If you’ve ever wondered why your business electricity bill spikes—even though your usage hasn’t—chances are you’re paying for demand charges. And if you don’t fully understand what they are or how to manage them, they can quietly drain thousands from your budget every year.
Quick Answer: To reduce demand charges on your commercial energy bill, monitor your maximum kilowatt demand, stagger high-energy equipment usage, install smart controls, and explore battery or load management systems. Even small adjustments can significantly lower your energy spend.
What exactly are demand charges?
Demand charges are fees based on your highest short burst of energy use, typically measured in 15 or 30-minute intervals during a billing cycle.
It’s not about how much total energy you use—it’s about how much you use at once.
For example, if you switch on your HVAC, commercial ovens, and cold storage all at 9am, that momentary spike could become your demand baseline—and you’ll be billed accordingly all month.
Demand charges are designed to account for the infrastructure needed to handle these peak loads, but for businesses, it often feels like being penalised for being productive.
Why do demand charges matter more now?
Because they’re growing. In some Australian states, demand charges make up 30–60% of a business’s electricity bill, especially for commercial properties with heavy machinery or HVAC.
And with network providers tightening capacity controls, these charges are becoming more prominent—even for small operators like gyms, laundromats, bakeries, and retail outlets.
It’s the sort of hidden cost that doesn’t show up until the invoice hits and leaves you scratching your head.
How can I identify what’s driving my demand charge?
Start with your interval data—this breaks down your energy use in real-time and shows exactly when your demand spikes occur. You can request this from your electricity distributor or access it directly if you have a smart meter.
Then ask:
- What equipment is starting up at those times?
- Are there patterns—like Monday morning resets or afternoon heatwave air con surges?
- Is the spike short or sustained?
Real example: A local brewery in Brisbane discovered their automated bottling line caused a 40kW spike every Monday morning. By simply delaying that start by 30 minutes (after the HVAC settled), they dropped demand costs by $430 per month.
What are the best strategies to reduce demand charges?
1. Stagger equipment usage
Avoid powering up all major appliances at once. Set timers or train staff to power on in sequence to smooth out spikes.
2. Install demand control systems
These smart controllers automatically adjust or shed non-essential loads when your demand nears a threshold.
3. Use thermal storage or pre-cooling
Run your air con early in the day (when demand is low), then rely on the cooled building mass to maintain temperature during peaks.
4. Battery storage
A well-sized battery can kick in during high-demand windows, reducing your draw from the grid when it matters most.
5. Peak demand awareness
Train staff. Even explaining the impact of flipping multiple switches at once can save you more than you’d expect.
Can solar help reduce demand charges?
Yes, but with a caveat.
Solar can help if your peak demand aligns with daylight hours. For instance, a cafe operating from 6am–2pm could benefit significantly.
However, if your demand spikes occur after 4pm—say, in a fitness centre or bottle shop—solar alone won’t help unless it’s paired with battery storage.
Note: Some retailers are now offering demand-based tariffs that reward businesses for staying under a specific kilowatt limit. Solar and battery combinations can give you more control under such tariffs.
How do demand charges compare to general energy usage charges?
Think of it this way:
- Energy usage charges are like paying for the fuel you burn.
- Demand charges are like paying for the size of the engine—regardless of how long you use it.
Both matter. But for businesses with large equipment, HVAC, or refrigeration, demand charges can be the bigger cost centre. It’s why smart energy users often look there first when cutting costs.
Are some businesses more exposed to demand charges than others?
Absolutely. You’re more likely to feel the sting if you:
- Run large HVAC or refrigeration systems
- Operate high-powered equipment (e.g., welding, hydraulics, baking)
- Have all systems turn on simultaneously
- Occupy commercial or industrial premises (vs. standard retail lease)
Even small businesses like dry cleaners, gyms, or florists with cold rooms can be hit—especially if they use equipment in bursts.
Should I talk to my energy retailer about this?
Yes—demand charges are negotiable in some contracts.
If you’re a medium to large business (or part of a buying group), you may be able to set a demand cap or shift to a tariff structure better suited to your operations.
Some retailers offer flexible peak demand windows or seasonal rates. Ask the question. If they can’t help, consider a broker who can shop your load profile across multiple providers.
What’s one practical thing I can do tomorrow?
Log into your distributor’s portal or request your last three months of interval data. Overlay that with your equipment start-up times.
Then: identify any “stacked” usage patterns and spread them out by 15–30 minutes. It’s simple. It’s free. And it’s often enough to drop you into a lower demand bracket.
Example: One café in Carlton shaved $1,100 off their annual bill by setting their coffee machine to pre-heat before lights and air con kicked in.
FAQs
What’s a demand threshold?
It’s the kilowatt level that triggers higher pricing tiers for demand charges. Staying under that threshold = lower costs.
Do demand charges apply to small businesses?
In some cases, yes—especially if you use more than 20,000 kWh/year or have three-phase power.
Can batteries help even without solar?
Yes. Batteries can charge off-peak and discharge during high-demand windows, making them effective demand reducers even without solar panels.
Final Thought
Demand charges are sneaky—but not unbeatable. With a bit of data, smarter usage patterns, and maybe a dash of automation, they can go from major headache to manageable cost.
It’s a sharp way to reduce retail store energy bills without compromising operations—just a smarter rhythm to the way you power your business.