Introduction #

Factory load doesn't just determine equipment sizing—it directly impacts your monthly energy bill. Many facility managers don't realize that how you use electricity (not just how much) affects costs through demand charges, power factor penalties, and time-of-use rates. Understanding the relationship between load and energy costs helps you identify savings opportunities and optimize operations. This guide explains how factory load affects energy costs and provides strategies to reduce expenses.

Components of Industrial Energy Costs #

1. Energy Charges (kWh) #

What it is: Cost per kilowatt-hour consumed

Example:

Monthly Consumption: 50,000 kWh
Rate: $0.08/kWh
Energy Charge: 50,000 × $0.08 = $4,000

Impact of Load:

  • Higher load = more kWh consumed
  • Direct relationship
  • Can't avoid if you need the power

2. Demand Charges (kW) #

What it is: Cost based on peak demand (highest 15-minute average)

Example:

Peak Demand: 500 kW
Demand Charge: $15/kW/month
Demand Charge: 500 × $15 = $7,500

Impact of Load:

  • Critical: Peak demand sets the charge
  • One high peak = high charge all month
  • Load management can reduce this significantly

Key Insight: Demand charges are often 40-60% of total bill for industrial facilities.

3. Power Factor Penalties #

What it is: Penalty for low power factor (typically < 0.90 or 0.95)

Example:

Average Power Factor: 0.75
Penalty Threshold: 0.90
Penalty Rate: 2% of demand charge per 0.01 below threshold

Penalty: (0.90 - 0.75) × 2% × $7,500 = $2,250/month

Impact of Load:

  • Low power factor equipment increases penalty
  • Mixed loads affect overall PF
  • Correction can eliminate penalty

4. Time-of-Use Rates #

What it is: Different rates for different times of day

Example:

Peak Hours (2-6 PM): $0.12/kWh
Off-Peak Hours: $0.06/kWh
Mid-Peak Hours: $0.09/kWh

Impact of Load:

  • Shifting load to off-peak saves money
  • Peak-hour usage costs 2× off-peak
  • Load scheduling matters

How Load Characteristics Affect Costs #

Peak Demand Impact #

Scenario 1: Steady Load

Average Load: 400 kW
Peak Load: 420 kW (5% above average)
Demand Charge: 420 × $15 = $6,300/month

Scenario 2: Variable Load

Average Load: 400 kW
Peak Load: 600 kW (50% above average)
Demand Charge: 600 × $15 = $9,000/month

Difference: $2,700/month ($32,400/year)

Key Insight: One high peak sets the demand charge for the entire month. Load leveling saves money.

Power Factor Impact #

Scenario 1: Good Power Factor

Load: 500 kW
Power Factor: 0.95
kVA: 500 ÷ 0.95 = 526 kVA
Demand Charge (based on kW): 500 × $15 = $7,500
No penalty
Total: $7,500

Scenario 2: Poor Power Factor

Load: 500 kW
Power Factor: 0.75
kVA: 500 ÷ 0.75 = 667 kVA
Demand Charge: 500 × $15 = $7,500
Penalty (0.90 - 0.75 = 0.15): 15 × 2% × $7,500 = $2,250
Total: $9,750

Difference: $2,250/month ($27,000/year)

Key Insight: Low power factor doesn't just waste capacity—it costs money directly.

Load Timing Impact #

Scenario: Peak Hours

Load: 500 kW during peak (2-6 PM)
Rate: $0.12/kWh
Cost: 500 × 4 hours × $0.12 = $240/day
Monthly: $240 × 20 days = $4,800

Scenario: Off-Peak Hours

Load: 500 kW during off-peak
Rate: $0.06/kWh
Cost: 500 × 4 hours × $0.06 = $120/day
Monthly: $120 × 20 days = $2,400

Difference: $2,400/month ($28,800/year)

Key Insight: When you use power matters as much as how much you use.

Real-World Cost Analysis #

Facility Example #

Facility Characteristics:

  • Average load: 400 kW
  • Peak load: 600 kW (occurs 2-3 times/month)
  • Power factor: 0.80
  • Operating: 8 AM - 6 PM (includes peak hours)

Monthly Bill Breakdown #

Energy Charges:

Consumption: 80,000 kWh
Rate: $0.08/kWh
Energy: 80,000 × $0.08 = $6,400

Demand Charges:

Peak Demand: 600 kW
Rate: $15/kW
Demand: 600 × $15 = $9,000

Power Factor Penalty:

PF: 0.80 (below 0.90 threshold)
Penalty: (0.90 - 0.80) × 2% × $9,000 = $1,800

Total Monthly: $17,200

Annual Cost: $206,400 #

Strategies to Reduce Energy Costs #

Strategy 1: Load Leveling (Reduce Peak Demand) #

Goal: Reduce peak demand to lower demand charges

Methods:

  • Stagger equipment starts
  • Shift non-critical loads
  • Use energy storage
  • Schedule high-load processes off-peak

Example:

