Easy Money

Utilities across the country offer incentives to commercial, institutional and industrial (CII) customers that can either reduce their load during peak utility demand times or shift their load to off-peak utility demand periods. These incentives are the result of utilities voluntarily looking for ways to operate more efficiently and/or federal and state regulatory or legislative mandates. These utility incentives can be very valuable to the electrical contractor’s customers who have already upgraded their facilities by replacing outdated lighting systems and controls and who are looking for new ways to reduce recurring utility energy expenses and be environmentally responsible. For the EC, utility rate incentives are a business development opportunity that can take its energy services business to the next level by helping customers make the most of these incentives.

Utility rate incentives

Many utilities offer a time-of-use (TOU) rate incentive, which means customers are charged a variable rate for energy and demand based on when electricity is used. With smart meters and the smart grid, the customer can be charged a real-time TOU rate based on the utility’s actual cost of energy production and delivery at the time the customer used it. However, most utilities do not have this capability today, so TOU rates are normally established based on daily blocks of time adjusted by day of the week and season. The EC can help its customers take advantage of TOU rates in a variety of ways, which include helping customers identify, segregate and shift load from peak to off-peak utility times where possible; install energy storage systems such as ice storage that produces ice at night at off-peak rates and then uses it during the day to cool the building during peak rate times; install a photovoltaic (PV) array that typically produces energy during peak utility times, offsetting utility energy use; and other strategies.

Most CII customers are under rate schedules that charge them for both energy used (kilowatt-hours) and demand (kilowatt), which is a measurement of the rate of energy use over a specific, rolling time interval, such as 15 minutes. Many utilities offer specific incentives for demand reduction, but even without an incentive, the customer can reduce recurring electric utility expense by lowering demand and becoming eligible for a more economical rate schedule as a result of its reduced demand.

Demand reduction can be achieved in a variety of ways for the customer, including the installation of variable frequency drives or soft-start on older, large motor-driven equipment, such as chillers; modification of existing on-site generation, such as emergency and standby generators so they can be used to reduce demand and provide power when needed for their original purpose; and installation of a battery bank, flywheel or other commercially available energy storage system (ESS) that stores off-peak energy that can be used later to reduce demand during peak utility system times.

Some utilities also offer lower interruptible rates to customers that allow the utility to curtail their service when needed (either partially or completely), for a specified or unspecified period of time, with or without advanced notice. Terms and conditions for interruptible rates vary from utility to utility, and usually, several classes of interruptible rates are offered with rates being lower the greater the leeway given the utility to interrupt service. The EC can help the customer take advantage of interruptible utility rates by first surveying the customer’s facility to determine what loads can be interrupted and for how long. With this information, the EC can develop a plan that segregates the nonessential from essential loads and ensures that minimal service is provided to keep the overall facility operational. The customer’s service entrance and distribution system can then be modified so that nonessential loads can be shed during curtailment. Alternatively, existing or new ESSs, such as uninterruptible power supplies could be used to avoid loss of essential systems during a planned outage just like during an unplanned outage.

Assisting with utility rate incentives

TOU, demand management and interruptible service are just three examples of utility rate incentives that the EC can help its customers take advantage of to reduce their electric utility bills. There are myriad other utility rate incentives that can be used to benefit customers, such as net metering or feed-in-tariffs for on-site renewable energy production. To be successful in this market niche, the electrical contractor must understand its customer’s operations and load profile, know the available utility rate incentives, and have a team that can address not only the technical design and installation of needed equipment and controls, but also assist the customer with financial analyses and system acquisition through purchase, finance or leasing.

About the Author

Thomas E. Glavinich

Freelance Writer
Thomas E. Glavinich was an associate professor in the Department of Civil, Environmental and Architectural Engineering at the University of Kansas. His tenure as one of Electrical Contractor's most trusted and reliable source of industry research end...

Stay Informed Join our Newsletter

Having trouble finding time to sit down with the latest issue of
ELECTRICAL CONTRACTOR? Don't worry, we'll come to you.