What does Demand Charge mean?

Explanation

Demand charges are a component of commercial electricity bills based on the highest instantaneous power draw during a billing period (usually a month). If a charging station draws 500 kW for even 15 minutes during the month, the demand charge is based on that 500 kW peak, regardless of how little electricity was used the rest of the time.

This pricing structure can make charging station economics challenging. A station with low utilization might draw high power for brief periods when a few cars charge simultaneously, triggering a large demand charge that the limited revenue from those sessions cannot cover. This is one reason why electricity costs for charging operators are often higher than what residential EV owners pay at home.

Demand charges are a major driver behind peak shaving and load management strategies. By limiting the site's peak power draw (even if it means slightly slower charging during peak moments), operators can significantly reduce their electricity bills. Some operators install battery storage systems specifically to reduce demand charge peaks.

This standard is maintained by OpenADR Alliance.

Where you'll see this

• On your charging receipt

Common confusion

Demand charges are not the same as energy charges. Energy charges are based on total kWh consumed. Demand charges are based on the highest kW peak during the billing period. A station can have low energy usage but high demand charges if it has occasional power spikes.

Example

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