Optimal strategies for demand charge reduction by commercial building owners

Abstract

A substantial part of electricity bills in various types of commercial buildings, such as office buildings, hospitals and retails can consist of demand charges. Demand charges represent the penalty for an electricity consumer levied by the utility provider. They are typically a direct result of the shape of the power duration curve, in particular, the hours that a certain power level is exceeded in a given billing period (normally a month). Lowering the peak and/or reducing the hours that a power threshold is exceeded can drastically reduce demand charges. The ability to do so by dynamic, operational adjustments reflects the “energy flexibility” of the building. This term is now widely used in Europe and is the subject of a new international effort (IEA Annex 67) in this area. This thesis targets the optimal choice among design and operational measures in a retrofit or new design project that delivers the most effective way of reducing demand charges and increasing energy flexibility of commercial buildings. This goal will be achieved through an analysis of all feasible energy and peak reduction measures in different building types and in different use contexts. A search algorithm that compares all possible interventions will deliver the optimum, first with a deterministic analysis then with the recognition of the effects of all possible sources of uncertainty. This thesis evaluates the measures that are commonly adopted to decrease energy consumption and increase energy flexibility and thus reduce demand charges, including (1) upgrading building components and installing energy efficient equipment; (2) applying dynamic building load control strategies such as demand-side management; (3) installing a rooftop photovoltaic (PV) panel array. Operational interventions include the manipulation of thermostat settings and possibly the voltage reduction of lighting and appliances (in some cases including HVAC components) in the building, which may reduce thermal and visual comfort for certain periods. In order to support retrofit and design improvement decisions, an approach is developed that finds the optimal mix of measures that maximize the net present value of the investment in energy flexibility measures over twenty years for the owner. This study will analyze optimal solutions for three commercial building types. Differences between them in terms of energy use and peak demand will be investigated and a generically applicable measure of energy flexibility will be developed. These three buildings are chosen (by scaling their total floor area) such that their demand charges are in the same range. The monetary benefit of energy flexibility will be studied under different demand charge rate structures and under variable building consumption scenarios. This research will result in a new optimization framework for choosing the optimum among multiple options. Based on the proposed framework, this research will determine optimal ways to increase energy flexibility, leading to the best investment decisions for different commercial building types in different locations and under different rate structures.