To calculate this, utility companies do not look at instantaneous spikes (which happen in milliseconds). Instead, they use a concept called the (or Time Window). This is usually a sliding window of 15 minutes or 30 minutes. The utility averages the power consumption over these blocks of time. The highest average block recorded during the billing month becomes your Maximum Demand.
The utility must have the capacity to deliver power to all its customers simultaneously. If every customer turns on their heaviest machinery at 9:00 AM on a Tuesday, the grid must be built to withstand that massive surge. Building transformers, substations, and transmission lines to handle these peaks requires massive capital investment. maximum demand
Some utilities offer “demand response” credits or time-of-use demand charges. Switching from a kVA demand tariff to a kW demand tariff (if your power factor is good) can save thousands. Always audit your tariff. To calculate this, utility companies do not look
Modern lithium-ion batteries respond in milliseconds. When demand rises, the battery discharges to “shave” the peak. For example, if load hits 500 kW, the battery supplies 200 kW, and the utility only sees 300 kW. The utility averages the power consumption over these
Current MD = 800 kW. Potential reduced MD = 600 kW. Savings = 200 kW × $12/kW = $2,400/month = $28,800/year.
Technically, MD is the highest average power (kW or kVA) drawn by a load over a specified interval—typically 15, 30, or 60 minutes—within a billing cycle. Utilities use "sliding window" averaging to prevent instantaneous spikes from triggering false peaks.