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Understanding Demand Charges


If you are a large commercial or industrial utility customer, chances are that a sizeable portion of your utility bill is made up of demand charges. The demand charge is a monthly fee that you pay as part of the cost of maintaining the electric utility’s infrastructure required to deliver electricity to your building. On each month’s bill, the demand charge amount is based on how high your energy use measured in kilowatts (kW) peaked during the month. So, the higher your peak usage in kW, the higher your demand charge is going to be.

Energy storage helps you use electricity from the grid to charge your storage system when electricity is cheaper (non-peak times). Later the system can lower your costs by discharging electricity from your storage system when demand charges and energy costs are higher. This is known as peak load reduction. Read the Fact Sheet on Demand Charges to learn more [PDF].

Time-of-Use Rates and Load Reduction Programs
Large energy users pay demand charges. Residential and small commercial customers do not. Instead these charges are part of the delivery rates on your electricity bills. Energy storage may be right for your home or small business if you’ve opted into a time-of-use rate or enrolled in a utility load reduction program, and you are interested in the resiliency benefits of solar-plus-storage.