In short
- Part of your bill is set by your single busiest half-hour, not your total use.
- Look for "demand", "capacity" or "maximum demand" on your bill.
- Lower it by spreading out big loads. Solar or a battery helps in some cases.
A demand charge is the part of your bill based on how hard your business draws power at its busiest moment. Your meter checks this in short blocks, usually 30 minutes, and your single highest block sets the charge. To cut it, you have to lower that one peak.
| Quick facts | |
|---|---|
| What it is | A charge set by your busiest half-hour, not your total use |
| How it's measured | Usually 30-minute blocks. Some large-business tariffs use 15 minutes |
| When it counts | Often only during set hours, called the charging window |
| How long one peak lasts | Usually the month. On some large-business tariffs, 12 months |
| Where it shows | Lines like "demand charge", "capacity charge" or "maximum demand" |
| Best first step | Ask your retailer for your interval data |
In plain words: one busy half-hour can decide a big part of your bill.
What is a demand charge?
Most business power bills charge you for usage in two ways.
- Energy charges pay for the total power you use over the bill period. This is measured in kWh (kilowatt hours).
- Demand charges pay for your peak, the fastest rate you draw power at any one time. This is usually measured in kW (kilowatts).
Think of it like a car. kWh is the distance you drive over the month. kW is your top speed.
The network charges for your peak because its poles and wires have to be built to carry your busiest moment. Running a machine for an extra hour adds to energy charges. Starting three big machines at the same moment can add to demand charges for the whole month.
How is my demand charge worked out?
Three details decide what you pay. They vary by network and tariff (your pricing plan), so check your own.
The block of time. Your meter averages your use over short blocks. Thirty minutes is common. Some large-business tariffs use 15 minutes.
The window. Many tariffs only count your peak during set hours. For example, one network's small business window is 3pm to 9pm on working weekdays. It applies in June to August and November to March, with no peak period in April, May, September and October. Another network measures large businesses from 7am to 7pm on workdays.
The reset. This is the one that surprises people.
| Type | How it works |
|---|---|
| Monthly | Your highest reading in the window each month sets that month's charge. Next month starts fresh. |
| Rolling 12 months | Your highest reading in the last 12 months sets the charge every month. One bad day can cost you for a year. |
In plain words: on a rolling tariff, a single spike keeps costing you until it's 12 months old.
kW or kVA? Some tariffs, often for large businesses, charge in kVA instead of kW. kVA also counts wasted power drawn by motors, compressors and some lighting. Your power factor is the share of power doing useful work, and the lower it is, the higher your kVA. For example, a site drawing 200 kW at a power factor of 0.8 is billed on 250 kVA. At 0.95, the same site is billed on about 211 kVA.
How do I find the demand charge on my bill?
Look for a line called demand charge, capacity charge, maximum demand or peak demand. It may also be a rate "per kW" or "per kVA". The rate is usually shown per month or per day.
On a daily rate, the charge may be worked out on your busiest day and multiplied by the days in the month.
Your bill shows the rate and the peak, but not when the peak happened or why. For that you need interval data: your meter's reading for every 15 or 30 minutes. Your retailer or metering provider can usually send it. It's the most useful single file you can have for this.
How can I lower my demand charge?
First work out when and why your peak happens. Then pick the fix.
Move work out of the window. If your peak falls inside the charging window, shifting flexible jobs outside it lowers the reading. Think pre-cooling a coolroom before 3pm, running batch jobs early, or charging forklifts overnight.
Stagger start-ups. Motors, compressors and air conditioning draw a surge when they start. If several start together, often at opening time, they stack into a peak no single machine would cause. Starting them a few minutes apart flattens it. So can soft starters or variable speed drives, devices that ease machines up to speed.
Fix your power factor (kVA tariffs only). On a kVA tariff, wasted power pushes up your billed demand. Power factor correction equipment cuts that waste, so kVA moves closer to kW. On a kW tariff it won't lower the demand charge.
Review your tariff. Sometimes the tariff is the problem. It may not suit how your site uses power, or a better option may be available. Network rules set which tariffs you can use and how often you can switch. Your retailer lodges the request.
Will solar or a battery cut my demand charge?
Solar lowers your peak only while it's making power. A peak at midday on a sunny day is a good match. A peak in a 3pm to 9pm window, or at a 6am start-up, mostly isn't, because solar output falls away in the late afternoon.
Solar also can't promise to cover the peak on a cloudy day, and one high reading is enough to set the charge. Its dependable saving is on energy charges.
A battery can trim short spikes, sun or no sun. It releases stored power during the brief moments your use jumps. It has to be sized and set up for your peak pattern, and it must be charged when the peak arrives. We cover this in commercial solar batteries.
Why does my bill decide the fix?
Two businesses with the same monthly spend can need opposite fixes. One has a 7am start-up spike on a kVA tariff. The other peaks at 1pm on a monthly kW tariff, where solar lines up well. Only the bill and the interval data behind it can tell them apart.
So a solar proposal should start with your bill. It shows whether solar touches your peak, whether a battery earns its place, and how the saving splits between energy and demand.
System size also affects any certificate discount. See STCs for business and the 1MW change. There's more on what drives the numbers in commercial solar cost.
What to ask your installer
- Is my demand charge billed in kW or kVA, and is it monthly or rolling 12 months?
- When is my charging window, and does my peak fall inside it?
- Will solar actually lower my peak, or mainly my energy charges?
- Would a battery pay its way on my peak pattern?
- If I fix my power factor, is the equipment properly designed? Poor designs can cause new power quality problems when the site is quiet.
- I'm on a rolling tariff. Can I apply in advance through my retailer to leave out a one-off spike, such as starting new equipment? Can I ask for a reset after fixing power factor or permanently cutting load? (At least one network allows both.)
If you send a recent bill, an accredited installer prepares a costed proposal for your site. It shows where the savings come from, including whether solar or a battery would touch your demand charge at all. It's free, and there's no obligation.