Back in January, we wrote about the approval by the Department of Public Utilities (DPU) of $400 million for electric vehicle (EV) charging in Massachusetts. Since then, both National Grid and Eversource have rolled out new incentives for both infrastructure upgrades and charging hardware. (Our incentives page details the incentives available to residential consumers; see this page for commercial incentives). In addition to approving these programs to address the upfront costs of installing charging, the DPU approved a new program through 2032 to address ongoing costs for commercial entities (including municipalities): specifically, demand charges.
| Fair warning: If you are not in the business of building or hosting public or workplace EV charging stations, this blog is not directly relevant to you! We wrote this mostly for current or prospective owners of DC Fast Charging stations or large banks of Level 2 stations, whether private or public, since these are the folks who can put this information into play. At a high level, this story could be of interest to anyone who wants to see more EV adoption in Massachusetts, so read on to learn some fun technical stuff, or feel free to skip this blog if you don’t want a headache. 😊 |
As a residential consumer, you pay for electricity on a per kilowatt-hour (kWh) basis. The more electricity you use, the more you pay. Commercial entities, however, may be enrolled in rate classes that incur demand charges in addition to per-kWh charges. Demand charges are based not on how much energy (kWh) you consume over the course of a whole billing period but on the peak power (in kilowatts, or kW) you draw at any point during that billing period.
Most Level 2 electric vehicle chargers draw power well under 20 kW. DC Fast Chargers, however, start around 50 kW and some go as high as 350 kW. The standard right now – and the minimum requirement for stations funded by the federal bipartisan infrastructure law, or NEVI program – is 150 kW. When an electric vehicle (EV) rolls up to one of these DC Fast chargers and starts charging (or several EVs charge simultaneously at a large bank of Level 2 chargers), that draws enough power to trigger demand charges. These demand charges can be quite hefty and can make hosting a DC Fast Charger financially unsustainable.
For example, on National Grid’s G-2 rate, the demand charge is $13.36/kW. (That’s all not including the energy costs that are incurred per kWh.) Let’s imagine a fictional 150 kW DC Fast Charger on this rate that charges drivers $0.50/kWh to charge, and that each driver who visits fills up their battery with 50 kWh of energy. That charger will incur $2,004 ($13.36/kW * 150 kW) in demand charges in a billing period if it delivers 150 kW of power at any point during the billing period. (Reminder, the site host has to pay both for the demand charge and the number of kWh the charger consumes each billing period.) This table illustrates that a $2,004 demand charge can be quite high compared to the revenue a DC Fast Charging station might generate in a month, depending on the number of charging sessions.
| Number of Charging Sessions | Number of kWh (# Sessions * 50kWh/session) |
Revenue from Drivers (#kWh * $0.50/kWh) |
Demand Charge per kWh ($2,004 / # kWh) |
| 1 | 50 | $25 | $40.08 |
| 10 | 500 | $250 | $4.01 |
| 100 | 5,000 | $2,500 | $0.40 |
| 300 | 15,000 | $7,500 | $0.13 |
| 1,000 | 50,000 | $25,000 | $0.04 |
To address this problem, National Grid and Eversource both now offer demand charge alternative programs where commercial customers get a demand charge discount based on their load factor. The load factor is basically a measure of how much the station is being used. It is calculated by dividing the energy consumed in a billing period (in kWh) by the product of the highest demand (in kW) and the number of hours in the billing period. The demand charge discount decreases as the load factor increases, as illustrated in this table. (In the first year, customers receive a 100% demand charge discount. After the first year and through 2032, the demand charge discount will be based on the load factor of the previous twelve months.)
| Load Factor ("LF") Threshold | Enrollment Years | Demand Charge Discount |
| None | 1 | 100% |
| LF <= 5% | 2 to 9 | 100% |
| 5% < LF <= 10% | 2 to 9 | 75% |
| 10% < LF <= 15% | 2 to 9 | 50% |
| LF > 15% | 2 to 9 | 0% |
Assuming a 30-day billing cycle, the DC Fast Charger in the example above has different load factors depending on how many 50-kWh sessions occur in a month. If that DC Fast Charger maintains that same load factor for a year, it would qualify for different demand charge discounts.
