Reducing Peak Demand Charges: A Cost-Saving Strategy for Hotels
Understanding Peak Demand Charges and Their Impact on Hotels
For hotels, energy costs are a major operating expense, and peak demand charges often make up a significant portion of the total bill. Unlike standard energy usage fees, which are based on the total amount of electricity consumed, peak demand charges are based on the highest level of power drawn at any moment during the billing cycle.
This means that if multiple high-energy systems—such as HVAC units, commercial kitchen equipment, and laundry machines—are running simultaneously, the utility company registers that peak and applies a higher charge. Over time, these peaks can lead to substantial cost increases, even if overall energy consumption remains stable.
The key to reducing these charges is understanding when and where they occur and then implementing strategies to balance energy use throughout the day.
Identifying Peak Demand in Your Hotel
Before making changes, hotels need to analyze their energy use patterns to pinpoint when demand is at its highest.
Review Energy Bills
Look for peak demand charges—they are usually listed separately from total energy consumption.
Identify patterns—do peaks occur at specific times of day, days of the week, or seasons?
Compare usage over multiple months to track trends.
Use Energy Monitoring Tools
Install smart meters or energy management systems to get real-time data on energy use.
Identify the specific systems and equipment that contribute the most to peak demand.
Look for unexpected spikes, which may indicate inefficient equipment or operational issues.
Once you have a clearer picture of your hotel’s demand patterns, you can take targeted steps to reduce peak loads and lower costs.
Strategies to Reduce Peak Demand Charges
Adjusting Operations to Even Out Energy Use
One of the easiest ways to lower peak demand charges is to spread out energy consumption so that high-energy equipment isn’t running all at once.
Shift laundry operations to off-peak hours when fewer guests are using power.
Pre-cool or pre-heat rooms before peak periods to reduce HVAC load during high-demand times.
Stagger kitchen operations, such as food prep and dishwashing, to avoid overlapping with HVAC or laundry energy use.
Upgrading to Smarter Energy Systems
Technology plays a major role in reducing peak energy use. Investing in energy-efficient automation can help optimize energy consumption without requiring staff to manually adjust settings.
Smart thermostats adjust room temperatures based on occupancy, reducing unnecessary HVAC use.
Motion sensors in hallways, conference rooms, and back-office spaces ensure that lights are only on when needed.
Energy management software provides real-time insights, allowing hotel operators to track demand and make adjustments.
Improving HVAC Efficiency
Heating and cooling systems are one of the largest contributors to peak demand. Keeping them running efficiently is essential for cost control.
Regular maintenance of HVAC units helps them run more efficiently and reduces unexpected spikes in demand.
Zoned heating and cooling allows hotels to control temperatures in different areas separately, preventing overuse.
Installing variable-speed fans and pumps can help reduce demand surges by running equipment more steadily rather than at full power all at once.
Exploring Battery Storage and Demand Response Programs
Some hotels are adopting battery storage systems to store energy when demand is low and use it when demand is high. This helps smooth out peaks and reduce overall charges.
Additionally, many utility companies offer demand response programs, where businesses receive financial incentives for voluntarily lowering energy use during high-demand periods. Hotels can enroll in these programs to benefit from reduced costs while helping stabilize the grid.
Optimizing Energy Contracts for Better Rates
In deregulated energy markets, hotels may have the ability to renegotiate their energy contracts to find better pricing structures.
Look for contracts that offer time-of-use pricing, where energy is cheaper during off-peak hours.
Work with an energy broker (that’s us!) to explore competitive rates from different providers.
Ensure that peak demand charges are clearly outlined in the contract so you can develop a strategy to manage them.
By making small adjustments to contract terms, hotels can achieve significant savings over time.
Reducing Peak Demand Charges Starts Now
Peak demand charges can have a major impact on hotel operating costs, but with the right approach, they can be managed effectively. By analyzing energy use, optimizing scheduling, upgrading equipment, and exploring smarter energy contracts, hotels can cut costs while maintaining a comfortable guest experience.
At Energy Now, we help hotels identify opportunities to lower energy expenses through audits, efficiency upgrades, and strategic contract negotiations. Contact us today to find out how your hotel can start reducing peak demand charges and saving on energy costs.
