Businesses under pressure to improve the bottom line are increasingly turning to energy data to find new opportunities to reduce operational costs.
One oft-overlooked opportunity for businesses to reduce energy costs is the capacity charge. With the right tools and guidance, businesses can save up to hundreds of thousands of dollars annually by making a temporary adjustment to their energy consumption at the right time.
A Quick Overview of Capacity Charges
First, it’s important to understand exactly what capacity charges are. In a nutshell, energy suppliers determine your capacity charge based on the amount of electricity your business uses when the power grid is most strained. To ensure they have enough generation resources to meet peak demand each year, local grid operators measure how much each customer impacts those resources. The final measurement is your organization’s system peak.
System peak is based on how much energy a facility uses during the specific period when demand on the overall electric grid is at its highest. Peak periods typically occur during the hottest weekdays of the summer, when higher demand for electricity to run air conditioners combines with operational power requirements to put pressure on the grid. The period in which your energy supplier measures your system peak depends on the regional market in which your facilities are located. System peak can be measured anywhere from 15 minutes to an hour, and can occur on one specific day or across a range of days.
At the end of the summer, when grid peak program season is considered closed every year, grid operators identify the peak periods from the program season, and the utility or supplier will pass on the associated charges to customers during the following year. Capacity charges are sometimes separately itemized as “capacity” on a bill or can be embedded in a total fixed price—making these extra costs difficult to identify.
How You Can Keep Capacity Costs in Check
The good news is capacity charges are one aspect of the supplier’s electricity price that businesses can control. If you can keep your system peak low when the grid reaches peak demand, you can keep your capacity costs low.
Managing system peak is not easy to do manually, however. You need to predict ahead of time what hours or time intervals will be designated as peak periods, which requires stringent analysis of prior billing and industry trends. Manually sorting through all this data would be challenging to say the least, and dedicating resources to such an endeavor could result in lost time and lower employee productivity.
To help businesses keep their capacity costs low, Enel X offers a system peak predictor program. During the summer, market analysts use analytical tools to conduct daily assessments of the likelihood that your market will reach a peak demand period, notify you in advance, and work directly with your business to put energy reduction measures in place. Your business can proactively manage peak demand to keep costs low without tying up internal resources to do so.
The costs savings don’t end with each fiscal year, either—the more a business can shift operations to reduce energy usage during the peak period, the lower the capacity charges will be in the following calendar year. The potential long-term impact of future reduction opportunities is invaluable, especially with a pre-determined energy reduction plan that can be enacted instantly during recommended curtailment periods.
Last year, Deloitte’s Resources 2015 Study found that 79% of decision makers at large enterprises agreed that reducing electricity costs is necessary to remain competitive. The ability to predict system peak and reduce capacity charges is an opportunity for businesses to establish long-term, significant savings on their energy bills.
