Quick answer
Demand Charge A demand charge is the part of an electric bill priced on your highest rate of power use, measured in kilowatts, rather than on the total energy you used in kilowatt-hours. The utility records your peak over a short interval, often 15 or 30 minutes, and bills each kW of it.
It appears mostly on business rates. Solar panels reduce it only when they happen to be producing at the moment of your peak.
Quick facts
The key facts about demand charge, with sources:
- EIA definition
- The part of the bill based on maximum capacity use, per the billing demand rules of the rate 1
- Unit
- Dollars per kW per month
- Common on
- Commercial and industrial rates; a few residential rates
- Example
- Duke Energy Carolinas SC Schedule SGS: no charge for the first 30 kW, $4.93/kW above, from 1 March 2026 2
- US scale
- About 5 million of 18 million US commercial customers could reach tariffs above $15/kW (NREL, 2017) 5
- Best tool against it
- A battery that discharges at the peak (peak shaving)
Key takeaways
- A demand charge bills your single highest burst of use in the month, in kW.
- Energy charges bill the total, in kWh. A bill can have both.
- It shows up mostly on business rates, not standard home rates in SC.
- One busy half-hour can set the charge, and a ratchet can keep it for a year.
- Batteries cut demand charges more reliably than solar panels alone.
Energy versus demand
Energy is how much electricity you used over the month, in kWh. Demand is how fast you were using it at the busiest moment, in kW.
A shop that runs one 10 kW oven for 10 hours uses 100 kWh at 10 kW of demand.
A shop that runs ten of them for one hour uses the same 100 kWh at 100 kW.
The utility has to build wires and transformers big enough for that second shop's peak. So rates for larger customers recover part of those costs per kW. The EIA calls it the portion of the bill based on the customer's maximum electric capacity usage, worked out under the rate's billing demand rules.
Sources: [1]
How billing demand is set: one real tariff
Duke Energy Carolinas' Schedule SGS (small general service, South Carolina) sets billing demand each month as the largest of these four 2:
- The highest 30-minute demand in the current month.
- 50% of the highest 30-minute demand in the previous 12 months, including this one.
- 50% of the contract demand.
- 30 kW.
Rule 2 is a ratchet: one hot afternoon can set a floor on demand billing for the next 11 months. Other utilities use other intervals and ratchets, so read your own schedule.
Types of demand charge you may see
| Type | How it works | What to watch |
|---|---|---|
| Flat monthly demand | Your single highest interval in the month, any time | Any spike counts |
| Tiered demand | A free or lower-priced block, then a price per kW above it | SGS: first 30 kW free, then $4.93/kW 2 |
| Ratcheted demand | A floor set by a share of an earlier peak | SGS: 50% of the 12-month peak 2 |
| Time-based demand | Only peaks inside set hours count | Shift loads out of those hours |
| Contract demand | A kW level agreed in your service contract | Sets a minimum on some rates |
Worked example: a 45 kW peak on Schedule SGS
A small business on Duke Energy Carolinas Schedule SGS in South Carolina hits a 45 kW peak this month. Its prior-12-month peak was also 45 kW.
| Step | Math | Result |
|---|---|---|
| Billing demand | Largest of 45, 50% × 45, 30 | 45 kW |
| Free block | First 30 kW at no charge 2 | $0.00 |
| Charged demand | (45 − 30) kW × $4.93 2 | $73.95 |
| If a battery holds the peak to 38 kW | (38 − 30) × $4.93 | $39.44 |
Trimming 7 kW of peak saves $34.51 that month, but only if the battery covers every 30-minute peak in it. Solar alone helps only if the panels are producing at that exact half-hour, which a cloud or a 6 p.m. peak defeats. Energy charges are billed separately and are not shown.
Where the demand charge appears on a bill and tariff
Demand charge compared with other bill lines
| Charge | Based on | What lowers it |
|---|---|---|
| Demand charge | Highest kW in an interval | Lower peaks: batteries, load timing |
| Energy charge | Total kWh | Solar, efficiency |
| Time-of-use energy | kWh by hour | Shifting use to cheaper hours |
| Fixed charge | Being connected | Nothing; it is set |
| Minimum bill | Contract demand or a set floor | Right-sizing the contract |
What solar and storage do to a demand charge
Can lower it
- A battery dispatched against the peak, which is what peak shaving means.
- Shifting heavy equipment out of the peak window.
- Solar, when peak load falls at midday on clear days.
Limits
- One missed interval sets the month's billing demand.
- Ratchets keep a past peak on the bill for up to a year on some rates.
- Solar output can drop in seconds under cloud, so it cannot guarantee a lower peak.
Why solar alone rarely moves the demand charge
A demand charge looks at one interval, not the month. Solar can cut thousands of kWh and still leave the peak where it was. If your busiest half-hour is at 6 p.m., or on a cloudy day, the panels were not there to help.
Batteries have limits too. They must be charged before the peak and big enough in kW to cover it. If a peak runs longer than the battery’s kWh can carry, demand climbs again. The control software must also predict when peaks come. See battery power rating.
What decides how much a demand charge costs you
Three things set the dollar amount: the price per kW in your tariff, how high your peaks go, and the tariff’s rules, like free blocks and ratchets. On SGS, the first 30 kW cost nothing, so a business that never tops 30 kW pays no demand charge.
Prices vary widely. NREL’s 2017 survey of more than 10,000 tariffs found about 5 million US commercial customers could take service on tariffs with demand charges above $15 per kW. That level is a common rule of thumb for when batteries start to pay off.
Battery cost depends on its kW, kWh, installation and controls. We do not list equipment prices; see solar cost and battery storage.
How a business tackles its demand charge
- Pull 12 months of bills and note billing demand and its dollar line each month.
