There are several important concepts in understanding electricity, at least for regulatory purposes. It is important to understand the distinction between these terms and how they are used (this article does not cover electrical engineering concepts in any depth).
Key concepts include:
- Electrical power is the amount of electricity generated, delivered or consumed at an instant, measured in watts.
- Electrical energy is the amount of electricity generated, delivered or consumed in a period of time, measured in watt hours.
- Electrical capacity is the amount of electricity that can be generated or delivered over a sustained period of time, measured in watts.
- Electrical demand is the amount of electricity that customers consume or wish to consume.
An illustration
To illustrate, consider a typical domestic electric oven rated at 3 kW.
The 3 kW figure represents the amount of electrical power required by the customer at any instant the oven is heating. When the oven is turned on, the electrical utility must deliver 3 kW of additional power, either by increasing its generation by 3 kW, or delivering the power from battery storage.
If the oven is used for 2 hours, it consumes 6 kWh of electricity (3 kW * 2 hours). This is the amount of electrical energy consumed by the oven in 2 hours, and the amount of energy delivered by the utility.
At the instant the oven is turned on, the utility must have the capacity to increase the power it delivers by 3 kW, and to sustain that delivery for 2 hours. Solar generation is no use if the oven is turned on at night, for example.
The use of the oven must be taken into consideration in the utility’s forecast of the customer’s demand. Utilities conduct studies of customer behavior (sometimes called end-use studies) to determine how much energy and capacity they will need to deliver. The utility needs to know the customer’s requirement for both energy and capacity.
The customer will be billed for the use of the oven. In BC, utilities bill their residential customers for each kWh they use, e.g. 14 cents / kWh. In other jurisdictions, utilities may also bill a “demand charge” based on the largest amount of power the customer uses at any point in the month, e.g. $10 / kW.
Why is this important?
This distinction is important because electricity is usually generated at the exact moment it is needed. Therefore, an electricity system must have the capacity to deliver the largest amount of power customers will require in the peak hour of the year.
It is not enough for an electricity system to be able to deliver the total amount of energy its customers want in a year. The electricity system must be able to meet the needs of the peak hour even if some of this capacity is idle for most of the year
Reducing the capacity required for the hour of peak demand can significantly reduce the cost of an electricity system.