Managing Electricity Demand through Demand Charges for Industrial and Commercial Customers

Abstract

<p>Demand charges for capacity consumption may represent a large proportion of industrial and commercial cus- tomers’ electricity bills. However, their potential to supplement existing Demand Response Programs to smooth or reduce load consumption in those clients has not been fully explored in the literature. In this paper, we analyzed the economic incentives for reducing and smoothing electricity demand of three different tariff structures that are already used to apply demand charges in electricity markets. Our analysis shows that demand charges could be used as powerful price signals to reduce and reallocate the load consumption of industrial and commercial customers. However, because they offer different incentives but share sim- ilar goals for efficient consumption, they must be designed in conjunction with Demand Response Programs. </p>