- Ask the utility for interval data, which shows when each peak happened.
- Find the loads behind the peaks, such as HVAC start-up, ovens or compressors.
- Try low-cost steps first: stagger equipment start times.
- Have a licensed installer model solar, a battery or both against the interval data.
- Check the tariff for solar or battery rules, then permit, inspect and connect the system.
Keeping peaks down over time
Demand control is not set-and-forget. Review billing demand each month. A new piece of equipment or a change in hours can create a new peak.
For battery systems, check that the peak-shaving settings still match your tariff after any rate change. Watch for months when the battery was empty at the peak. Your installer can adjust reserve levels and schedules. Keep solar panels and inverters in good order so they charge the battery as planned.
Warning signs and when to get help
- Billing demand jumps after one unusual day and stays high: a ratchet may be in play.
- Your demand charge rises even though kWh fell.
- A battery that was meant to shave peaks shows full charge at month end with no change in demand.
- You are near a tariff limit; SGS customers whose demand reaches 100 kW move to Schedule LGS 2.
- Ask your utility account rep or an energy professional to review the bill. Electrical changes need a licensed electrician.
Who sets demand charge rules
Investor-owned utilities. In South Carolina, the Public Service Commission approves rates. Duke Energy Carolinas’ Schedule SGS took effect for service on and after 1 March 2026 under PSC Docket No. 2025-172-E, Order No. 2025-769. It is open to customers with demand of 75 kW or less.
Solar on demand rates. SGS allows parallel operation with a net metering rider only at the company’s option, under written terms. Berkeley Electric’s solar rider is not available on time-of-day or demand rates.
Co-ops and city utilities. Their own boards set rates. Read the current schedule from your utility’s website.
Common myths
- Myth "Using fewer kWh always lowers my demand charge."
- Reality Only if it lowers the peak interval.
- Myth "Solar panels will wipe out my demand charge."
- Reality They help only when producing at the peak. Batteries are the usual tool.
- Myth "Homes pay demand charges."
- Reality Most do not. Standard SC home rates in our fact file have none.
Demand charges in SC, GA and VA
The standard residential schedules held in our South Carolina fact file (Duke Energy Carolinas RS and R-STOU, Dominion Energy South Carolina Rate 8 and Rate 5) bill energy and a fixed charge, not a demand charge 3.
Demand charges in the state show up on business schedules such as Duke's SGS. Berkeley Electric's solar rider is not available on demand rates 4. We have not verified Georgia or Virginia demand tariffs; check your utility’s current business schedule.
When the demand charge matters to you
- You run a business with a demand line on the bill.
- Your demand line is a large share of the total.
- Your tariff charges $15 or more per kW, the level NREL used to flag battery potential 5.
- You plan new equipment that may raise your peak.
Next steps
Questions about demand charge
Do residential customers pay demand charges?
Most do not. A small number of utilities offer or require residential demand rates, so check the schedule name on your bill. The standard SC home rates we track, from Duke and Dominion, bill energy and a fixed charge only.
What is the difference between kW and kWh on my bill?
kWh is the energy you used over the month; kW is the highest rate of use in a short interval. Energy charges bill the first, demand charges the second. A business can lower one without moving the other.
What is a demand ratchet?
A rule that sets this month's billing demand at no less than a share of an earlier peak. Duke Energy Carolinas Schedule SGS in South Carolina uses 50% of the highest 30-minute demand over the prior 12 months.
Will solar panels eliminate my demand charge?
Rarely. Solar lowers energy use but cannot promise a lower peak, because output can drop under cloud during the interval that sets the charge. Batteries are the usual tool, sometimes paired with solar.
How is a demand charge calculated?
The utility finds your highest average kW over a set interval, such as 30 minutes, then applies the tariff rules. On Duke SGS, billing demand is the largest of four tests, and each kW above 30 costs $4.93 a month.
What is peak shaving?
Using a battery, or switching loads off, to keep your highest interval lower. The battery discharges when demand is about to spike. It only works if the battery is charged and big enough for the whole peak.
How do I find my demand charge?
Look for a line labeled demand, kW or billing demand on your bill. The tariff name tells you the rules. Many utilities also offer interval data online that shows when your peaks happened.
How high do demand charges need to be for a battery to pay off?
There is no fixed number. NREL’s 2017 survey used $15 per kW as a common industry benchmark for battery potential. Your load shape, tariff rules and battery cost decide the answer, so get a model built on your interval data.
Sources
- US EIA, Glossary: Demand charge, retrieved .
- Duke Energy Carolinas (SC), Schedule SGS Small General Service, effective 1 March 2026 (Docket No. 2025-172-E, Order No. 2025-769), retrieved .
- Duke Energy Carolinas (SC), Schedule RS (Docket No. 2025-172-E), retrieved .
- Berkeley Electric Cooperative, renewable energy (Renewable Surplus Rider), retrieved .
- McLaren, Gagnon and Mullendore, NREL/Clean Energy Group, Identifying Potential Markets for Behind-the-Meter Battery Energy Storage: A Survey of U.S. Demand Charges (NREL/BR-6A20-68963, Aug 2017), retrieved .
Expert review
Written by the HyreSolar Research team. Not yet reviewed by an outside expert. We say so rather than imply a review that has not happened; see our editorial policy.
How the numbers were checked: The definition is EIA's. Billing demand rules, availability, basic, demand and energy charges are copied from the Duke Energy Carolinas Schedule SGS PDF (re-read 8 October 2026); the worked example multiplies those numbers only. National scale from the NREL 2017 survey abstract on OSTI. Berkeley rider eligibility is from sc-local/facts.js.
Suggest a correction. We fix errors and say what changed.