Demand Charge Questions for Cannabis Facilities

kW vs kWh on a grow bill

Energy is kilowatt-hours: how much you used over the month. Demand is kilowatts: how fast you drew power at your worst interval. NREL's tariff survey describes utilities averaging load over 15- or 30-minute windows and billing the highest window as demand [nrel-demand-charge-survey].

A facility that runs 400 kW flat for twelve hours and idles at 100 kW overnight uses a lot of kWh but peaks at 400 kW. A facility that hits 550 kW for one interval because every flower room and every chiller starts together uses fewer kWh but pays a higher demand charge. Utilities price the infrastructure for the peak.

Why cannabis peaks are tall

The Northwest Power and Conservation Council's survey of licensed producers found lighting at 66 percent of electricity use, flowering rooms at 49 percent, cooling at 15 percent, and dehumidification a major share of the HVAC slice [nwpcc-cannabis]. A photoperiod is a timer, not a dimmer. Contactors close and the load appears inside one interval. HVAC responds to the heat seconds later. The spike is structural.

NREL's survey of more than 10,000 tariffs found demand can be 30 to 70 percent of a commercial bill [nrel-demand-charge-survey]. Grows with high watts per square foot and synchronized schedules sit at the high end of that range when the tariff carries a double-digit per-kW charge.

Ratchets and load factor together

Ratchet sets a floor from history. Indiana Michigan Power billing demand shall not be less than 60 percent of the highest peak in the prior eleven months [im-tariff-iurc]. Santee Cooper uses 30 percent [santee-cooper-demand]. One bad test day where every room runs can raise the floor for a year.

Load factor compares average to peak. EIA defines load factor as an indicator of how evenly electricity is consumed [eia-glossary-l]. Indoor cannabis with twelve-on, twelve-off lighting often shows load factors that look fine on paper but still produce expensive peaks because the peak interval is so much taller than the off-peak trough.

Metric	Formula (conceptual)	What a low value signals
Load factor	Average kW ÷ Peak kW	Sharp spikes; demand-heavy bill
Ratchet floor	% × Highest peak in lookback	Bill stays high after a cutback month
Coincident peak	Your kW at grid peak hour	Drives capacity/transmission, not just utility demand

Use the demand charge estimator with your own interval data where available.

What a supply contract does not fix

Switching to a competitive supplier does not change the utility's distribution demand charge. A fixed supply contract locks or floats the generation price; it does not reclassify your meter or remove a ratchet.

In PJM, NYISO, and ISO-NE, coincident peak behavior on your meter also sets capacity tags that flow through supply bills. That is supply-side peak cost, managed by scheduling and curtailment, not by choosing a different REP name.

Texas adds ERCOT 4CP: ERCOT describes using the highest-load 15-minute intervals in each summer month to allocate transmission costs [ercot-dr-overview-2023]. A North Texas grow on a transmission-voltage schedule may care as much about four summer afternoons as about its own monthly utility demand peak.

Scheduling and equipment levers

Stagger photoperiods across flower rooms so coincident lighting plus HVAC stays below a single-room peak. Biology allows different rooms on different twelve-hour windows.

LED retrofit lowers watts per square foot if you do not add fixtures to compensate. See LED vs HPS.

Rate class review with the utility sometimes matters more than supplier shopping. Moving from a general service tier with a demand ratchet to a larger-load schedule with different demand rules is a utility tariff conversation. See utility rate classes.

Batteries can shave a short interval if demand charges exceed roughly 15 dollars per kW in NREL's storage screening range [nrel-demand-charge-survey]. A thirty-minute lighting spike is an easier battery target than a twelve-hour plateau. Match battery discharge duration to your tariff's billing interval, whether 15 or 30 minutes [nrel-demand-charge-survey].

Demand response programs pay some facilities to curtail during grid peaks. Enrollment rules vary by utility and ISO. A grow that can dim or delay non-critical load for an hour may earn more from a DR event than it saves on one month's demand line, but photoperiod constraints limit how often that works.

The long-form walkthrough is on demand charges explained and peak demand vs. peak usage. For bill-wide strategy, see how to lower a grow facility electric bill.

