If you're managing energy for commercial buildings and only looking at kWh consumption, you're missing half the picture. For many commercial sites, the demand charge (based on your peak power draw) accounts for 30-50% of the total electricity bill.
How Demand Charges Work
Your utility measures power in 15-minute intervals (sometimes 30 minutes). The highest average power draw in any single interval during the billing period becomes your "peak demand." You're charged for this peak, typically $10-25 per kW, every month.
Here's what makes this brutal: it only takes one bad 15-minute window to set your demand charge for the entire month. Everything else could be perfectly optimized, but if you spike to 300 kW for a single interval, you're paying the demand charge on 300 kW for 30 days.
Peak demand: 250 kW
Demand rate: $18/kW
Monthly demand charge: $4,500
Reduce peak by 50 kW → Save $900/month → $10,800/year
What Causes Peaks
Peaks rarely come from a single source. They happen when multiple loads coincide:
- HVAC kicks on after morning setback recovery
- Refrigeration compressors cycle simultaneously
- Kitchen equipment starts up for lunch service
- EV chargers activate while everything else is running
Each load individually might be fine. But when they stack, you get a peak that costs you for the rest of the month.
Why This Is a Flexibility Problem
The good news: most of the loads that cause peaks are flexible. HVAC doesn't need to recover from setback all at once. It can ramp gradually. Refrigeration compressors can be staggered instead of synchronized. EV charging can pause for 15 minutes while other loads settle.
This is where orchestration pays for itself. A system that can see all loads in real-time and coordinate them to avoid coincident peaks directly reduces demand charges. Not through efficiency, but through timing.
The 15-Minute Game
Demand management is fundamentally a 15-minute game. You don't need to reduce load all day. You need to shave the peaks. If your orchestration system can predict when a peak is forming and respond within minutes, it can keep you under your target threshold.
This is why real-time visibility matters. Monthly or daily reports tell you what happened. Real-time telemetry lets you do something about it. The difference is whether you pay the demand charge or avoid it.
Time-of-Use Demand Charges
Many utilities now have time-differentiated demand charges: higher rates during peak hours (typically 2-7 PM), lower rates off-peak. This adds another layer of optimization.
A site might be willing to accept a 300 kW peak at 3 AM when demand rates are $8/kW. But at 4 PM when rates are $25/kW, keeping under 200 kW becomes critical. Smart orchestration adapts to these rate structures automatically.
The Takeaway
Demand charges reward flexibility and punish coincident peaks. If your building has HVAC, refrigeration, or EV charging, you have flexible loads. Orchestrating them to avoid peaks is often the fastest path to energy cost reduction. Faster than efficiency upgrades, faster than solar, faster than battery storage.