is 60,000 / (250 x 720) = 33.33%.
At $15 per kW and $0.08 per kWh the demand charge is $3,750 and the energy charge is $4,800, for a bill of $8,550, with 43.9% of it coming from demand. Cutting the peak by 40 kW with the same energy use saves $600 and raises the load factor to 39.68%.
Why a peak costs so much
Many commercial electric tariffs charge for the highest demand in a period as well as for the energy. The grid has to be built for the peak, so a short spike when several machines start at once can set the charge for the whole month. Two sites that use the same energy can pay very different bills if one runs steadily and the other spikes.
The load factor shows how spiky a load is. A value near 100% means the site uses close to its peak all the time, and a value near 20% means the peak is much higher than the average. Raising it by shaving peaks or staggering start times lowers the demand charge without using less energy.
Making the estimate realistic
Real tariffs have more parts. Demand may be measured over 15-minute windows, ratchet clauses may keep a high peak on the bill for months, rates may vary by time of day, and there can be taxes and fixed fees. Use the rates from your own bill and treat the result as a first estimate.
To judge a project, such as batteries or controls that cut the peak, compare the saving per month with the cost, and check the tariff for how a new lower peak is billed.
Assumptions and limits
- The hours are the length of the billing period. A 30-day month is 720 hours.
- Energy cannot exceed the peak running for every hour of the period.
- A single demand rate and a single energy rate apply to the whole period.
- The figures are examples. Nothing is uploaded.
Frequently asked questions
What is a good load factor?
Higher is steadier. The right level depends on the type of site, so compare against your own past months rather than a fixed number.
Does the saving include the energy charge?
No. The saving is the demand charge avoided by the lower peak. The energy charge stays the same because the energy used does not change.
How do I find my peak kW?
Look at the bill or at the interval data from your utility. Many bills show the billing demand in kW.
What if my bill has time-of-use rates?
This page uses one rate for energy. Run it for each rate period or use a tariff comparison tool for a fuller picture.