PEER perspective: understanding demand, consumption, power and energy

Published on: 
17 Sep 2015
Gaurav Dighe

In discussions of the future, perhaps “energy” is one of the most frequently used words. Yet, there are numerous instances when the term “energy” is misused for “power” and vice versa. The textbook explanation is that energy is the capacity to do work, and power is the rate at which work is done. But what does that mean in terms of our electricity bill? What is load, consumption, demand? Do we get billed by our utility based on our consumption, demand or both? How do we technically use these terms?

Let us look at these terms from a supplier and consumer point of view. The suppliers are the power plants and the distribution network or grid putting power on the grid and transmitting it. Consumers are the electric appliances and other electric loads connected to the grid using that power.

Consider a hypothetical case where House A is illuminated by one 100 watt (W) light bulb. This bulb has a dedicated power plant supplying it. When the user switches on the bulb, the power plant instantaneously starts generating electricity, electrons begin flowing, and a meter installed at the house measures the consumption of electrons at a fixed time interval. In order for the bulb to turn on at all, the power plant has to deliver 100 W instantaneously to the house. To keep the bulb on, the power plant must continue to deliver 100 W until the user turns the bulb off. So, 100 W is the rate at which electricity is being consumed and represents the power supplied to the house at any given moment. This is also the demand or load that the power plant must support. Say our bulb consumes 100 W for 10 hours for a total consumption of 1000 watt-hours (Wh) or 1 kilowatt-hour (kWh). Because this house only has one bulb, 1 kWh is also the energy consumption of the house. 

Now let’s add another house to the grid. House B needs the electricity to operate 5 bulbs of 100 W each for 2 hours. The energy consumption is still 1 kWh, but the demand or load on the power plant is 500 W. If we compare House A and B, the amount of energy required by both the houses is the same, but House B demands 5 times more power. This has a huge impact on how much capacity the power plant must have to meet the demand.

The PEER rating system values communication between customers and power suppliers and emphasizes a holistic approach to reducing energy costs, including potential savings on charges for consumption as well as demand. Though energy consumption is often the biggest line item on a utility bill, based on this simple example, it’s clear that it wouldn’t make sense for the utility company to charge a customer based on energy consumption alone. Hence, it is common for utility bills to include both consumption and demand. With a better understanding of the difference between energy and power, consumption and demand, project teams can begin to identify strategies to lower utility bills.