Commercial electricity bills are driven by demand charges, power factor, and ageing infrastructure as much as raw consumption — tackling all three systematically can cut operating costs by 20 to 40 percent.
For most Australian commercial and industrial tenants and owner-operators, electricity is the second or third largest operating cost after payroll. Yet the majority of energy reduction programs focus exclusively on consumption — kilowatt-hours used — while ignoring two factors that often have a larger impact on the bill: network demand charges (based on peak kW demand, not just kWh consumed) and power factor penalties (charged when reactive current inflates the apparent load on the network). A systematic electrical efficiency program addresses all three levers simultaneously and typically delivers a 20 to 40 percent reduction in total electricity costs within 12 months, with payback periods on capital investment of 2 to 5 years.
Understanding Your Bill: Consumption vs Demand
Most large commercial electricity customers in Australia are on time-of-use (TOU) tariffs with a separate demand component. The demand charge is based on your peak 15 or 30-minute average demand during the billing period, measured in kilowatts. A business that uses 10,000 kWh per month but has a single 15-minute spike of 150 kW during a hot afternoon — perhaps when air-conditioning, a commercial oven, and a compressor all start simultaneously — will pay a demand charge on that 150 kW peak for the entire month, even if the average demand is 50 kW.
The practical implication is that reducing your peak demand has a disproportionate impact on your bill. Demand charges in Australian networks typically run between $12 and $25 per kW per month. A business with a 150 kW peak demand paying $18/kW/month is paying $2,700 per month in demand charges alone, regardless of how many units it actually uses. Reducing that peak by 30 kW — through load scheduling, soft starters on motors, or simply staggering the start-up sequence of major loads — saves $540 per month, or $6,480 per year.
Power Factor Correction
Power factor (PF) is the ratio of real power (kW, the power doing useful work) to apparent power (kVA, the total power drawn from the network). A PF of 1.0 means all current drawn is doing useful work. A PF of 0.75 means 25% of the current drawn is reactive — it is circulating in the system, loading cables and transformers, but performing no useful work. Motors, transformers, fluorescent ballasts, and variable-speed drives all introduce reactive current. Most Australian networks impose a power factor penalty when PF falls below 0.9, and some large commercial tariffs include a kVAr charge for reactive power explicitly.
Power factor correction is achieved by installing capacitor banks at the main switchboard or at individual load points. The capacitors supply reactive current locally, eliminating the need for it to travel from the substation through the network. The result is a lower apparent demand, reduced current in cables (which reduces cable losses), and — for businesses on demand-based tariffs — a lower peak kVA reading. PF correction equipment is a mature technology with predictable payback periods. A licensed electrician with a power analyser can measure your site's current PF over a representative week and calculate the size of correction required.
- Measure current PF with a calibrated power analyser over a full operational week
- Target a corrected PF of 0.95 to 0.99 — over-correction can cause leading PF, which is also penalised
- Install correction capacitors at the main switchboard for broad correction, at large motor loads for localised correction
- Verify harmonic content before specifying capacitors — harmonic-rich environments require detuned capacitor banks to avoid resonance
- Retest PF after installation and after any major load changes to confirm correction remains optimal
Lighting: The Fastest Payback Upgrade
If your commercial premises still have fluorescent tube lighting — T8 or T5 troffers, high-bay fittings, or battens — replacing them with LED equivalents is almost always the highest-return electrical efficiency investment available. A 36-watt T8 fluorescent tube produces approximately 2,800 lumens. A direct LED replacement tube producing the same lumen output draws 15 watts — a 58% reduction in consumption. In a warehouse running 100 fittings for 10 hours per day, 250 days per year, that is 52,500 kWh saved annually. At $0.22/kWh, that is $11,550 per year in savings from a hardware investment of approximately $4,000 to $6,000. Payback: under 6 months.
The savings compound when lighting controls are added. An occupancy sensor on a warehouse bay that is only occupied 40% of operating hours captures an additional 60% reduction on that zone. Daylight harvesting — dimming artificial light in proportion to available natural light through skylights or windows — is now cost-effective at the fixture level with addressable DALI-2 LED drivers. A full DALI lighting control system with occupancy and daylight sensors typically adds 30 to 50% to the hardware cost of an LED retrofit but can reduce lighting energy consumption by an additional 40 to 60% on top of the base LED saving.
Motor Loads and Variable Speed Drives
In commercial and industrial facilities, motor loads — HVAC fans and compressors, pumps, conveyors, and compressors — often account for 60 to 70% of total electrical consumption. Most of these motors are designed to run at a fixed speed, regardless of the actual load demand. A pump sized to deliver maximum flow at peak demand runs at full speed and full power even when only 30% of that flow is required. The excess energy is wasted as heat or throttled by mechanical dampers and valves — an inherently inefficient design.
Variable speed drives (VSDs, also called variable frequency drives or inverter drives) solve this by controlling motor speed in proportion to demand. Because motor shaft power scales with the cube of speed, reducing a fan speed from 100% to 70% reduces its power consumption by approximately 66% (0.7³ = 0.343). For a 30 kW HVAC fan running 4,000 hours per year, that is a saving of approximately 21 kW at 70% speed, or 84,000 kWh per year — $18,480 at $0.22/kWh. VSDs for motors in the 5 to 30 kW range typically cost $2,000 to $6,000 installed, delivering payback in 1 to 2 years on most HVAC applications.
Switchboard and Infrastructure Losses
Ageing switchboards, undersized cables, and poor termination practices all create resistive losses that are both a safety issue and an energy cost. A main switchboard that runs noticeably warm under normal load has resistive losses in terminations and bus bars that are dissipating energy as heat. A licensed electrician with a thermal camera can identify hot spots in under an hour. Loose terminations that a calibrated torque wrench would fix in minutes are wasting energy continuously.
Cable losses are proportional to the square of the current. Cables that were adequately sized when a facility consumed 200 amps but now regularly carry 350 amps are not just an overloading risk — they are generating significant I²R losses that appear directly on your electricity bill. If your facility's load has grown substantially since it was built, a cable loss audit — comparing input energy at the main meter against measured consumption at load centres — will quantify losses in the distribution system. In heavily loaded older facilities, sub-main upgrade or parallel cable runs can pay for themselves in reduced distribution losses within 3 to 4 years. PrismTech Electrical carries out full commercial energy efficiency audits, including power quality analysis, thermal imaging, lighting surveys, and motor load assessments, with a written report and prioritised investment recommendations.