What is Energy Demand?

by | Aug 6, 2021 | Buildings, Economics, Sustainability

While focusing on appliance efficiency and the transition to renewable power is important, energy demand is often left out of everyday conversations regarding the clean energy transitions. Energy demand, not to be confused with the demand for energy, can be a tricky term in economics due to the typical meaning of the word “demand”. For those operating in manufacturing and heavy industry, the term will be very familiar as higher demand comes with a large price tag. 

Energy demand, or “load”, is a measure of power. More specifically it is the amount of power required in an instant to satisfy the needs of all connected appliances, lighting fixtures, HVAC systems, and anything else requiring electricity in your building. On a grid level it is the amount of instantaneous power required to keep everything running. 

For those new to the concept, here is an example – a familiar metric to most is kWh, a measure of energy consumption, as it is how we are all charged on our monthly utility bills. Well, energy demand is a power requirement measured in kW. If you use an appliance that requires 25 kW to operate for one hour, you have consumed 25 kWh of electricity. 

Most people are often concerned with total electricity usage and the climate implications related to it, especially in places with dirty grids. However, this misses an important point – utilities make electricity production and distribution investments to satisfy demand. If you’ve ever experienced a brownout or a blackout, there is a good chance it was due to the fact that the grid could not handle the demand for electricity and supplied lower voltages, or completely shut down. This is such an important consideration that the more you demand as a customer, the more you are required to pay, regardless of your total electricity consumption. For example, take two customers. Customer A requires 2,500 kW of power for a 15 minute interval in a given day, and consumes 10,000 kWh of electricity. Customer B requires the exact same amount of electricity consumed at 10,000 kWh, but only requires 800 kW of power at their peak demand (remember this term!). Customer A should pay more because they have placed a larger burden on the grid to distribute electricity. 

Utilities cope with this through expanding the capabilities of their production and distribution systems, but also institute demand charges in order to dissuade consumers from having high demand. Further, many utilities will have different demand charge rates for different hours of the day, and for different months, depending on the unique challenges they face in supplying power to all of their customers. 

In their 2016 paper, NREL showed that demand charging is a key driver of investment in battery storage systems. Further, NREL posited how a consumer’s demand changes throughout the day may determine the scale of battery storage systems required to shave peak demand. This is due to differing reductions of demand brought about by energy storage solutions required to avoid demand charges.

As buildings consume around 75% of electricity in North America, they can play a central role in the demand side response to grid investments. By implementing peak shaving strategies buildings can reduce the need for investing in grid capacity, ultimately leading to fewer emissions in the long run. These strategies boil down to changing the times when you require power from the grid. Charging electric vehicles overnight rather than in the day, implementing passive design principles, and implementing energy storage solutions such as batteries are three prominent ways to reduce peak load. What is best for the grid and the clean energy transition is often best for building owners looking to lower their utility bills. 

Autocase is able to structure a business case for investing in peak shaving strategies for your building or building portfolio. With access to all energy demand charging schedules in the United States, and standardized building energy model output, Autocase can value how much money peak shaving investments will save your business in the long run, and if there is a return on investment


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