Why On-Premise Solar Energy Generation Is the Solution to Painful Energy Costs + Demand Charges

As if water and wastewater treatment plant operators didn’t already have enough on their collective plates, the recent surge in energy prices and expected ongoing inflation is adding to the industry’s collective headaches. Add these new woes to an existing problem—energy demand charges—and the struggle to cover a plant’s energy costs and maintain rates to customers is becoming a near impossible task.

How real is the problem? This is just one example, but in a piece published October 12, CNBC reported that natural gas prices are up 112% since January 2021. Oil prices are up more than 61% in the same period. Supplies of coal are down dramatically, pushing prices up there, too. A cold winter is likely to continue the upward march of energy prices, including electricity.

Are you pulling your hair out yet?

There is a way for water and wastewater treatment plants to regain control over the uncertainty of energy demand charges and rising energy costs: on premise solar energy generation. It sounds pretty simple. But how exactly does it work? Let’s delve into some basics.

What are energy demand charges?

Demand charges are additional fees that electrical utilities charge commercial customers for maintaining and providing 24/7 access to a constant supply of electricity. These fees usually amount to a substantial sum of money that businesses and entities like water and wastewater treatment plants must pay on monthly electric bills. Demand charges can be as much as 50%  or more of a total electric bill.

A recent report from the National Renewable Energy Lab (NREL) shows that millions of commercial and industrial customers pay demand charges of more than $25/kW. To put that into perspective, this is above and beyond an average kWh (Energy) cost of just nine cents. That’s an exponential difference!

If you’re not familiar with energy demand charges, here’s a great explanation.

Demand charges are a combination of how much electricity is used and the rate at which it is consumed. Imagine how different watering your lawn is using a garden hose on the gentle rain nozzle setting versus a fire hose set on high. Then imagine everyone around you using their fire hoses at the same time. That is demand.

Utilities use demand charges because they have to supply the maximum amount of power that customers might need at any time. So, if you’re drinking  out of a fire hose and so are all of the other businesses in your community, a local utility has to be able to meet that demand regardless of how extreme the need. That’s difficult to do in terms of generating and delivering the energy. Think of all the infrastructure needed to make large volumes of electricity possible—transformers, substations and additional equipment. Now think about the cost of maintaining it. Thus, utilities charge you demand charges based on your facility’s electrical consumption. This includes the amount of energy used and when it’s used.

The other complicating factor is demand surges and how to deal with them. A heat wave causes a surge in demand, making it difficult for utilities to keep up with the demand for electricity to run air conditioners. Treatment plants see the same types of surges. As an example, during a dry summer, there’s going to be a larger than normal demand for watering lawns and irrigating fields. Meeting that demand is tough and stressful, but the demand is typically met. It’s the same for energy utilities. To make sure they can handle the load during surges in demand they charge demand fees.

So how do you get a grip on demand charges?

One of the first things Solential Energy recommends to municipalities and water and wastewater treatment plant customers is to gain an in-depth understanding of your treatment plant’s energy consumption. Specifically, you need to know what your daily energy consumption volume is and when your peak energy demand occurs. Utility companies measure facilities that use large amounts of Power (kW) by installing a revenue grade meter. This measure’s the demand of a facility every 15-mintues, this data tells us what specific minute of the day when you have surges in demand. Securing and understanding these inputs is key to taking control of energy costs and creating resiliency regardless of market forces.

The next things to consider are: can you reschedule your most energy-intensive operations to off-peak times of the day or night? Can we invest in more energy efficient equipment to decrease our overall energy demand? Both can balance electricity usage and lower demand charges.

The more significant way to wrap your arms around demand charges is to add renewable energy, typically solar, that is generated on premises. A solar system is a great way to reduce demand charges particularly if you’re generating energy your own solar energy and offsetting the energy you typically pull from the grid during those peak usage hours. However, if there’s a spike in demand when the solar system is not operating—during nighttime hours or cloud coverage—then demand charges remain a threat.

Solar Generation + Natural Gas Generation + Energy Storage = Win

The way to avoid this scenario is to invest in multiple sources of on-site energy generation and build resiliency in the face of rising energy costs is creating a microgrid at your water or wastewater treatment facility. This is where we use natural gas or bio-gas generators as a primary source of power for your facility. We then couple solar energy as a secondary source of power and then add battery storage to make your facility more resilient when it comes to supplying energy. This reduces your reliance on the grid power and gives you the ability to take control of your energy and demand costs. Find more details here.

On premise energy generation and storage is a perfect workaround for demand-based energy costs as it flattens energy consumption from the grid during peak time periods and ultimately results in you paying less in monthly demand charges.

There are additional value streams from on premise energy generation and energy storage system. For example, should the grid be taken offline by a natural disaster such as a tornado, hurricane or fire or from a hacking event, your on-premise solar energy microgrid can be used to provide valuable battery backup power, avoiding downtime and ensuring service continuity. I am sure the folks in Louisiana would have appreciated such a scenario of self-preservation post when Hurricane Ida struck.

I am not exaggerating when I say that when used in combination, solar energy generation and energy storage can save your operation and ultimately your community and ratepayers thousands and thousands of dollars per year in electricity costs and downtime.

Taking Control of Your Energy Costs Starts Here

Whether we like it or not, America’s energy system is facing significant headwinds, resulting in tremendous price volatility. Fortunately, there are ways to bring control back to the equation. On-premise solar energy generation and storage on its own or as part of a microgrid is a powerful solution. Solential will be announcing a major project with a large Midwestern city that is seizing the opportunity. Their solution includes a first for the Midwest, a floating solar array installed on their treatment lagoons.

Challenging times require courage and creative problem-solving. If you would like to discuss the opportunities covered in this blog and share your own situation, please connect with Solential. I can be reached at cmiller@solential.com and 317-627-4530.