Shake It Up: Managing Your Energy May Help Your Bottom Line

How much money is the status quo costing your business? When you look at how you do business and how that impacts your electricity usage and spend, you start to realize that sometimes ‘business as usual’ can be taking away from your bottom line.

How much money is the status quo costing your business? When you look at how you do business and how that impacts your electricity usage and spend, you start to realize that sometimes "business as usual" can be taking away from your bottom line.

Manufacturers can make an immediate impact by better managing their energy costs. Demand, in terms of electricity, is the instantaneous consumption of electricity. Your usage is the sum of demands over a period of time. Demand management is the act of controlling, through various means, how and when you use your electricity.

Reduction in demand decreases need for investments in networks and/or power plants. The electricity infrastructure has to be built to serve the hypothetical peak demands of all customers plus a cushion. It’s like a machine that manufacturers 1,000 widgets an hour because each year you receive an order that requires that production rate in order to fill the order in the allotted time. The remainder of the year all you need is the capacity to produce 500 widgets an hour. For the remainder of the year, a smaller machine would meet all your needs. But because you need the extra production capacity for the one order, you pay for a larger machine, more energy and more production floor space. Now if the larger machine was always operating at full capacity, these costs on a per-widget-produced basis might even be equal to those of the smaller machine on a cost-per-widget basis. However, since most of the time the full capacity is not utilized, the cost per widget is higher with the larger machine.

Demand management does not typically result in reduction of total energy consumption, rather in load shifting to off-peak times. In the example above, it would be analogous to doubling the allotted time to fill the once-per-year super order. Demand management is achieved through behavioral changes. Different-sized businesses can do this in different ways. Users that can shed at least 100kW (if a business can drop 15 percent, an average drop, the peak load would need to be at least 650kW) can benefit by implementing demand management and participating in demand response programs. Here are the steps you need to take to initiate your demand management program:

Step 1. Understand your load profile and load factor.

To get your monthly load factor you divide your monthly usage (kwh) by your peak demand (kw) and the hours in the month (load factor=kwh/(kw x hours in the month). A load factor of less than 40 percent indicates an opportunity to employ demand management. Your load profile is a representative view of how you use electricity over time. To get this information you will have to contact your utility. If you are interval metered, the utility can provide this to you. If you’re not, you may need to install a demand logger. The load profile will help you understand when you have peaks to manage so that you can tie them back to specific business operations.

Step 2. If appropriate, employ demand management tactics.

Once you understand your load factor and load profile, you can achieve demand management savings though distribution charge reduction, capacity/transmission reduction charge reduction, generation charge reduction and demand response program revenues.

Market insights and knowledge are the foundation of capacity tag management programs. If you’re not doing it already, you need to make a commitment to learn and follow the electricity market. The best source of this information is the ISO website, which publishes this type of market information.

Demand response revenues can be either capacity- or economic-based. Load flexibility and timeliness of response are considerations when enrolling in these types of programs.

Don’t forget to account for the cross effects your plan could have. If you manage your demand to reduce your capacity tag, it can reduce the baseline against which your demand response participation is measured. Make sure you are continuously measuring your results against your plan. Sit down annually and revise your plan based on results, market condition and changes in operation. With careful analysis, planning and follow through, businesses can help drive down energy costs and keep them down. Sometimes it pays to shake up the way you think about your business. 

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