Demand Charge

A demand charge is the part of a commercial electricity bill priced in dollars per kilowatt on the highest average power the facility drew in any single interval, usually fifteen minutes, during the billing period.

It is separate from the energy charge, which is priced per kilowatt hour on total consumption. Because the charge is set by one interval, a short spike costs as much as a sustained peak, and a battery that discharges through that interval lowers the whole month’s charge. For many commercial and industrial customers the demand charge is a third to a half of the bill, which is why peak shaving is the most common behind the meter storage application.