Why Your Maximum Demand Matters More Than Your Annual Consumption
Ask most businesses what drives their electricity cost, and the answer is usually the annual total - kWh used, multiplied by a rate. That's a real cost, but it's not the only one, and for some sites it isn't even the largest one worth paying attention to.
Maximum demand - the single highest level of power a site draws, usually measured in kVA - sits behind a separate set of charges that have nothing to do with the annual total.
What maximum demand actually is
It's the highest demand recorded in any half-hour period, not an average. A site that's mostly quiet but has one sharp spike each day has a maximum demand set by that spike, however brief it is, however low the rest of the day's usage sits.
Capacity charges
Sites agree a capacity - the maximum demand they're contracted to draw - with their network operator. Charges apply to that agreed capacity regardless of whether it's fully used, and additional charges, sometimes significant ones, apply if actual demand exceeds it. Get the agreed capacity wrong in either direction and it costs money: too high, and a site pays for headroom it never uses; too low, and it risks breach charges every time a genuine peak exceeds it.
Diversity
Not everything on site runs at once, and diversity is the practice of accounting for that properly when sizing a connection or estimating demand, rather than simply adding up the nameplate rating of every piece of equipment as if it all switched on together. Get diversity wrong and a site can end up contracting far more capacity than it will ever genuinely need.
Start-up peaks
Motors, compressors and certain equipment draw significantly more current at the moment they start than during normal running - sometimes many times their running load, briefly. If several pieces of equipment happen to start within the same half hour, that combined start-up peak can set a site's maximum demand for the entire period, even though normal running demand is far lower.
Sequencing equipment
Simply staggering when equipment starts - rather than everything switching on together at the start of a shift - can meaningfully reduce a site's peak without changing how much electricity is used overall. It's one of the few genuine no-capital-cost changes available to reduce a capacity-related cost.
Batteries for peak reduction
A battery sized and controlled specifically to manage peak demand - discharging briefly during the site's own highest-demand moments - can reduce the maximum demand a site needs to contract for, and therefore the capacity charge itself. This is a genuinely different sizing exercise to a battery aimed at solar self-consumption or arbitrage, and the right battery for one purpose isn't automatically right for the other.
Procurement implications
A procurement conversation that only discusses the unit rate against annual volume is missing this entire cost category. Two sites with identical annual consumption but different demand shapes can have meaningfully different total costs once capacity and peak-related charges are properly accounted for - and a contract comparison that ignores that isn't comparing like for like.
Annual consumption tells you the size of the bill. Maximum demand tells you a lot about its shape, and a real part of its cost. If you want your own site's demand properly understood, get in touch.