For years now, consumers have been encouraged to contribute to energy efficiency by restricting the number of kWhs they use. With the global introduction of demand rates, the way we think about responsible electricity consumption is about to change.
It may not seem logical, the idea that you can relieve the power grid by redistributing your consumption to different hours during the day. A lengthy tradition of paying for what we use has shaped the way we think of energy efficiency. Up until now, most countries have used energy rates as their main pricing model for electricity. When you receive your power bill, you pay for the amount of energy used during a set period, in addition to a fixed price for grid connection.
Although there are different pricing models and the specifics of the demand rate system vary between countries, they are all built on the same principle: There is enough power to go around, provided there is a conscious practice and approach to how and when we consume it.
Rewarding Consumers Who Avoid Peak Hours
The higher the grid’s total electricity consumption at any given time, the more strain there is on the grid and the cost of supply increases. Peak hours are mainly in the morning when a majority of the population get up and prepare for a new day, and again when the same group of people return home in the afternoon and start dinner preparations, charge their EVs, run their dishwashers and other household appliances. It is exactly these hours that define the need for grid expansion and reinforcement.
Demand rates incentivize consumers with lower energy prices to use electricity outside peak hours when general consumption is lower and/or by charging consumers for the amount of kWhs they drain from the grid at higher or maximum peak periods. If people want to get up in the morning to a warm house, they are encouraged, through low nighttime kWh rates, to start the heating at 4 am and leave it on for a few hours, instead of turning it on maximum heat for half an hour when they get up. Hence, a little planning will go a long way. For owners and operators of commercial buildings, there is potential for substantial economic gain. If you run a large-scale building, you can store excess energy and sell it back to the grid, or, even better, make use of it and save the cost of buying electricity from the grid.
Distribution is Key
By distributing electricity usage throughout all 24 hours of a day and avoiding peak hours, we can contribute to reducing costly grid extensions and reparations, as well as unnecessary grid stress. Expanding the power grid’s capacity is expensive, increases CO2 emissions and carriers potential environmental impact. Needless to say, limiting the expansion of the power grid is beneficial to all parties.