A building management system governing the distribution of electricity and controlling HVAC in your building saves money. There’s no question about that. However, facility managers can reduce those utility cost savings even more if they understand how their electrical utility determines the charges for the coming year for the electricity to power their building, especially if that utility charges by using ratchet demand.
Many energy utilities, especially those in large cities and regions experiencing higher-than-average growth in the business and industrial communities, use a demand response program referred to as ratchet demand. Ratchet demand can cause you to pay more for your electricity than your business or building actually consumes, and steep penalties from the utility if you exceed your predicted demand. However, by properly applying the tools in their building management system and focusing on energy efficiency in buildings, facilities managers and owners can limit those charges, thus containing the cost of their electricity and, in many cases, lowering it.
We’ll show you how.
What’s inside this blog post:
- What is ratchet demand?
- BMS can help control ratchet demand charges.
- Ratch demand billing is not your enemy.
- FICO: Experts on building management systems.
What is ratchet demand?
Ratchet demand is a billing plan some utilities have developed that accomplishes two things. First, it allows the electrical utility to ensure enough financial resources to maintain and expand their infrastructure, including electrical distribution stations and power plants, to meet the peak demands of their customers, especially their business customers–office buildings, colleges and universities, hospitals, and manufacturers. Second, ratchet demand is also a billing structure that allows commercial electricity consumers to fine-tune their operations to control and lower their energy costs through utility rate optimization.
A look at a building’s daily energy use?
The easiest way to understand ratchet demand is to examine a commercial building’s day-to-day operations. Buildings have a baseline energy usage. This is the amount of energy required to maintain the building at what can best be described as a resting state, typically during the night and on the weekends. Baseline usage includes minimal lighting, low computer usage, and perhaps several elevators and escalators that are shut down, all things that would minimize the need for electricity. The electrical utility meets this baseline demand with a minimal amount of generating units. Costs are low, including the building’s costs for energy and the utility’s cost for generating that energy.
Energy use in a building starts to climb as those first few employees arrive in the morning. They turn on lights, coffee makers, computers, printers, and other electrical office equipment. Depending on the weather, they turn on the heat or the air conditioning. The HVAC system kicks in, optimizing ventilation. This activity increases as more and more people arrive to begin the day’s work, translating to increased energy demand throughout the day.
Colleges and universities have a similar usage pattern, but hospitals have an increased need for lighting, machinery, and other services. Surgery suites are often running at capacity. The imaging departments in a hospital (large electricity consumers) see the bulk of their use during the day.
Then there are manufacturers, ranging from a local machine shop with one or two electrically driven CNC spindles or hydraulic systems to large manufacturing concerns with conveyor belts and multiple processes. As demand for electricity increases, the utility brings on additional generating units, and utility costs begin to go up. As the day progresses, there are more demands on HVAC, imaging in a hospital, and manufacturing teams in factories.
Energy usage is also seasonal. Regions with harsh winters have more demand on HVAC to push warmer air into workspaces. In the warmer summer months, all of these concerns need air conditioning to keep employees comfortable. Some tenants maintain in-house data centers, which also require increased energy. Utilities are compelled to activate additional generators that can start up quickly to meet these power demands, and running these dynamic generators is often more expensive.
Electrical utilities are in the business of delivering electricity. This is how they make their money. If demand exceeds capacity, though, then systems shut down. There are brownouts, blackouts, and upset customers. Productivity and reputations suffer, both for the utility and the customer.
Ratchet Demand Steps in
According to the Washington State University (WSU) Energy Program, utilities with ratchet demand take the highest monthly demand for the year and establish that as the annual peak for each entity, business, or building. The utility uses this annual peak to determine the ratchet for the monthly demand peak for the next eleven months. For example, the minimum demand charge for any month might be 60 percent of the highest demand in the preceding 11-month period. This makes the peak demand month a very important target for reduction if your utility has a ratchet clause on the demand.
The WSU Energy Program uses the following example for ratchet demand:
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- Your demand in December is 800 kW, and you pay $5 per kW
- You will pay a $4,000 demand charge for December
- The following June, the demand meter reads 150 kW. You are charged $2,400 rather than $750 (60 percent of 800 kW is 480 kW, times $5 per kW, equals $2,400)
This $1,650 increase in demand cost is due to the ratchet clause in the rate schedule. The same ratchet will be charged in all warm months, even when demand is low.
