How LEDs can reduce your power demand costs

Posted by 20th September, 2017 in


This blog aims to teach you how energy efficient lighting retrofits can reduce your power costs through power demand cost reduction – and how this process works.

Power demand summary

  • LEDs typically reduce your peak demand, but you should request a review of your power demand in order to monetise that reduction as quickly as possible.
  • Four to six weeks after installation of LEDs you should contact your account manager at your electricity retailer to request a review of your peak demand.
  • You’ll need to provide some evidence of the power demand reduction – list the changes in lighting wattage, photos of the installation, VEEC/ESS documentation etc.

What are power demand costs?

Demand charges are power costs you pay in order to access a certain amount of power at any given instant. In contrast to energy charges which relate to the total amount of energy you use in a month, demand charges relate to the maximum amount of instantaneous power draw that has occurred or is likely to occur.

How is demand cost calculated?

Demand cost is calculated differently depending on who your network operator is. In most cases, the electricity network operator identifies the maximum demand you used at any instant in the past 12 months, and charges you on that basis each month.

Some network operators also charge you for the capacity of your connection to the grid, whether you ever use that much power or not. Some network operators also charge you for critical demandan additional charge that applies to the maximum demand that occurred during periods in which time the network was under particular stress.

Demand review process

By installing LEDs it’s highly likely that you will have reduced your peak demand. However, it may be that your network operator won’t automatically reduce your demand charges because they expect your future demand will look like your past demand, and so will continue charging you for the next one-to-12 months based upon a peak demand level that may never occur again.

Thankfully it may be possible to cash in the demand savings earlier by requesting that the network operator review your demand accounting for your new lighting installation. This will ensure you get maximum cost benefits out of your LED installation. You might also be able to change your tariff structure. See the graph above for an illustrative example of savings made through the demand review process.

How to apply for a review of your demand charges

To apply for a review of your demand charges, you should contact the business account manager of your electricity retailer by phone or email. Their direct contact details should appear on your bill.

What you should provide

When you apply for a review, you should provide as much detail as possible about the changes you have made. In addition to the details requested by your retailer, this includes photos of the retrofit installation, details of the quantity of lights you had before/after as well as their power ratings and data. Also include any documents which confirm that the installation was completed – e.g. VEEC/ESC documentation. It may pay to wait four to six weeks after installation of LEDs before requesting a review – your network operator will then also be able to consider post-installation consumption data.

Questions you should ask

You should ask your retailer some questions about the demand reduction application before you lodge it. Here are some important things you should ask about:

Are there any costs associated with the review request? (Although network operators are highly unlikely to charge for a review, retailers might charge depending on the level of service they provide and what their individual policy is).

Am I likely to be moved to a different tariff structure altogether? If you are moved to a different billing structure as a result of your review, you might be billed differently for power – which may affect your bill.

What happens if I need more power again? If you change your tariff structure and then need to change back to your old structure, you may need to pay a fee.

What now?

Contact Shine On to arrange a free lighting audit and proposal which will include annual peak demand savings, as well as annual kWh savings made through an LED upgrade.