What Is a Demand Charge? A Plain-English Guide for Canadian Business Owners
Your commercial electricity bill has two big numbers on it. One is energy — cents per kilowatt-hour times how many hours you used. The other is demand — dollars per kilowatt times your single highest 15-minute spike in the billing period. Demand is the number most business owners can't explain, and it's usually the biggest controllable line on the bill. In Ontario, Alberta, BC, and Nova Scotia, demand charges account for 25–50% of a typical commercial power bill.
kW vs kWh — the difference that costs you money
Energy (kWh) is total consumption. Think of it like the total distance driven on a road trip. Demand (kW) is peak instantaneous rate of consumption. Think of it like the top speed you hit at any point on the trip. Utilities bill you separately for both.
Here's why demand matters. If you run flat at 100 kW for eight hours you consume 800 kWh — an 800 kWh energy charge plus a 100 kW demand charge. Now: if you run flat at 50 kW for sixteen hours, you consume the same 800 kWh — but your demand charge is 50 kW, not 100 kW. Same total energy, half the demand bill. That's the game commercial energy management is playing.
How much do demand charges cost by province
| Utility | Demand charge (typical) | Share of C&I bill |
|---|---|---|
| Toronto Hydro + IESO Global Adjustment | $/kW varies + GA $8–14/MWh | 30–50% |
| ENMAX (Alberta) | ~$10–15 / kW / month | 25–40% |
| Nova Scotia Power | ~$11.17 / kVA / month | 30–45% |
| BC Hydro Large General Service | ~$5–9 / kW / month | 20–30% |
| Hydro One (Ontario mid-market) | ~$8–14 / kW / month | 25–40% |
Ontario adds a wrinkle: the Global Adjustment (GA). GA is a separate line billed either on a Class A or Class B basis depending on whether your facility's peak load exceeds 5 MW on average. Class A customers are billed GA based on their share of Ontario's top 5 peak hours each year — literally, if you can be off during those 5 hours, you win big. Class B customers pay a flat ¢/kWh add-on. Most mid-size commercial facilities are Class B by default; check your bill to confirm.
Peak shaving — the fix in one sentence
Peak shaving means charging a battery from the grid (or from your solar array) during your quiet hours, then discharging it during your daily demand spike so the meter never records the spike. If your facility's typical peak is 300 kW at 2 pm every day, a properly sized battery can hold that peak down to 200 kW — cutting your demand bill by roughly a third.
Real numbers: a facility paying $10/kW × 300 kW peak/month is paying $36,000/year in demand charges alone. Cutting peak by 50% saves $18,000/year. A well-designed peak-shaving battery system pays back in 4–7 years in Ontario, Alberta, or Nova Scotia — faster in BC where the BC Hydro Energy Storage Incentive covers up to 80% of eligible project cost.
How to find your demand charge on your own bill
- Pull your last 12 months of commercial electricity bills.
- Find the line item labelled 'demand charge' or 'peak demand' or 'kW charge' — utilities use different names but the unit is always $/kW or $/kVA times peak.
- Add up 12 months of that line. Divide by your total 12-month bill.
- If that number is 25% or more, peak shaving with battery storage will meaningfully reduce your bill. If it's under 15%, the case is thinner and you probably want to focus on solar or efficiency retrofits first.
- Bonus for Ontario: find your Global Adjustment line separately. If you're Class A, load-shifting during the top-5 provincial peak hours can save 60%+ of your annual GA — a bigger win than pure peak shaving.
Frequently Asked Questions
Are demand charges just for big businesses?
No. Utilities apply demand billing to most commercial and light-industrial accounts, including small businesses over ~50 kW peak load. Residential customers rarely see explicit demand charges (they pay a bundled ¢/kWh rate that internally reflects average demand).
What's the difference between kW and kVA?
kW measures 'real' power — what actually does work in your building. kVA measures 'apparent' power — the total including reactive power drawn by motors, compressors, and transformers. Utilities bill the larger number on some tariffs (Nova Scotia Power's $11.17 is per kVA, for instance). If your facility has lots of induction motors, your kVA can be 20–40% higher than kW.
Does Ontario's Global Adjustment count as a demand charge?
It's a related but distinct charge. Demand charges bill your monthly 15-minute peak; Global Adjustment bills you based on Ontario's PROVINCIAL peak hours (Class A) or a flat ¢/kWh (Class B). Class A customers can save 60%+ on GA by curtailing during the top 5 peak hours each year — a form of peak shaving on a province-wide clock.
Can battery storage help with both demand charges and Global Adjustment?
Yes. The same battery can shave your daily peak (demand charge) AND discharge during Ontario's top-5 peak hours (Global Adjustment for Class A customers). Class B customers only see the demand-charge benefit. Ask your integrator to model both savings streams — many quote only demand-charge savings and understate the total.
How is peak shaving different from a backup generator?
A generator kicks in when grid power fails. A battery discharges every day to smooth your load profile, whether or not there's an outage. They solve different problems. Many farms and food processors combine both: a battery for daily peak shaving + a generator for extended outages.
What does peak shaving actually cost to implement?
Small commercial (100 kW peak, 50 kWh battery): $60K–$110K installed. Mid-size (300 kW peak, 200 kWh): $220K–$400K. Large (1 MW peak, 500 kWh): $550K–$950K. All ranges before the federal 30% Clean Tech ITC. BC Hydro's Energy Storage Incentive can compress payback further. See our commercial battery pillar for the full cost table.
See your commercial project's payback
Commercial calculator handles systems from 100 kW to 5 MW, with the right rate class and provincial rebate rules baked in.
Run the Commercial Calculator