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Reducing Utility Costs Through Peak Shaving

Oct. 1, 2007
Editor's note: The following article is adapted from Peak Shaving A Method to Reduce Utility Costs, published in the proceedings of the 2004 Region 5

Editor's note: The following article is adapted from “Peak Shaving — A Method to Reduce Utility Costs,” published in the proceedings of the 2004 Region 5 Conference: Annual Technical and Leadership Workshop and used with permission of the Institute of Electrical and Electronics Engineers (IEEE).

In 2001, after seeing its energy costs nearly double the previous two years, Baldor Electric Co., the Fort Smith, Ark.-based manufacturer of industrial electric motors, power-transmission products, drives, and generators, commissioned a team to reduce the energy consumption of the company's 14 U.S. plants by 15 percent.

The team surveyed all conveyor, pump, fan, and machining-center motors in each facility. The survey showed that those already-efficient motors could be replaced with newer designs exceeding National Electrical Manufacturers Association (NEMA) Premium efficiency levels.

Several projects addressed the plants' HVAC systems:

  • Programmable thermostats were installed on HVAC equipment to save energy when possible.

  • Building roofs were sprinkled with water during summer to achieve an evaporative-cooling effect.

  • To conserve cool air, automatic doors were installed at the entrances of warehouses that were not cooled.

  • Adjustable-speed drives were installed on fans that previously employed dampers to control airflow.

In all plants, 455-w metal-halide light fixtures were replaced with 196-w T-8 fluorescent high-bay light fixtures controlled with movement sensors.

Power-factor-correction capacitors were added to the plants' power systems.

Despite these actions, the company failed to meet its 15-percent-reduction goal. Conservation was not enough; Baldor needed to find a way to reduce electricity rates.


Baldor's Westville, Okla., plant was chosen as a test site. The 175,000-sq-ft, air-conditioned facility employs about 450 people and runs 24 hr a day, five days a week. Electrical loads come courtesy of powder-coating and varnish systems, processing equipment (computer-numerical-control [CNC] machines, hundreds of feet of conveyor systems), HVAC, lighting, and security systems.


Baldor learned that with a rate schedule offered by the local electricity provider, Ozarks Electric Cooperative, significant savings could be achieved by avoiding peak usage. According to Ozarks Electric, “peak” hours are 3 p.m. to 8 p.m. throughout July and August. Baldor signed on for Ozarks Electric's off-peak rate and agreed to install a series of diesel-generator sets to subsidize power from the utility and effectively shave peak demand. The plan showed potential to reduce electricity costs by 25 percent, or more than $100,000 a year.

The diesel-generator sets are designed for standby power and load shedding, in addition to the supply of power to critical loads in the event of an outage.


In 2001, a peak demand of 1,728 kw was established for the Westville plant. The goal for 2002 was to keep the peak below 1,000 kw. That goal was met with a peak demand of 965 kw.

While the new off-peak rate structure had a much higher charge per peak kilowatt unit (from blended-usage levels of 5 cents per kilowatt-hour to a straight 2 cents per kilowatt-hour), the year-round cost per kilowatt-hour consumed dropped by 3 cents (from 5 cents per kilowatt-hour to 2 cents per kilowatt-hour). With an annual consumption of 7.1 million kwh, the kilowatt-hour charge was reduced by $213,000. With additional peak charges of nearly $109,000 (965 kw multiplied by $9.40 multiplied by 12 months), the calculated net savings was $104,000.

Once committed to an off-peak rate plan, utility customers must dramatically lower their peak demand or risk increasing their total costs. While the base kilowatt-hour charge drops, the penalty for exceeding it (the peak charge) rises significantly.

Ozarks Electric designs rates that reflect only the cost of producing and distributing energy. Off-peak rates are designed to save both the cooperative and the member/customer money. Off-peak rates basically reflect costs that influence Ozarks Electric's system cost. When a large user, such as Baldor, can greatly reduce its kilowatt usage, the cooperative saves money in facility/generation costs. The Westville facility is helping to control future costs for Ozarks Electric and its members by slowing the need for costly facilities upgrades to meet growing demand.


For help in deciding how best to reduce demand by more than 700 kw without adversely affecting the production process, Baldor turned to All Phase Electric of Greenwood, Ark., and TL Services of Van Buren, Ark. All Phase and TL assisted in mapping and monitoring the load structure of the facility, installed an energy-management system (EMS), and identified the best loads to move to alternative sources. The plant-systems analyst programmed the EMS to capture demand usage on a continuous, real-time basis. Also, he monitored and reported progress on a daily basis and maintained the service schedules of all of the equipment used.

The largest load was removed by installing a 140-kw (175-kva) trailer-mounted, diesel-powered generator for each of the three 100-ton air-conditioning units that supply the plant with cold air. Each generator was free-standing and housed in a sound-attenuated package that reduced noise by 25 dBA, as measured from a distance of 23 ft. The generators sat atop their own 160-gal. fuel tanks and were capable of running for up to 10 hr at rated power before needing to be refueled.

Each of the generators was connected to an air-conditioning unit using a 225-amp, 480-v, three-pole automatic transfer switch in a NEMA 1 enclosure. This configuration allowed the reduction of approximately 450 kw.

The generators were configured to start when the load-monitoring system sensed power usage was approaching a target set point. Normally, the system would give a command for one generator to run for approximately five minutes. If load usage did not drop, another command would be given for a second — and, if needed, a third — generator to start.