Reading interval data for your peak interval

Most commercial demand meters record usage in 15-minute intervals. Your utility bill shows the billed demand in kW; interval data shows which clock period set that number. Export twelve months from the utility portal or ask your supplier for Green Button data if available.

Look for three patterns on cultivation accounts:

1. Lights-on step. A vertical jump at photoperiod start when contactors close.
2. HVAC lag. A second bump five to fifteen minutes later when compressors respond to sensible load.
3. Batch overlap. Extraction or drying equipment stacking on top of horticultural load.

Staggering addresses pattern one and often pattern two. Pattern three appears in mixed-use buildings where kitchen or lab load shares the meter with flower rooms.

Demand charge as dollars per pound

Operators sometimes normalize demand cost against production. Assume peak demand of 550 kW, a delivery demand charge of $14 per kW (tariff input), and annual dry yield of 18,000 pounds (inputs). Monthly demand cost is 550 x $14 = $7,700. Annualized demand is $92,400. Demand cost per pound is $92,400 / 18,000 = $5.13 per pound before energy.

Cutting peak to 480 kW saves 70 x $14 = $980 per month, or about $0.65 per pound at the same yield. That math helps a CFO compare demand work to wholesale flower price moves.

When batteries pencil for cultivation peaks

NREL's storage screening work identified millions of commercial customers where demand charges above roughly $15 per kW can support behind-the-meter battery economics [nrel-demand-charge-survey]. A grow with a sharp thirty-minute lighting spike at lights-on is a better battery candidate than one with a twelve-hour flat plateau. Match battery discharge duration to the utility billing interval, whether 15 or 30 minutes [nrel-demand-charge-survey].

Federal tax credit eligibility for cannabis entities remains limited while marijuana is federally controlled. Model battery payback on utility savings alone unless your tax advisor confirms ITC eligibility.

Coincident peak on the supply side in PJM

Utility distribution demand and ISO coincident peak behavior are related but billed differently. Your highest interval in the month sets utility delivery demand on many tariffs [nrel-demand-charge-survey]. Your average load during PJM's five Coincident Peak hours sets a peak load contribution tag that flows through capacity charges on supply bills [pjm-glossary]. Staggering flower rooms helps both if it lowers your meter's contribution during those grid peak hours. Running everything at night may lower one without lowering the other.

Pull twelve months of interval data before you assume which peak matters more for your facility. A North Jersey grow on PSEG delivery may care about both the utility ratchet and the PLC tag. See peak demand vs. peak usage.

Worked demand example for a staggered grow

Assume four flower rooms at 100 kW each and HVAC that adds 40 kW within ten minutes of lights-on (inputs). Synchronized schedule: one interval near 440 kW. Staggered two-by-two with two-hour offset: first interval near 240 kW, second interval near 240 kW if HVAC follows each block separately. Billed demand on a ratchet-free tariff is the maximum interval, so stagger wins when peaks decouple.

At $14 per kW delivery (tariff input), the synchronized case pays 440 x $14 = $6,160 per month on demand alone. The staggered case at 240 kW pays $3,360, saving $2,800 per month with nearly identical kWh. Run your interval curve before you assume stagger helps; if HVAC is central plant, peaks may stay stacked [nrel-demand-charge-survey].

Ratchet illustration with eleven-month lookback

Assume 600 kW peak in July and a 60 percent ratchet [im-tariff-iurc]. Floor becomes 360 kW billed through the following June even if measured demand falls to 280 kW in January. At $14 per kW, you pay on 360 kW, not 280 kW, an extra 80 x $14 = $1,120 that month versus a no-ratchet tariff. One bad commissioning test where every room runs together can cost $1,120 x 12 = $13,440 annualized until the lookback clears.

Quick reference: questions to ask your utility account manager

1. What interval length sets billed demand, 15 or 30 minutes?
2. Is there a ratchet and what percent lookback applies?
3. Does my class bill on-peak demand separately from maximum demand?
4. Will a rate class change require a new service agreement or witness test?
5. Can I get Green Button interval data for the last twelve months?

Write down the answers before you spend capex on batteries or LEDs aimed only at kWh. The demand charge estimator turns your peak kW and tariff into dollars so you can compare levers on one page.