Demand Charges

What are demand charges in EV charging?

Electricity bills for commercial sites include two components. One tied to energy consumed. Another tied to the highest level of power drawn at any single moment. That second component is the demand charge.

Recorded in kilowatts (kW). Based on the single highest demand window in the billing period, often a 15-minute block, sometimes 30. One brief surge is enough. Duration does not matter much. The peak stays on the bill.

At EV charging sites, particularly where DC fast chargers operate, sudden power jumps are routine. A vehicle plugs in. Power ramps up instantly. That sharp rise can quietly define the month’s demand cost.

How to calculate demand charges on the electricity bill:

Highest recorded peak demand (kW) × Demand rate (₹ or $ per kW)

Numerical example 1 — Fleet depot

Peak recorded during the month: 140 kW
Demand rate: ₹375 per kW

Demand charge = 140 × 375
= ₹52,500

Now compare energy charge:

Total energy consumed: 9,000 kWh
Energy rate: ₹7 per kWh

Energy charge = 9,000 × 7
= ₹63,000

In this case, demand charges account for a significant portion of the total electricity bill.

Numerical example 2 — Public DC fast charging site

Two 90 kW chargers are operating simultaneously for a short window.

Peak = 180 kW

If demand rate = ₹450 per kW:

Demand charge = 180 × 450
= ₹81,000

Even if that peak occurred only once during the month.

This explains why EV demand charges can reshape the economics of fast-charging infrastructure.

Demand charge vs energy charge

Energy charge — based on total kWh consumed across the month.
Demand charge — based on maximum kW drawn at one point in time.

Energy reflects volume. Demand reflects grid capacity stress.

Utilities apply demand charges to recover infrastructure costs. Transformers. Distribution lines. Substation capacity. All sized to meet peak conditions, not average use.

Understanding the difference between demand charges and energy charges is essential when planning high-power EV deployments.

How to minimise demand charges?

Reducing demand charges does not necessarily mean reducing total electricity usage. It means controlling the highest spike. Smoothing the curve. Managing peaks deliberately.

This is where Demand charge management and Peak load management come into focus.

1. Smart Charging

Smart charging systems regulate how multiple vehicles draw power at a site. Instead of allowing every charger to operate at full capacity simultaneously, the software distributes available power.

Scenario without control:

Three chargers at 60 kW each.
Simultaneous operation → 180 kW peak.

Scenario with smart charging:

Charger 1 → 60 kW
Charger 2 → 50 kW
Charger 3 → 40 kW

New peak = 150 kW

If demand rate = ₹400 per kW:

Savings = (180 − 150) × 400
= 30 × 400
= ₹12,000 per month

Smart charging may also include:

Scheduled charging during off-peak tariff hours
Dynamic load balancing across chargers
Priority rules based on departure schedules
Participation in utility demand response programs

These measures directly support the Reduction of demand charges for EV fleets.

2. Peak Shaving in EV Charging

Peak shaving is the practice of intentionally reducing the peak power draw during a billing period. The objective is not to stop charging. Instead, to avoid an extreme simultaneous load.

Peak shaving in EV charging is the process of flattening load spikes to keep the billing peak lower.

Peak shaving can be implemented through software control. Or hardware solutions. Often both.

3. Battery Energy Storage Systems (BESS)

Battery Energy Storage Systems act as a buffer between EV chargers and the grid.

Energy is stored during low-demand hours and discharged when the charging demand spikes.

Illustration:

Charging demand at a site: 220 kW
BESS discharge contribution: 100 kW
Grid sees only: 120 kW

If demand rate = ₹500 per kW:

Without storage → 220 × 500 = ₹1,10,000
With storage → 120 × 500 = ₹60,000

Monthly reduction = ₹50,000

Beyond lowering demand charges, BESS also enables:

Time-of-use optimisation
Solar integration
Emergency backup capability
Higher charger utilisation without increasing contracted demand

In many cases, DC fast charging increases electricity demand unless peak load is actively managed through smart controls or storage.

Combining Smart Charging + BESS

Smart charging reduces avoidable simultaneous peaks. BESS addresses unavoidable high-load moments.

Software smooths patterns. Storage absorbs spikes.

Together, they form a structured Demand charge management strategy that strengthens financial predictability for charging operators.

Struggling with high commercial electricity bills?

Demand charges can quietly double your operational costs. Learn how Smart Charging and Battery Storage (BESS) can flatten your load spikes and protect your bottom line.

Master Peak Load Management

FAQs

What is meant by demand charges in an electricity bill?
Charge linked to the highest power draw during the month. One sharp spike. Billed on kW, not total kWh.

How to reduce demand charges in electricity bill?
Avoid everything running at once. Shift heavy loads. Use timers, smart systems, or storage to soften the peak.

What is the difference between energy charges and demand charges?
Energy charges relate to the total units consumed over time. The more kWh used, the higher that portion of the bill. Demand charges focus on the highest power draw reached at any one point. One heavy spike can shape the entire month’s cost.

How can EV charging stations reduce demand charges?
Do not let all chargers pull full power together. Spread sessions out. Add battery backup to handle sudden surges.