Demand Charge Savings Calculator

Inputs

Enter your current peak demand and expected reduction. If you provide both a reduction percent and a new peak, the calculator will prioritize the values and compute an effective reduction using the performance factor.

Example Data Table

These sample scenarios show how peak reduction can change demand charges.

Formula Used

Demand charges are typically based on the highest measured demand (kW) in a billing cycle. This calculator estimates savings using the difference between current and reduced peak demand.

• Effective reduction (%) = planned reduction × (performance factor / 100)
• Effective new peak (kW) = current peak × (1 − effective reduction/100)
• Monthly demand charge ($) = peak demand (kW) × demand charge rate ($/kW-month)
• Monthly savings ($) = monthly charge before − monthly charge after
• Annual net savings ($) = (monthly savings × 12) − annual maintenance cost
• Simple payback (months) = net project cost ÷ annual net savings × 12 (only when annual net savings > 0)
• NPV ($) = −net project cost + Σ(annual net savings ÷ (1+discount)^t) for t = 1..analysis years

How to Use This Calculator

1. Find your recent billed peak demand (kW) from utility statements.
2. Enter your demand charge rate ($/kW-month) from the tariff.
3. Add a planned reduction percent or a planned new peak demand.
4. Set a performance factor to reflect real operating conditions.
5. Include project costs, incentives, and annual maintenance costs.
6. Review savings, payback, ROI, and NPV, then download reports.

Industry Context

Demand charges shape total electricity spend

Demand charges bill the highest measured kW in a month, often 30–60% of large commercial bills. Many tariffs apply a demand “ratchet,” so one bad month can influence later months. If a site peaks at 120 kW and the tariff is $18 per kW-month, the demand line item is $2,160 monthly before energy usage is even counted.

Peak shaving targets the cost driver

Peak shaving targets the cost driver by lowering that single highest interval. A 15% planned reduction lowers the peak to 102 kW. With a 90% performance factor, the effective reduction becomes 13.5%, producing an effective peak near 103.8 kW. At $18, the monthly demand charge drops to about $1,868, saving roughly $292 per month, or $3,504 per year before maintenance.

Operational scheduling can be low-capital

Load shifting moves flexible processes away from coincident peaks. Examples include staggering HVAC starts, sequencing compressors, trimming setpoints or rescheduling EV charging. Even a 10 kW reduction on a $20 tariff saves $200 each month, or $2,400 annually. Tracking interval data helps confirm the peak window and prevents rebound peaks after curtailment.

Storage and automation improve consistency

Battery peak shaving and automated controls reduce volatility and protect operations. Storage can cap peaks during spikes, while controls keep loads under a target threshold. Performance matters: when dispatch misses events, savings fall quickly. This calculator uses a performance factor to convert planned reduction into delivered reduction. Using conservative factors (80–95%) produces more realistic payback estimates, especially for sites with variable production.

Financial metrics align projects with capital rules

Net project cost equals project cost minus incentives. Annual net savings equals monthly savings times 12, minus annual maintenance. Simple payback converts that relationship into months. ROI compares annual net savings to net project cost. NPV discounts future annual net savings using your discount rate, then subtracts net project cost to show long-term value across your chosen analysis period.

FAQs

What is a demand charge?

It is a utility fee based on your highest measured kW during the billing cycle. It is separate from energy charges, which are billed per kWh. Lowering the peak kW typically lowers this charge.

How do I find my peak demand?

Check your utility bill for “billing demand,” “maximum demand,” or an interval-data report. Use the highest billed kW for the month you want to model. For seasonal tariffs, use a representative month.

Should I enter reduction percent or new peak kW?

Either works. If you know the target peak kW from interval analysis, enter it directly. If you only have a planned reduction estimate, enter the percent and let the tool calculate the implied peak.

What does performance factor mean?

It adjusts planned reduction to reflect real outcomes. For example, 15% planned reduction with a 90% factor becomes 13.5% effective reduction. Use lower values when operations are variable or controls are manual.

Does this include energy (kWh) savings?

No. This focuses on demand-charge savings from peak reduction. If a project also cuts kWh, treat that as additional value. Combine both in a broader analysis if your tariff has time-of-use pricing.

How should I interpret NPV?

NPV discounts future annual net savings to today’s value, then subtracts net project cost. Positive NPV suggests the project creates value at your discount rate. Compare NPVs across options to prioritize investments.