Distributed Energy Resources and Demand Based (3-part)  Tariffs

Arizona is moving to Residential Demand based Tariffs. By implementing an appropriate Distributed Energy Resource (DER) solution, you can leverage these tariffs to save significant money now and future proof your investment.

Southface Solar and Electric is a pioneer, innovator and leader in DER solutions. It has been designing and deploying on and off grid solar plus battery storage solutions for over 10 years.

The key to saving money with Demand Based tariffs is to reduce high grid energy use during peak hours which are typically late afternoon to early evening (3-8PM) in summer and sometime early morning (6-9AM in Winter). As an example a typical DER installation would be 5 kW of solar with a 5 kW battery and a load controller. As shown below for an APS customer on the R-Tech rate monthly demand charges can be reduced by 5 kW, saving $1035 annually, and the solar system will produce 8,653 kWh saving $458 annually.

Distributed Energy Resources

Solar  +  Battery  +  Load Controller  =  Distributed Energy Resources

What are Demand Based Tariffs and why are they important?

Demand Based Tariffs are the result of how the energy companies have to buy power.  During peak periods, they have to buy power from outside sources or generate more power at a premium cost.   The billing system they use to bill us, doesn’t match up with their cost structure.  Each energy company is now correcting this with what is now called Demand Based Tariffs.

This billing system charges customers in 3 parts: a monthly service fee, a usage fee (kWh) and a demand charge (kW).  Older, traditional residential tariffs have only two parts: a monthly service fee and a usage fee.

Demand based tariffs are important to understand because all the major Arizona utilities  (APS, TEP, and SRP) have implemented either mandatory (SRP) or optional (APS and TEP) demand charge tariffs for new solar installations.

Monthly Service Fee
Usage Fee
Demand Charge

In SRP Demand based tariffs are MANDATORY for solar systems

Why do utilities believe Demand based tariffs are appropriate for residential customers?

To service a residential customer utilities have approximate 50% of expenses on fuel and 50% on infrastructure like power plants and transmission lines. Traditionally for non-residential customers, fuel expenses were recovered from usage fees (kWh) and infrastructure expenses were recovered from demand charges (kW)

When a customer is on a 2-part tariff (monthly plus usage) goes solar and eliminates their usage (kWh) the utility’s infrastructure expenses (kW) are not covered. Therefore, for customers “wanting to go solar” utilities are asking (forcing) them unto a 3 part tariff to insure the infrastructure expenses are covered.

utility demand home
  1. Solar Panels
  2. Smart Inverter
  3. Variable speed AC unit
  4. Battery Storage system
  5. Load Controller
  6. Variable Speed pool pump
  7. Smart/wireless thermostat
  8. Homeowner/Energy Manager

If electricity use is kept below a certain rate during peak hours, the electricity bill as a whole stays substantially lower or at least stays at a consistent rate.  Slipping up for just a single day will result in a painful end of the month bill.  Adding battery energy storage goes a step further – excess energy is stored and AUTOMATICALLY utilized during the on-peak hours.  Allowing you to comfortably enjoy your electronics throughout the day without fear of an unmanageable bill.

It is Important to Monitor your Energy Usage

With technology today, understanding how your home or business uses energy has never been easier. Many products can be installed with minimal effort that sync to your computer or smart phone. Examples would be a Sense Energy Monitor or Curb Energy Monitor to name a couple. They have a low initial investment, but the information they provide can guide you on where your current energy and power consumption is going and how to become more energy efficient. This will begin to shape how you are currently using energy and power.

We believe by using advanced technology in a simple way we can give people a choice in Energy Independence.  This ideal permeates throughout all aspects of SouthFace Solar & Electric. Through this Mantra we give you, the consumer, the Choice of Power … the power to claim your Energy Independence! Tired of waiting to do laundry or not running air conditioning due to high On-Peak utility rates? We can help. At SouthFace Solar & Electric we have helped thousands of people like you achieve this reality.  Let us know how we can help you!

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