In Demand

08/05/2002 |

Controlling electricity costs with peak shaving energy management

Managing energy costs may sometimes leave building managers feeling as if they are chasing the wind. Whether applying new technologies promising a high return on investment or implementing a plan relying on buy-in from tenants, achieving real energy and dollar savings is the goal.

One option for controlling electric costs is peak shaving, a method of energy management that involves using generators, soft starts, and other equipment to “shave” energy costs. The goal of peak shaving is to lower the spikes of electrical demand that occur throughout the day. Lowering these spikes can reduce costs associated with electric consumption and demand charges.

To develop a peak shaving strategy, it is important to understand the two components of an electric bill: energy usage and demand charges. Energy usage reflects the amount of energy used during the billing cycle – the more energy you use, the more you pay. Usage is further broken down into peak and off-peak hours. Energy used during peak hours often costs 35- to 50-percent more than energy consumed during off-peak hours.

The demand charge is typically 40 to 50 percent of the energy bill. Demand charge is calculated by the utility and reflects the average power used in one month over a specific period of time, usually 15-minute increments. At the end of the month, utilities charge a demand rate for the highest 15 minutes of usage over the entire month.

Implementing peak shaving can help reduce costs of energy consumption and demand charges. One effective way to peak shave is to operate a backup or emergency generator when the building is drawing the highest level of utility electricity. Running the generator parallel to the utility power will reduce the consumption of utility electricity. This will also lower the demand charge by lowering the usage spikes that occur throughout the day.

If buildings professionals choose this option, they must consider the demands placed on their generator. There may be loads in the system requiring a high in-rush of power to start. The generator must be able to handle the maximum draw of these loads. If it cannot, provisions must be taken to draw utility power until these loads are operating within the normal range.

Installing soft starters in place of electromechanical starters on some loads can also be used for peak shaving. Soft starters can help lower electrical peaks when used to replace traditional starters on loads requiring a high in-rush of power to start. Soft starters allow the attached device to ramp-up gradually, reducing the initial draw that creates usage spikes and impacts the demand charges. (Whereas a device may require 1,600 amps to start and 500 amps to operate using a traditional starter, a soft starter can reduce the initial draw from 1,600 amps to 750 amps.)

To build a peak shaving plan that is effective for their facilities, buildings professionals should request an energy usage history from their utility companies. Based on the data, they can then address the situation by determining when energy usage is at its highest point of the day.

Neil O’Shea is the product manager, Eaton Corp.’s Cutler-Hammer business unit (, based in Pittsburgh.

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