Demand Charge

A demand charge is a fee on your electricity bill based on the highest rate of power usage (measured in kW) during a billing period, rather than total energy consumed (measured in kWh). Demand charges are common for commercial customers and are increasingly appearing on some residential rate plans.

While standard energy charges bill you for the total kilowatt-hours you use, demand charges bill you for your peak power draw — the maximum amount of electricity you consumed at any single point in time. For example, if you run your air conditioner, electric oven, dryer, and EV charger simultaneously, your peak demand might spike to 15 kW, even if it only lasts 15 minutes. That peak sets your demand charge for the entire month. Solar panels alone may not reduce demand charges effectively because your highest usage often occurs in the evening when panels aren’t producing. Battery storage is the most effective way to reduce demand charges — the battery can discharge during peak demand moments, effectively “shaving” your peak draw from the grid. For commercial solar customers, demand charge management is often a major part of the financial case for adding batteries.