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Setra Blog

Sep 12, 2016 5:02:00 AM

What is the difference between energy consumption and demand?

In order to understand your electric bill, there are two main concepts you should understand; energy consumption and demand. These charges are regularly misunderstood, making it difficult to prioritize which energy savings measure will have the biggest impact. People are often overcharged by their energy provider or have failed to reduce their total energy cost due to a lack of understanding or improper calculations.  

An easy way to distinguish between energy consumption and demand is to consider the analogy of flying an airplane. If you are flying in a plane, you can view your energy consumption as the distance you have flown and your energy demand as the maximum speed you hit during the journey.  Another way of thinking about consumption and demand is to look at it from the perspective of the energy provider. Energy consumption is the charge to you for using a product and energy demand are the additional charges for the service and delivery of the product.

Demand (Peak Demand)

  • Peak demand is the highest peak_vs_consumption.jpgamount of energy consumption or average load during a specific time interval
  • Charges are based on the highest capacity of energy you required using usually during a 15 min interval
  • Often the largest portion of an electricity bill
  • Measured in kw (kilowatts)


  • Consumption charges are based on the total amount of energy you consume
  • Consumption charges are calculated using overall kWh consumption within a billing period, whereas peak demand refers to energy consumption at a specific moment
  • Measured In kWh (kilowatt-hours)


CLICK HERE to learn how to reduce peak demand charges.

Topics: Energy Management, Building Automation, HVAC/R

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