In the electricity industry, analysts primarily use two units of measure: demand and energy.
Demand represents a customer’s rate of use. Think of a speedometer when studying demand. As you travel to the office, the speedometer shows your rate of speed at a specific point in time. For example, you may get on the highway and begin travelling at 60 mph, and then speed up to 70 mph. In this case, your maximum rate of speed is 70 mph, not 130 mph. For electricity, demand is measured in watts. A customer’s maximum demand for July and August may be 100 kilowatts and 150 kilowatts, respectively. Like the mph example, the customer’s annual peak demand would not equal the sum of the two but rather the maximum value (e.g., 150 kilowatts). Energy represents rate of use over time. Think of the odometer when studying energy. In the prior example, you may have traveled 60 mph for 30 minutes and 70 mph for 30 minutes. In this case you traveled 65 miles. Likewise, if you turn on 100-watt bulb for ten hours, then you use 1,000 watt-hours or 1 kilowatt-hour (1 kWh). Unlike demand, energy values are additive, so a customer’s annual kWh would be the sum of each month’s energy usage.
Energy is measured as the product of time and watts. If you graphed the two variables, watts on the y-axis and hours on the x-axis, then energy is the area under the plotted curve. In other words, energy (“area”) equals watts (“length”) times hours (“width”). In comparison, demand is any point along the plotted curve, and is measured with respect to a time interval. For example, if a customer uses 100 KWh over a fifteen-minute interval, then the customer’s demand is 400 kW (e.g., 100 KWh/0.25 h = 400 KW). Common time intervals used to measure demand are 15 minutes, 30 minutes, and one hour. Finally, a customer’s demand is always stated relative to a specified maximum. For instance, a customer’s maximum demand, independent of any other customer, is known as non-coincident peak (NCP) demand. Conversely, a customer’s demand that contributes to a system peak (e.g., ISO or EDC) is known as coincident peak (CP) demand. By definition, CP demand is always less than or equal to NCP demand.
Defining Demand vs. Consumption
Electricity demand is measured in kilowatts (kW) and represents the rate at which electricity is used.
Electricity consumption, on the other hand, is measured in kilowatt-hours (kWh) and represents the amount of electricity used over a certain time.
Let’s start with the familiar analogy of driving a car to explain further. The rate at which a building consumes energy, or the facility’s demand (kW), equates to the car’s speed (mph). And the energy consumption (kWh) is like the total distance driven (miles).
Total driving distance and total energy consumption are calculated the same way: in the car, multiply the average speed by the number of hours driven to determine distance driven; for energy usage, multiply demand by time in use and you get total energy consumption.
With our imaginary car turned off, here’s the difference between demand and consumption in the real energy world. When turned on, the 10W LED light always demands 10 W from the grid. However, energy consumption varies according to the number of hours the light is used. If the LED is on for 10 hours, total consumption is 10 W x 10 hours or 100 Wh; if it’s only illuminated for five hours, then you’re consuming 50 Wh.