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This example prompts the question of why you are paying more for the energy you use in June. Remember that $5 per kW was based on the utility running at near capacity to meet that demand. The auxiliary power-generating units are typically more expensive to run, and the charge of $5 per kW reflects that more expensive electricity.
Additionally, many utilities enact expensive penalties for exceeding your ratchet demand for any month.
This is but one example of ratchet demand billing. Every utility using ratchet demand has a variation on it. Some are very similar, and others are considerably different.
BMS can help control ratchet demand charges
If you are planning a new building or considering upgrades in your current building, understanding how you are charged for electricity is vital. Utilities have business representatives who specialize in working with facility managers and owners to manage their electrical usage and how to avoid heavy charges and penalties.
Here are some ways to manage ratchet demand and peak load management. It really comes down to understanding your peak months for electrical usage and then containing that usage, thus driving down your ratchet demand number.
Understand your electrical usage patterns
Every facility manager or business owner should understand their patterns of electrical usage. What are your peak times for usage during the day? You should also know what months are your highest usage months. You mustn’t assume. Look at the numbers. Once you determine that information, you can ask, “How can I decrease usage during those times?” A building management system using cloud computing and data analysis makes this information readily available and easy to understand. Use BMS to control usage during peak months.
The warmer summer months in the sunbelt states are more likely to be your peak months for energy usage. If your building uses chillers, you can program your building management system to switch to the chillers to make ice at night. You can then run your chillers at a lower power load while melting stored ice to meet peak HVAC demand during the day. You can also program your HVAC equipment to pre-cool the building in the early morning, hours before people arrive for work. When the HVAC kicks in, the building will already be cooler. Less energy is needed to keep an already cooler building at comfortable temperatures. If you have solar panels, using these to power HVAC keeps you off the public grid and not incurring charges.
Efficient control of lighting
As we reported in a blog post several months ago, BMS and Lighting Control Systems: Intertwined Technologies, lighting accounts for 15% to 20% of an office building’s energy usage. Using more energy-efficient LED lights and lighting control systems and incorporating them into the building management system saves energy and money. LED lights also create less heat, which means less strain on the HVAC.
BMS means more efficient maintenance practices
The HVAC systems in commercial buildings consume about 40% of total energy use. Malfunctioning equipment means wasted energy. A faulty electrical relay or a worn bearing in an HVAC fan means things operate a little less efficiently. Using powerful data analysis, a building management system can detect these problems and even point to a precise location of the faulty component, such as monitoring the motor current. When HVAC motors start to draw more current over time, it is likely a sign that the motor needs maintenance.
BMS can also point out other maintenance issues, including excessive scale buildup in chilled water systems, out-of-spec capacitors, leaking ducts, and dirty filters, condensers, and evaporator coils.
BMS allows you to perform data analysis to see where energy is going
This is a massive consideration for manufacturers that use processes driven by electric motors. When employees come into work in the morning and turn on several big, energy-hungry electric motors at once, it causes a massive spike in electrical demand. Those spikes drive your peak usage. You can see it in data analysis from your building management system. Reviewing the building management system data shows managers how they stagger the start-up of different machinery and reduce the impact on peak usage.
Another solution is incorporating devices known as variable frequency drives (VFDs). Electricity delivered to your facility comes in at a fixed frequency and voltage. VFDs control that incoming electricity, modifying it according to the load demands. Thus, a fan’s motor speed and torque can be adjusted to match the requirements with a high degree of accuracy. This allows your factory to operate and use electricity more efficiently.
VFDs are often used in HVAC systems’ fans, too. When the HVAC system’s demand changes, the VFD-controlled motor can alter the fan’s speed to match the change in demand.
Ratchet demand billing is not your enemy
We mentioned this earlier, and it bears repeating.
Businesses should not consider ratchet demands a punishment or penalty from their electrical supplier. They are a way utilities in high-growth areas can ensure the financial resources to produce enough electricity to meet needs. The information from ratchet demand also allows businesses to see their peak demand periods and modify their operations to lower those peaks.
It’s all about smartly using electricity, and a building management system can help you accomplish that and save you money, too.
FICO: Experts on Building Management Systems
For the past twenty years, FICO has provided turnkey building management systems (BMS) for businesses, schools, office buildings, hospitals, and others. They are also experts in building security, access control, and system integration services. Their staff has numerous industry certifications from major suppliers in the industry, including Schneider Electric, Tridium, Danfoss, and others. FICO works with leading BMS component manufacturers to provide optimum environments that are comfortable for employees and save energy.
Do you have questions about a building management system for your business or building?
