Why Some Businesses Pay for More Than the Energy They Use
Most small businesses only need to think about the energy they use.
You use electricity.
Your meter records it.
Then, you pay for it in kilowatt-hours (kWh).
However, larger businesses can be different.
They may also need to think about the amount of electrical power their site needs at one time.
This is where terms such as:
- kW
- kVA
- Maximum demand
- Available capacity
- Power factor
start to appear.
They sound technical.
However, the basic ideas are easier than they first appear.
Energy and Power Are Different
First, we need to separate energy from power.
A kilowatt-hour (kWh) measures energy used over time.
However, a kilowatt (kW) measures power at a particular time.
Think about a kettle.
A 3 kW kettle running for one hour would use:
3 kWh
Of course, you would not normally run a kettle for an hour.
Run it for six minutes and it uses about:
0.3 kWh
So:
kW = how powerful something is
while:
kWh = how much energy it uses over time
This difference becomes important for businesses.
Why Does Power Matter?
Imagine a small office.
It has computers, lights and a kettle.
Its electricity needs are fairly modest.
Now imagine a workshop.
At 8am, several large machines start.
An air compressor starts too.
Meanwhile, the heating, lights and ventilation are already running.
The workshop suddenly needs a lot of electrical power.
Therefore, the electricity supply must be able to cope with that demand.
This is not simply about how many kWh the workshop uses during the whole day.
It is also about:
How much power does it need at the same time?
Think of It Like a Water Pipe
Imagine two buildings.
Both use 1,000 litres of water each day.
The first uses that water slowly over 24 hours.
However, the second needs hundreds of litres within a short period.
The daily amount may be the same.
Yet the second building needs a much larger flow.
Electricity has a similar idea.
A business may not use huge amounts of energy overall.
However, if it needs a lot of power at once, its electricity supply must be large enough to provide it.
What Is Maximum Demand?
Maximum demand is the highest level of electrical demand reached during a set period.
In simple terms, it asks:
How much power did the business need at its busiest point?
Imagine a factory where most machines operate separately.
Demand may stay fairly low.
However, suppose several large machines run at the same time.
Demand rises sharply.
That peak can matter.
Therefore, reducing maximum demand is not always about using less electricity overall.
Sometimes, it means avoiding too many large loads running together.
A Simple Example
Imagine a workshop has four machines.
Each needs:
20 kW
If one machine runs, demand is around:
20 kW
If two run together:
40 kW
However, if all four operate at once:
80 kW
The machines could still run for the same total number of hours during the day.
Yet the maximum demand changes depending on when they run.
That is why timing can matter.
What Is kVA?
This is where things become slightly more technical.
You may see electrical capacity measured in:
kVA
This means kilovolt-amperes.
For a simple resistive load, kW and kVA can be very close.
However, many businesses use motors, compressors, pumps and other equipment.
These can make the relationship more complicated.
Therefore:
kW tells us about useful power
while:
kVA tells us about the total electrical demand placed on the supply
For many small businesses, you do not need to calculate this yourself.
However, larger sites may have an agreed amount of kVA available.
What Is Available Capacity?
Some business electricity supplies have an agreed available capacity.
You may also hear terms such as:
Agreed capacity
or
Supply capacity
This is the amount of electrical capacity reserved for the site.
Think of it as the size of the electrical doorway into the business.
A small shop needs a fairly small doorway.
However, a large factory may need a much bigger one.
The electricity network must be able to provide that capacity when the business needs it.
Therefore, some businesses can face charges linked to the amount of capacity they have available.
Why Too Much Capacity Can Cost Money
Imagine a business has:
200 kVA
of available capacity.
However, its actual needs have changed.
Perhaps machinery was removed several years ago.
The site now rarely needs more than:
100 kVA
The business may be paying for more capacity than it needs.
Therefore, reviewing the agreed capacity could potentially reduce costs.
However, do not simply ask for it to be reduced.
You first need to understand what the business actually requires.
Why Too Little Capacity Can Also Be a Problem
Now consider the opposite situation.
A business expands.
It adds:
- New machinery
- Electric heating
- EV chargers
- Air conditioning
Its electricity demand increases.
However, its available capacity has not changed.
The business could then exceed its agreed level.
That can lead to extra costs or supply problems.
Therefore:
Too much capacity can waste money.
However:
Too little capacity can create problems.
The aim is to have the right amount.
What Is Power Factor?
Some businesses may also come across power factor.
Again, this mainly matters where larger electrical equipment is used.
Power factor describes the relationship between:
kW
and
kVA
A power factor of:
1.0
would mean the two are the same.
However, motors and some other equipment can reduce the power factor.
For example, imagine a business needs:
80 kW
but its power factor is:
0.8
The apparent power is:
80 ÷ 0.8 = 100 kVA
So, the electrical network has to support 100 kVA to provide 80 kW of useful power.
That is why power factor can matter.
Do Small Businesses Need to Worry About Power Factor?