Current Peak: 600 kW
After Load Leveling: 500 kW
Savings: 100 × $15 = $1,500/month
Annual: $18,000

Implementation:

  • Review load patterns
  • Identify peak-causing equipment
  • Reschedule if possible
  • Use timers/PLC control

Strategy 2: Power Factor Correction #

Goal: Improve power factor to eliminate penalties

Methods:

  • Install capacitor banks
  • Use synchronous motors
  • Replace old equipment
  • Add harmonic filters

Example:

Current PF: 0.80
Target PF: 0.95
Correction Required: ~150 kVAR
Capacitor Cost: $8,000
Penalty Elimination: $1,800/month
Payback: 4.4 months
Annual Savings: $21,600

Implementation:

  • Measure current power factor
  • Calculate correction needed
  • Install capacitors
  • Monitor and adjust

Strategy 3: Load Shifting #

Goal: Move load from peak to off-peak hours

Methods:

  • Schedule production off-peak
  • Pre-charge batteries during off-peak
  • Shift HVAC operation
  • Batch processing during off-peak

Example:

Peak Load Shifted: 200 kW
From Peak (4 hours): 200 × 4 × $0.12 = $96/day
To Off-Peak: 200 × 4 × $0.06 = $48/day
Savings: $48/day = $960/month
Annual: $11,520

Implementation:

  • Analyze time-of-use rates
  • Identify shiftable loads
  • Reschedule operations
  • Use automation/controls

Strategy 4: Equipment Efficiency #

Goal: Reduce overall load through efficiency

Methods:

  • Replace old motors with high-efficiency
  • Use VFDs for variable loads
  • Upgrade lighting to LED
  • Optimize HVAC systems

Example:

Old Motors: 200 kW at 85% efficiency
New Motors: 200 kW at 95% efficiency
Load Reduction: 200 × (1 - 85/95) = 21 kW
Energy Savings: 21 × 8 hours × 20 days × $0.08 = $269/month
Demand Reduction: 21 × $15 = $315/month
Total Savings: $584/month
Annual: $7,008

Strategy 5: Demand Response #

Goal: Reduce load during utility peak events

Methods:

  • Participate in demand response programs
  • Reduce non-critical loads on request
  • Use backup generation
  • Temporary load reduction

Example:

Demand Response Events: 10/year
Load Reduction: 100 kW
Incentive: $20/kW
Annual Payment: 100 × $20 × 10 = $20,000

Complete Cost Reduction Example #

Current Situation #

Monthly Bill:

  • Energy: $6,400
  • Demand: $9,000
  • PF Penalty: $1,800
  • Total: $17,200/month

After Optimization #

1. Load Leveling:

  • Peak reduced: 600 → 500 kW
  • Demand savings: $1,500/month

2. Power Factor Correction:

  • PF improved: 0.80 → 0.95
  • Penalty eliminated: $1,800/month

3. Load Shifting:

  • 150 kW shifted to off-peak
  • Energy savings: $720/month

4. Equipment Efficiency:

  • 20 kW reduction
  • Energy savings: $256/month
  • Demand savings: $300/month

New Monthly Bill:

  • Energy: $5,424 (reduced)
  • Demand: $7,200 (reduced)
  • PF Penalty: $0 (eliminated)
  • Total: $12,624/month

Monthly Savings: $4,576
Annual Savings: $54,912

Investment: $25,000 (capacitors, controls, efficiency)
Payback: 5.5 months

Monitoring and Management #

Key Metrics to Track #

1. Peak Demand (kW)

  • Track daily peaks
  • Identify peak-causing equipment
  • Monitor trends

2. Power Factor

  • Continuous monitoring
  • Alert if below threshold
  • Track improvement

3. Load Profile

  • Hourly/daily patterns
  • Identify opportunities
  • Validate changes

4. Energy Cost per Unit

  • Track cost trends
  • Compare to benchmarks
  • Measure improvement

Tools and Systems #

Power Monitoring:

  • Submetering
  • Power analyzers
  • Energy management systems
  • Real-time dashboards

Load Management:

  • PLC controls
  • Automated scheduling
  • Demand response systems
  • Load shedding controls

Integration with Factory Load Calculator #

Our Factory Load Calculator helps you:

  • Calculate current load accurately
  • Understand load components
  • Identify high-load equipment
  • Plan for optimization

For Cost Reduction:

  1. Calculate current load
  2. Identify peak-causing equipment
  3. Plan load leveling strategies
  4. Calculate power factor
  5. Plan correction if needed

Calculate your load: Factory Load Calculator

Conclusion #

Factory load directly impacts energy costs through demand charges, power factor penalties, and time-of-use rates. Understanding these relationships helps identify significant savings opportunities. Key strategies include load leveling to reduce peak demand, power factor correction to eliminate penalties, load shifting to off-peak hours, and equipment efficiency improvements. Typical savings of 20-30% are achievable with proper load management, often with payback periods under 12 months. Monitor key metrics, implement appropriate strategies, and continuously optimize to maximize cost savings.