New York and New Jersey have some of the highest electricity rates in the country. Both states have kilowatt-hour prices well above the national average and are particularly high in New York City. When homeowners want to reduce their electricity bills, the most common options are energy efficiency and on-site generation, but the list doesn't end there.
Energy savings and renewable generation are common knowledge among the general public, but the structure of electricity tariffs is rarely considered. Depending on how your energy bill is calculated, there may be additional ways to reduce electricity expenses. Many electricity tariffs are double-edged: they allow you to save significantly if you actively manage your consumption, but you can also end up with hefty energy bills if you are careless with your electricity use.
Reduce your building's electricity costs with an energy audit.
1) Energy Efficiency
There are plenty of energy efficiency measures for buildings, and some are more effective than others depending on project conditions. However, they have a common objective: to reduce the energy consumed by building systems without affecting their performance. Note that energy efficiency aims to reduce energy consumption in general, not just electricity use. For example, many HVAC upgrades simultaneously reduce electricity and gas bills.
Lighting upgrades and automatic controls tend to have the quickest payback periods among energy efficiency measures. On the other hand, building envelope upgrades require more time to recoup the initial investment, typically more than a decade. HVAC upgrades are more variable in terms of payback period depending on the condition of the building before the project, but you can get a realistic estimate with an energy audit.
2) On-site generation
If your energy meter measures fewer kilowatt-hours, you will be charged less regardless of which method you use. Energy efficiency achieves this, but generating your own kilowatt-hours has the same effect: net consumption as measured by the energy meter decreases, even if internal usage remains the same.
Some examples of generation systems are gas-powered microturbines, fuel cells, photovoltaic solar arrays and wind turbines. Depending on project conditions, the business case will be better for some options, and others may not be profitable at all. For example, solar panels won't provide much electricity on a small roof that is shaded by taller buildings all day, but they are excellent on a large, unshaded warehouse roof.
3) Taking advantage of electricity rates at the time of day
Electricity prices are typically reported as a single value in cents/kWh, but this is not the case for all tariffs. If you are subject to hourly rates, the kilowatt-hour price changes throughout the day. Although the rules vary by dealership, they tend to follow the same pattern:
- When total demand on the electricity grid is high, generation and transmission capacity is pushed to its limits, increasing costs. The highest prices in kWh are charged.
- On the other hand, when demand is low, utility companies can operate their cheaper power plants and transmission losses are minimal. The lowest prices in kWh are charged.
If your energy bill follows this structure, you can reduce expenses by moving loads away from peak times, even if your total kWh consumption remains the same. Sometimes the difference between peak and off-peak rates is drastic. Consider the SC-1 tariff, Tariff III, applied by Con Edison to many residential users in New York:
- Summer peak rate, June to September: 21.80 cents/kWh
- Peak rate for all other months: 8.07 cents/kWh
- Off-peak rate: 1.52 cents/kWh
Significant reductions in energy bills are possible simply by moving loads away from peak demand times. For example, a homeowner may avoid using the washing machine when peak rates apply.
Please note that the values above are for energy only, with an additional delivery fee for transmission and distribution via the electricity grid. However, this does not affect the potential savings from scheduling your loads during off-peak hours.
4) Reduction in capacity charges
Large-scale electricity consumers can overload the power grid if they consume electricity in sudden bursts. A spike in demand from a large commercial or industrial user can push local network capacity to the limit, even at times when the global network does not experience spikes in demand. To account for this, electric utilities use capacity rates, which are based on the highest peak kilowatts during the billing period. Consider the following example, which applies to the Con Edison service area:
- Multifamily properties with low voltage service must pay $32.29 per kW of peak demand during the summer and $24.95/kW during the winter.
- If they have a high voltage connection, these rates are reduced to US$25.43/kW and US$18.08/kW, respectively.
Capacity charges penalize consumption spikes regardless of when they occur, while hourly rates only affect users with excessive consumption at times when the network is overloaded.
5) Eliminating Power Factor Loads
Not all the electricity you draw from the grid is actually used. Some devices produce a fluctuating flow of electricity between themselves and the voltage source, and this is called reactive power. Transformers and electric motors are some of the most common reactive loads.
Although the reactive power is returned to the electrical grid, it congests power lines and causes losses due to the heating effect on the conductors. To account for this, utility companies introduce power factor ratings that are based on the relationship between real power (what you consume) and apparent power (what you apparently consume, based on measured current).
- A completely resistive load, such as an incandescent lamp, consumes zero reactive power.
- A highly inductive load, such as a welding machine, consumes very high reactive power
- Reactive power is measured in reactive kilovolt-amperes (kVAR), to be distinguished from kilowatts of real power.
Utilities typically establish a minimum power factor, at which there is no charge for reactive energy. As the difference between the power factor and the minimum value increases, the percentage charge also increases. The exact minimum amount and calculation rules vary by dealership, and sometimes there are bonus payments for exceeding the minimum PF.
The power factor can be increased by installing appropriately rated capacitors . In simple terms, they behave opposite to reactive loads, producing a fluctuating power flow of inverted magnitude. If you have a motor that consumes 100 kW of real power and 40 kVAR of reactive power, a 40 kVAR capacitor neutralizes the effect.
Conclusion
Saving electricity and producing your own electricity are surefire methods for reducing energy bills. However, you can also take advantage of your tariff structure to reduce payments, even if your net energy consumption remains the same. Moving 10 kWh/day from peak to off-peak offers savings if you pay hourly rates, and splitting a 200 kW peak into two smaller 100 kW peaks offers savings if you pay capacity fees.
To identify the best opportunities to reduce energy bills at a property, an energy audit qualified engineering consultants is strongly recommended. This way, you will know exactly which measures to implement and how they work financially.