During peak hours, the facility's 825-cfm compressed-air system was replaced with a portable diesel-powered unit. The portable compressor was a better alternative than supplying the existing compressors with a generator because of high starting-current demands. This shaved an additional 200 kw.

Commercially available software gave project managers the ability to monitor incoming load and switch load power from the utility to the generators. It also allowed the monitoring of kilowatt usage and generator performance in real time. The data monitored at the facility was within 3 kwh of that monitored simultaneously by the utility.

In addition to moving loads on and off of generators, the facility could pull non-critical loads from the utility during emergency peak conditions. One option concerned the control of a fourth 100-ton air conditioner operating in a non-critical area of the plant. This unit was connected to the EMS, meaning its 40-ton compressor and/or its 60-ton compressor could be shut down. This method was used when the outside temperature reached triple digits and other measures proved insufficient.

Optimizing the cost of running the facility during peak-shaving hours required the ability to switch back and forth from the generators to the utility. The cost of providing power from the generators was greater than the cost of electricity from the utility. When demand allowed, the plant received all of its power from the utility. That meant the generators had to be able to start in seconds and cycle on several times a day, when needed.


To prepare the facility for the project, Baldor invested approximately $31,000 in one-time charges for the purchase and installation of additional wiring, transfer switches, and monitoring software. Generators for peak shaving can be purchased or leased. If properly sized, they can be used for both peak shaving and standby power. The typical life of generator sets is in the 15-to-20-year range, so annual savings will increase after purchase and installation costs are amortized over the first five to 10 years.

By the end of August 2002, Baldor had managed to lower peak demand to 965 kw. After the first six months of the program, electricity costs were $45,000 less than they were over the same period the previous year, putting the facility on track to meeting its $100,000-annual-energy-savings goal.

During peak operation, many electric utilities adjust their rates when users move grid load to standby generators. In exchange for reducing daily peak demand through load shedding, Baldor received a reduction in its energy bill. Plus, the generators added backup power to protect against lost productivity during utility outages. The reduction in power provided Ozarks Electric with energy it could use to help meet peak demand for non-industrial customers.

Cost financed at 5-percent interest rate Actual cost 5 years 10 years Software and switch gear $31,000 $7,020 $3,280 Three 140-kw generators $90,471 $20,484 $11,520 500-kw generator $42,000 $9,516 $5,340 Diesel compressor Lease $3,800 $3,800 Average annual diesel-fuel and maintenance costs $6,000 $6,000 $6,000 Total annual costs $46,820 $29,940


To satisfy the power demands of an oven used to cure varnish applied to motor-stator windings, a 500-kw (625-kva) generator was added in time for the peak demand of summer 2003.

The new generator further lowered the plant's energy consumption. Equipment and installation costs are broken down in Table 1.

Through its work with Ozarks Electric, Baldor learned of a peak demand during winter, when a higher rate of heating was required. The generators were brought online to ensure the plant did not exceed the peak limit. Also, the diesel-powered compressor was leased for an additional two months. Later, a compressor was purchased, further reducing costs.


Baldor continues to work to control internal energy consumption. In 2003, it partnered with Energy Star, joining a nationwide effort to eliminate energy waste through the voluntary implementation of improved energy-management practices and technologies.

Companies should take advantage of opportunities to evaluate and actively control their energy consumption, as the resultant savings will translate to a stronger bottom line.

John Malinowski is the AC- and DC-motor product-marketing manager for Baldor Electric Co. He serves on several Institute of Electrical and Electronics Engineers (IEEE) and American Petroleum Institute working groups and subcommittees and is a senior member of the IEEE. Also, he serves as Baldor's representative to the National Electrical Manufacturers Association Premium, Motor Decisions Matter, and Energy Star programs. Keith Kaderly is the manager of marketing/energy services for Ozarks Electric Cooperative. A certified key-account executive (National Rural Electric Cooperative Association accreditation), he specializes in energy conservation, surge lightning protection, geothermal technologies, and utility-rate design.

For past HPAC Engineering feature articles, visit

Energy-Saving Resources

  • Energy Star ( is a joint program of the U.S. Environmental Protection Agency and the U.S. Department of Energy intended to help consumers and businesses protect the environment through energy-efficient products and practices. In 2006, it is said to have helped Americans save enough energy to avoid greenhouse-gas emissions equivalent to those from 25 million cars — all while saving $14 billion on their utility bills.

  • Part of the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy, the Industrial Technologies Program ( is dedicated to improving “the energy intensity of the U.S. industrial sector through a coordinated program of research and development, validation, and dissemination of energy-efficiency technologies and operating practices.” Among its resources are a number of software tools, including MotorMaster+, AIRMaster+, Pumping System Assessment Tool, and Steam System Assessment Tool.

  • Motor Decisions Matter (MDM) ( is a national public-awareness campaign sponsored by a consortium of motor manufacturers, motor service centers, trade associations, electric utilities, and government agencies. MDM and its sponsors provide support for companies interested in motor management.

  • Pump Systems Matter ( is an educational resource aiming “to help lower the energy needs of North America while improving the bottom-line profitability of businesses by providing pump users with strategic, broad-based energy-management and performance-optimization solutions.” Free modeling tools, case studies, white papers, tip sheets, guidebooks, executive summaries, and more are available.

  • Motor manufacturers can be a source of assistance with motor management. Many provide software tools for analyzing the operating cost of motors and drives.