Could you take more control of your capacity charges?

When it comes to running your business, there are many costs you can’t control, including interest rate rises, the impact of inflation and supply chain pressures. The good news is that you may be able to take more control of your electricity costs, including your capacity charges.

By understanding how capacity charges apply to your business, you could plan ahead to make changes to your electricity use, which could help to reduce the capacity charges you pay in the future.

What are capacity charges?

Capacity refers to the total amount of electricity generation resources that are available to produce electricity at one time. This is different to the amount of electricity actually generated and sent out to be used across the grid.  

Your capacity charges are based on how much electricity your business uses on Peak Demand Days . The Peak Demand Days are the four days with the highest demand in the SWIS during the hot season. 

Capacity charges are designed to encourage investment in electricity generation and demand side management to keep the electricity grid stable. Electricity demand usually peaks once the sun sets and demand for electricity increases. For more details on electricity demand fluctuations throughout the day, read Everything you need to know about the Duck Curve. 

How capacity charges apply to your business

If your business can reduce its demand for electricity when demand in the grid is at its highest, you could save on your capacity charges. 

In general terms, this is how WA Capacity Charges work:

  • The Australian Energy Market Operator (AEMO) manages the capacity mechanism in the SWIS.  AEMO pays generators a capacity payment for making their electricity generation resources available to ensure total demand can be met. 
  • Synergy pays AEMO a price for capacity based on the amount of electricity it requires to meet its customer demand and recovers this cost from customers through either a capacity charge or as part of a bundled price of electricity depending on the type of electricity supply agreement.
  • The AEMO uses the Peak Demand Days, which are the four Trading Days where SWIS demand is at its highest between 1 December and 31 March each year, to determine '12 Peak Trading Intervals' annually. The 12 Peak Trading Intervals are the three half-hour periods on each Peak Demand Day with the highest demand.  
  • Synergy uses the amount of electricity consumed by a business customer (that does not pay a bundled price) during the 12 Peak Trading Intervals to calculate that customer’s capacity charges for the following year.

To help our business customers manage their electricity consumption during predicted or forecast Peak Demand Days, which could potentially impact their capacity charges, some of our business customers are able to take advantage of our Peak Demand Notification Subscription Service.*

This service could provide you with notifications for predicted SWIS Peak Demand Days.* You could then introduce an electricity demand management plan to try to reduce electricity consumption on those days and during times when electricity demand in the SWIS is predicted to be at its highest.

* Synergy's Peak Demand Notification Subscription Service is offered in Synergy's sole discretion. Terms and conditions apply. 

Your electricity management can impact capacity charges

If you would like to take action to try to lower your capacity charges for the following Capacity Year, which runs annually from 1 October to 30 September, the key is to try to reduce your electricity consumption between 5pm and 9pm on predicted Peak Demand Days. This is generally the time period when demand is at its highest and the 12 Peak Trading Intervals occur.

This practice is known as ‘peak-shaving’, and as the name suggests it is about reducing your business’s electricity use during peak demand times, to potentially reduce your capacity charges for the next year.

The first step is to take a close look at your electricity consumption to identify periods of high electricity usage for your business. You could do this by taking advantage of usage interval data and other features in My Account, which can help you to monitor and manage your electricity consumption.

Consider these peak-shaving options for your business

To help reduce your electricity use on predicted Peak Demand Days, here are some ideas you could explore:

  • Depending on your business, you could encourage your team to work remotely during periods of high demand on Peak Demand Days. This could mean that your business isn’t powering so many devices, appliances and other items at once. Having fewer people in your building could also mean that you use less electricity for heating or cooling and lighting.
  • Explore what kind of temporary adjustments you could make for Peak Demand Days. For example, you might be able to adjust the temperature on air-conditioning systems or run them earlier in the day to cool spaces before 5pm. You could also consider powering down your pumps, chillers or compressors for the time period when demand is generally at its highest.
  • Consider using specialised equipment such as smart lighting with sensors or soft starter monitors and try to choose the most energy efficient equipment. Look for smart tech that can be switched off or that can switch itself off when not in use.
  • Try to avoid using energy-hungry appliances or equipment (especially at the same time) on Peak Demand Days during 5pm to 9pm.

Every business is different, but in general the more a business can reduce its electricity use during 5pm to 9pm, the better it could be for your business' bottom line.

Consider your longer-term demand management

WA is embracing more renewable energy generation, which presents a number of challenges and opportunities for the electricity grid, including the issue of low load.

If your business has a solar PV system, using as much of the electricity it generates during the day when the sun is shining can be an effective electricity demand management strategy. 

You could also consider adding battery storage, if this is commercially viable, to store any excess electricity generated during the day to use at a later time, including when demand is high. 

Understanding capacity charges, when demand in the SWIS is highest (generally between 5pm and 9pm daily) and taking action to reduce your electricity use during these times could help you to reduce your potential capacity charges that are payable the following year – and may help keep the entire grid more stable in the process.

For even more energy-saving ideas for your business, try our top 16 summer energy saving tips for business or visit our energy saving tips page.

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