Volume 22, number 3, september 2008

A choice of solutions—off-peak electricity

The right energy in the right place first requires the right solution for the right application. For the past several years, popular belief has held that it is more economical to manage energy by transferring thermal loads to off-peak electricity. Several energy saving projects have even been carried out on this premise. But is this really profitable?

In fact, the energy manager, regardless of whether he’s a property owner, a CEO or an engineer, should ask about the most efficient actions he can take to minimize his energy costs. The choice of solutions available can be summed up as follows: is it cheaper to maximize power consumption by increasing off-peak electricity (utilization factor of 85% or more), or must demand be reduced to benefit from savings?

For each of the two scenarios, fossil fuels are normally used to shift thermal loads. An actual case is presented to answer this question. For this customer, natural gas is used to heat the building and for domestic hot water. Electricity is used to meet the needs of conveniences such as operation of mechanical and air conditioning systems. Graph 1, on the next page, presents the customer’s current situation, including the energy balance (electricity at Rate M with a 95% power factor, and natural gas at Rate D1 and a 12-month average cost).

Parallel to this, still in Graph 1, the off-peak solution is represented by the extension of the bars. This solution seeks to increase electrical energy consumption without increasing the power, in order to obtain an 85% utilization factor. The example shows that this solution would require shifting of a volume of 39,785 m3 of natural gas at 85% efficiency and replacing it with 355,914 kWh of thermal electricity. Accounting for the rates in force, this solution would save $5,237 a year. In exchange such a solution would require costly major modifications to the electrical mechanical systems and often to the installations, such as the electrical inlet.

Another solution would consist of sound management of demand, when this can be applied. Contrary to the off-peak solution, Graph 2 shows a lowering of the demand while maintaining the same 85% utilization factor. Once the impacts are calculated, the results are significant and speak for themselves. The savings for the same customer would have been $6,982 a year, representing additional annual savings of $1,745.

It is thus of the utmost importance for every customer to optimize demand first before undertaking an energy saving program. Indeed, this type of solution obeys the 80-20 rule, whereby 80%of the savings are usually realized by the controls and 20% by the equipment. Conversely, 80% of the costs will come from the equipment and 20% from the controls.

Cost comparison

  Cost of electricity Cost of natural gas Total cost
Current situation $183,682 $254,435 $438,117
Situation with off-peak electricity $195,577 $237,303 $432,880
Situation with demand management $176,700 $254,435 $431,135

The justification of this result is simple but often misunderstood: the electricity bill has two cost components – the cost of energy and the cost of demand. When comparing the unit cost of the two energy sources, you must always remember that power is attached to each kilowatt-hour of electricity and that the demand must first be minimized for off-peak energy to be more profitable.

So is it feasible to add off-peak loads? Can these electrical loads be added without limitation as long as an energy manager subtracts the loads that would penalize the customer’s bill? According to the Quebec Construction Code, Chapter V, Electricity, sections 8-104.4 and 8-104.5, it is forbidden to connect heating loads if their connection, added to the existing loads, exceeds the capacity of a customer’s power inlet, despite the presence of an energy manager.

In conclusion

When an energy saving project is studied, the demand must first be minimized (optimized). For this purpose it is preferable to transfer all the electrical loads used for thermal production purposes, such as heating, hot water or processes, to natural gas. Finally, if demand has been optimized and a measure for use of off-peak electricity should be in place, it is important to remember that the codes prohibit exceeding the power inlet capacity. In case of doubt, it is recommended that you have the work inspected by a representative of the Régie du bâtiment or a specialized electrical engineer who is a member in good standing of the Ordre des ingénieurs du Québec.

Roger Gauvin, Eng.
Technical Advisor