Energy Academy
Level 1/Electrical Science Refresher
Electrical Energy Management8 / 10

Managing Demand & Power Factor

How utilities charge for demand, and practical steps to reduce it.

10 min read · Jacob Willis, Net Zero Lead · Last reviewed July 2026

A business electricity bill is not just a price per unit. For any site above domestic scale, the bill also charges for how fast electricity is taken and how much capacity is reserved, and those charges respond to different actions than the kWh line does. Plenty of sites have cut consumption and been puzzled that the bill barely moved; the answer is usually in the demand-related lines this lesson explains.

The anatomy of a larger site's bill

Four elements matter for energy management:

  • Unit charges (per kWh): the energy itself, possibly split into day, night and evening/weekend rates. Reduced by using less or shifting use to cheaper periods.
  • Standing and fixed charges: per-day amounts largely independent of behaviour.
  • Availability or capacity charges (per kVA): larger sites agree a maximum supply capacity with the network, and pay monthly for every kVA of it, used or not. This is where the power factor lesson lands on the bill, because capacity is measured in kVA, froth included.
  • Maximum demand charges (per kW or kVA): some tariffs charge for the highest half-hourly demand recorded in the month, so a single energetic half hour can set a charge for the whole period.

Network (distribution) charges also vary by time of day on many tariffs, with short expensive peak windows on weekday evenings, so the same kWh can carry very different network costs depending on when it is drawn.

Worked example — right-sizing an agreed capacity
Given
  • A site's agreed capacity: 500 kVA, charged at £1.50 per kVA per month
  • Half-hourly data shows the site has not exceeded 400 kVA in two years
  • A sensible planning margin suggests 425 kVA would be safe
Find
The current annual capacity cost and the saving from re-declaring.

Managing demand, not just consumption

Because peaks are charged, flattening the site's load profile is worth money independent of total kWh:

  • Stagger starts. Motors, chillers and heaters all starting at 8:00 sharp create a peak no production requirement actually needs. Sequencing starts over half an hour can trim the monthly maximum.
  • Shift discretionary load. Anything tolerant of timing (water heating, charging, some batch processes) belongs outside the expensive network windows and off the site's own peak.
  • Watch the coincidence. Maximum demand is set by what runs simultaneously. The question is never "what is our biggest load?" but "which combination produces our peak half hour?", and half-hourly data answers it precisely.
  • Correct the power factor. Since capacity and many demand charges are in kVA, correction from 0.80 to 0.95 cuts those lines by roughly 16% at a stroke, exactly the 500-to-421 kVA arithmetic from the power factor lesson.
Two different games on one bill

Energy charges reward using fewer kWh. Demand and capacity charges reward using them evenly and with a good power factor. The interventions are different, the evidence is different (annual totals versus half-hourly peaks), and a complete electrical cost strategy plays both games. Sites that only chase kWh routinely leave the demand lines, often 20 to 40% of the bill, untouched.

Everything in this lesson depends on knowing the site's half-hourly shape, which is a metering question. The final lesson covers what the meters can tell you and how to build the monitoring habit around them.

Sources and further reading