| Number of Charging Sessions | Number of kWhs | Load Factor ( #kWh / (150 kW * 720 hrs) |
Demand Charge Discount |
| 1 | 50 | 0.046% | 100% |
| 10 | 500 | 0.46% | 100% |
| 100 | 5,000 | 4.63% | 100% |
| 300 | 15,000 | 13.89% | 50% |
| 1,000 | 50,000 | 46.30% | 0% |
The rate classes mentioned above have charges beyond demand charges, of course. Enrolling in the demand charge discount program does not change the fixed monthly charge or supply costs per kWh, but it does change the per-kWh base distribution component of the delivery charges. That makes it difficult to immediately estimate potential savings because bill impacts will depend on your location, what rate you’re currently enrolled in, and your load factor. If you want to dive deep, here is the relevant rate sheet for Eversource, and here is the one for National Grid. To illustrate this concept, here is an example of the EV-2 Rate in Eversource in Boston.
| Load Factor | ||||
| <=5% | Between 5% and 10% | Between 10% and 15% | >=15% | |
| Fixed Customer Charge | $225.04 | $225.04 | $225.04 | $225.04 |
| Demand Charge (kW) | $0.00 | $3.04 | $6.09 | $12.18 |
| Delivery Charge (kWh) | $0.08069 | $0.07347 | $0.06625 | $0.05181 |
As you can see, as the demand charge decreases due to the demand charge alternative program, the delivery charge increases. For context, the same customer enrolled on the Eversource G-2 Rate in Boston would be paying $27.26/kW for a demand charge but only $0.02335/kWh for delivery (again, excluding all costs relating to supply or generation.)
What’s the TLDR? When you switch to the new demand charge alternative rate, your demand charge costs will go down but your per-kWh distribution costs will increase. On the whole, National Grid and Eversource designed these rates so that the owner of a DC Fast Charging station still sees net benefits. National Grid estimates savings of up to 70% on monthly electricity bills as a result. For specifics about your particular station, we recommend you talk to a representative from your utility.
All new and existing National Grid and Eversource customers are eligible to participate in the demand charge alternative program. However, the charging stations must be:
If stations are not currently separately metered, the customer will need to put in a new service request. The complexity (and therefore the cost) of separating EV service out after it’s already been installed will be site-dependent.
If you are a commercial or municipal entity with a station or stations that are eligible, here are the steps to take.
National Grid customers: Visit this page, review this factsheet, and fill out this application form.
Eversource customers: Customers with EV stations that draw more than 100 kW can opt for Rate EV-2, the demand charge discount rate, by calling the company at 800-340-9822 or contacting your Account Representative. (Electric vehicle stations that draw less than 100 kW can choose to remain with the G-1 rate, which does not have a demand charge at all and also does not require the station(s) to be separately metered.)
Rhode Island Energy, the electric utility serving Rhode Island, does not currently offer a program like the ones offered by National Grid and Eversource in Massachusetts. However, we expect the company to propose new electric vehicle programs in the fall and we’ll certainly weigh in to make sure the issue of demand charges for EV charging stations is addressed!
We know we need more EV charging, including DC Fast Charging, in the Commonwealth to meet our emissions reductions requirements. These new demand charge alternatives will help make EV charging stations more financially sustainable and therefore help push us toward lowering emissions in Massachusetts.
One of the biggest takeaways from the recently released initial assessment by the Electric Vehicle Infrastructure Coordinating Council is that we absolutely need managed charging so that EV don’t exacerbate peak demand. Addressing demand charges – either with programs like the one described here or by collocating chargers with solar and/or storage – is an absolute must.
Comments