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How to save 20% off your business’s energy bill by planning ahead this summer

Not adequately planning for ‘capacity charges’ is costing businesses thousands of dollars in energy bills.

What is a capacity charge?

Modern life relies on a constant supply of electricity, so it’s essential there is enough electricity to meet demand across the entire grid at all times. 

Although the demand for electricity constantly fluctuates depending on a wide variety of factors, the system needs to have sufficient capacity to ensure supply during the highest demand periods.

This ‘capacity’ is provided via standby generators and other methods which incur a cost, and this cost is passed on to businesses in the form of a capacity charge. The capacity charge is essentially a penalty to ensure supply of electricity to the entire grid in times of peak demand.

Do all businesses pay a capacity charge?

A capacity charge can be up to 23% of a business’s overall energy bill for the year, but for a lot of businesses, it’s easily avoidable.

A capacity charge is applied based on a business’s energy use during the periods when WA’s energy grid is at maximum demand.  This is determined based on a few hours of peak consumption between December and March each year. 

If your business contributed to electricity demand during the peak consumption periods, it will be charged a penalty for its part in that demand for electricity.

On the other hand, if your business did not draw electricity from the grid during the calculation periods, you will not have contributed to peak demand and you can avoid the capacity charge.

How to avoid a capacity charge

Businesses that are able to reduce electricity consumption for a few hours during peak periods are ideally placed to take steps to avoid the capacity charge. 

Peak periods are in 1 ½ hour windows between December and March (which generally occur during the hottest days of the year). So, if you know when the periods of pressure on the grid are going to be, you can power down non-essential energy usage for that period and reduce or avoid the charge on your next yearly bill.

While business owners may be able to make rough predictions about the periods of peak demand, getting them right is a very complicated process. Factors including cloud cover, sea breeze, humidity, heatwaves, day of the week and electricity consumption across the grid all play a part in determining when those peak periods are going to be.

Amanda Energy uses analytics to predict and assess the hours that will impact the capacity charge, and sends alerts to clients to advise them to power down their non-essentials, so they’re in the best position to reduce the charges wherever possible. 

Shaving just a few hours each year allows you to lower your energy bill over the life cycle of your business. Given the capacity charge can be more than 20% of a business’s overall energy charges for the year, if a business has an average annual energy bill of $50,000, taking steps to avoid the charge would save over $10,000, which can then be spent on other important assets.

Now is the time to plan for reducing your electricity consumption during the peak periods. Amanda Energy’s peak shaving program is available to clients. Please contact us for more information.