kWh’s, your bill and Energy Management

Wednesday, November 11, 2020

The basics: kWh

Let’s start with the basics. Your electricity bill has various charges. Some are fixed like the service charge and others are based on your electricity consumption. The unit on which your business is charged is the kilowatt hour (kWh) which is a unit of energy.

For example, a 1000 watt appliance running for 10 hours uses 10 kWh. If you take a look at your power bill under ‘usage’ it may say that per kWh the retailer charges you, say $0.25 and the cost of running your 1000 watt appliance for 10 hours is, therefore, $0.25 x 10 = $2.50

What is energy management?

From the perspective of a business, energy management is the identification of the different forms of energy utilized and the strategies developed to minimize these inputs without any detrimental effect on the business.

Reducing Energy consumption

Reducing electricity consumption is incredibly hard if directly related to productive output. If a business is running multiple three phase machinery, inductive loads, it's not a viable option to reduce the run times, but when the machines are running can play a role. 

Off peak shift

If part of the productive process can be shifted to an off-peak time (when the cost of electricity is lower), productive output can be maintained. Obviously there is the cost benefit analysis required when comparing load shift versus extended opening times and the potential of increased labour cost, penalty rates etc.

Create an energy management strategy

So how do we start the process? Effectively all the site loads have to be identified and categorised into productive, semi productive or non productive loads. For example, machinery used to produce things is a productive load, the energy used to package the product can be classed as semi productive load and office heating and cooling a non productive load.

Electrical and non electrical loads

We should then segregate these loads into electrical and non electrical loads and can further divide into, in this case, engineering (specific) and office loads (non specific). Further understanding may be gained by looking at the ratio of specific to non specific loads.

Intermittent loads and continuous loads

Next steps are to identify intermittent loads and continuous loads and look at day time/night time ratios. This is especially important if considering a commercial solar system to address the day time loads. The next step of course is to identify strategies to address the loads.

How to reduce costs; the office

So you have identified your non productive loads being the office so what now?

The relationship between HVAC and energy can be a complex one depending on the nature of the business, but with up to 50% of energy bills often due to HVAC, it is worth looking at optimising your summer and winter ambient office temperatures to reduce costs.

Phantom loads are another area to look at (appliances that are on, consuming energy but not doing anything at a particular point in time)

Office HVAC

In Australia the recommended summer temperature in the office is 26 - 27 degrees and the recommended winter temperature is 20 degrees and straying outside these temperatures can substantially increase costs.

In addition:

  • Every 1 degree drop in summer temperature can result in a 10% increase in costs
  • This can add up with multiple air conditioners
  • But have to be aware of perceived level of acceptable thermal comfort

Let’s say we have 1 x air conditioner in the office:

  • The cooling capacity of this air conditioner is 6 kW
  • In summer running for 8 hours/day
  • Set air conditioner to 25 degrees in summer

Will assume the cost of electricity at $0.28479 kWh so the cost per hour to run is $0.33.

This equates to $963.6/year. But what if we set the temperature to 21 degrees? Cost per hour is now $0.50 so per year $1460. This is an increase of 51%.

Many businesses have more than one. 

Let’s say there are 5 of these air conditioners, all running 8 hours/day:

  • If we run at 21 degrees cost per year is $7300
  • If we run at 25 degrees cost per year is $4818

This is a difference of $2482 per year just by increasing the temperature!

What about demand charges

A demand charge is where a daily charge is determined by the highest power demand (load) experienced during the day in a specified period (it can be a year for commercial customers).

If an engineering business had a peak demand of 100kW due to welding equipment for one hour, for one day in a year, a daily demand charge could be imposed for a full year even though standard usage may only be 20 kW at any other time.

These demand charges can have tiers. For example the bigger the load, the more the business is charged for the whole year from the billing period when this demand peak occurred.

Demand charges, also known as capacity charges, can sometimes be addressed with very positive outcomes. 

So how to avoid?

By closely documenting consumption, high demand periods can be recognised. Also you can minimize simultaneous operation of machinery if possible. There are examples of businesses where the first employees to arrive in the morning start turning on all the machines. 

This can result in high demand charges.

If purchasing any new equipment, compare the load ratings and try to shed loads by switching off non essential equipment during peak periods. In addition, look at the viability of energy storage to augment existing or planned solar. 

Energy Management Options

  • Full energy audit of site,
  • Harmonic filtration,
  • Power factor correction,
  • Installation of a renewable energy generation and/or storage systems,
  • More comprehensive machine management hardware & software.

Cost benefit analysis should be applied to your circumstances. An energy audit is usually a good starting point and would make a range of site specific recommendations. 


A business must know and categorise all its loads, then look where loads can be reduced. If consumption can be decreased with no effect on productive capacity this is obviously the best course of action.

The other energy management options are to effectively address the loads through tailored strategies that include commercial solar, harmonic filtering, power factor analysis and correction as well as installation or upgrade of machine management hardware or software.

In future we will look at each of these strategies in further detail. Stay tuned.

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