Usually, not very much.
A small office, shop or café does not normally need to start calculating power factor.
However, it becomes more relevant for sites using larger amounts of electrical equipment.
For example:
- Factories
- Workshops
- Large refrigeration systems
- Pumps
- Motors
- Compressors
If charges linked to reactive power or capacity appear on your bill, then it is worth investigating.
What Is Reactive Power?
You may occasionally see reactive power mentioned.
This is linked to the way some electrical equipment draws power from the network.
Motors are a common example.
A poor power factor can increase the amount of current needed to provide the useful power the equipment requires.
Therefore, some larger businesses may face charges when reactive power becomes significant.
Again, most small businesses do not need to worry about this.
However, if it appears on your bill, do not simply ignore it.
There may be ways to improve the situation.
Why Motors Matter
Motors are everywhere in business.
They can be found in:
- Pumps
- Fans
- Refrigeration
- Air conditioning
- Compressors
- Manufacturing equipment
A motor can also draw much more power while starting than when running normally.
Therefore, a business with several large motors starting together can create a sharp rise in demand.
This is another reason why when equipment operates can matter.
EV Chargers Can Change the Picture
Electric vehicles are creating another issue for businesses.
Imagine a site installs ten:
22 kW EV chargers
If all ten were drawing their full rated power together, that could represent:
220 kW
of additional demand.
The business may not have enough spare electrical capacity for that.
However, there is another option.
A smart charging system can manage the available power.
For example, it could reduce charging rates when the building needs more electricity.
Then, it can increase charging when other demand falls.
Therefore, adding EV chargers does not always mean simply buying a much larger electrical supply.
Good control can matter too.
Heat Pumps Can Also Increase Electricity Demand
The same idea applies when changing heating systems.
A business may replace gas heating with heat pumps.
Its gas use falls.
However, its electricity use rises.
Therefore, before installing a large system, it is important to check whether the electrical supply can cope.
This becomes even more important if the business is also adding:
- EV chargers
- Electric cooking
- New machinery
- Battery systems
Electrifying several parts of a business at once can significantly change its electrical needs.
Solar Panels Work in the Other Direction
Solar panels can reduce the amount of electricity a business takes from the grid.
This can be particularly useful when generation matches the business’s daytime use.
However, solar does not automatically remove the need for sufficient electrical capacity.
Imagine a cloudy winter afternoon.
Solar output may be low.
Yet the business still needs to run.
Therefore, the grid connection still needs to support the business when solar generation is not available.
Batteries Add Another Possibility
A battery can store electricity and use it later.
For some businesses, this could help reduce peaks in demand.
Imagine a site normally uses:
60 kW
However, for short periods it rises to:
100 kW
A battery may be able to provide some of the extra power during those peaks.
This is sometimes called peak shaving.
However, batteries cost money.
Therefore, the saving needs to justify the investment.
Technology should solve a problem rather than simply add another piece of equipment.
Look at the Business Before Changing the Supply
If a business has high maximum demand, the first answer should not always be:
“We need more capacity.”
Instead, ask why the peak occurs.
Perhaps several machines start together.
Could they start at different times?
Maybe EV charging happens during the busiest part of the day.
Could charging be moved?
Perhaps heating, cooling and production equipment all operate together.
Could better controls help?
Sometimes, changing when energy is used can be cheaper than increasing the electrical supply.
When Should You Get Specialist Advice?
For a small shop or office, you probably do not need an electrical engineer to study your kVA.
However, specialist advice can make sense if:
- You are adding large machinery
- You are installing several EV chargers
- You are moving towards electric heating
- Your business has high maximum demand
- You are paying significant capacity charges
- Reactive power charges appear on your bill
- You regularly exceed your agreed capacity
- You are planning a major expansion
At that point, understanding the electrical supply can prevent an expensive mistake.
The Main Numbers to Understand
You do not need to become an electrical engineer.
Remember these four ideas:
kWh = energy used
This is what builds up over time.
kW = power
This tells you how much power equipment needs.
kVA = electrical demand on the supply
This becomes more important for larger business connections.
Maximum demand = your highest demand
This tells you how heavily the site can load the supply.
Those four ideas explain much of the technical language.
In Short
For most small businesses, energy is mainly about:
How many kWh do we use?
However, larger businesses also need to ask:
How much power do we need at once?
That is where maximum demand and kVA become important.
A business can have too much electrical capacity.
It can also have too little.
Therefore, the aim is not simply to increase or reduce capacity.
It is to have:
The right supply for the way the business operates.
Also, look at timing.
If several large loads operate together, maximum demand can rise.
Sometimes, better controls can reduce those peaks without reducing the work the business does.
So, the technical side of business electricity ultimately comes back to something very practical:
What equipment are we running, and when are we running it?
Once you understand that, you can start looking for ways to cut waste and reduce costs.
That brings everything together on our final Business page:
Next: Reducing Business Energy Costs →
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