Can a solar power system reduce peak demand, and how do include its value in ROI calculations?
Peak Demand charges are immense, and often form over 40% of a customer’s bill.
The problem is that while solar power systems are excellent at reducing the volume of energy (and associated charges), they don’t affect standing charges (such as monthly charges), but do they reduce Peak Demand charges?
For example, if the peak demand occurs during the middle of the day, then solar could reduce peak demand, but what if that day of peak demand was cloudy? Or if it occurred mid-afternoon on a winter’s day?
At PVsell, our parent company SunWiz has performed extensive calculations that demonstrate that a solar power system can frequently reduce Peak Demand, in a statistically likely way. Our whitepaper shows that peak demand can be reduced by as much as 41% of the array capacity (i.e. a 100kW system can reduce peak demand by 41kW). Our whitepaper shows that including the benefits of peak demand reduction can speed up payback by two-thirds. But it also shows the amount of Peak Demand Reduction (PDR) that occurs depends upon:
- The co-incidence of solar production and peak demand – is the peak demand during the middle of the day?
- The shape of the peak demand profile. Reducing peak demand during the middle of the day doesn’t help much if there’s a secondary peak at 5pm or at night.
- Is Peak Demand calculated on a monthly or annual basis. A monthly reset will allow you 12 “bites at the cherry”, so even if it was cloudy on the day of annual peak demand, you could reduce peak demand on the other 11 monthly peaks.
- Are the Peak Demand charges separated out into Time-of-Use periods. Even if you miss reducing the peak demand during the peak tariff period, you might be able to do so during the shoulder tariff, or even off-peak Peak Demand (yes that’s legit).
So you can see that its challenging knowing how much PDR will occur for a given solar power system, and how much its worth?
The easiest thing to do is not include PDR in your ROI calculations. But if you’re not including the benefits of PDR, your ROI calculations will be too conservative and you’re missing out on sales as a result. But if you use a guesstimated value then there’s every chance that you’re overstating the benefits, which could ruin your reputation or get you sued.
Did you know PVsell can easily calculate and incorporate the benefits of Peak Demand Reduction into your customers’ ROI calculation.
