Manufacturing AUTOMATION

Demand management can help control energy costs

April 12, 2013
By Theresa A. Wilson

How much money is the status quo costing your manufacturing facility? 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 buying a car that holds four passengers because every year at Christmas you take your mom and dad to dinner. The remainder of the year it is just you and the dog. For 364 days a year a two seater meets your needs. But because you need the extra seats that one day, you pay for a larger car, more insurance, and more gas. Now if the car were always full these costs on a per passenger basis might even be equal to the two seat car on a per passenger basis. However since most of the time it is just one passenger, the cost per passenger is higher with the four seat model.

Demand management does not typically result in reduction of total energy consumption, rather in load shifting to off peak times. Demand management is achieved through behavioral changes.


Different sized businesses can do this in different ways. Users that can shed at least 1000kW (if a business can drop 15 per cent, an average drop, the peak load would need to be at least 650Kw) can benefit by implementing demand management. 100kW is the requirement for a business to participate in demand response, per PJM requirements.

Understanding your load profile and load factor are the first steps in initiating a demand management program. 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 per cent 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 usage 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.

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 just such 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 conditions, 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.

With 16 years of energy industry experience, Theresa A. Wilson, C.E.M., C.E.P., C.E.A, is the Head of 360Direct at Direct Energy Business, a provider of electricity and natural gas services in 14 states, the District of Columbia and five Canadian provinces.

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