Everything You Need to Know About Implied Load Factor

Thank you for showing interest in the Major Energy Select 12 plan – the plan that rewards efficient users of energy with some of the best rates we have available. Consumers are more energy aware today than they have ever been in the past. If you’re one of those energy-conscious consumers, you’ll want to know more about the load factor associated with your home or business and what it has to do with how efficiently you use energy.


What is the Load Factor?

The load factor is an indicator of how efficiently energy is being utilized. It’s the actual amount of energy (kilowatt-hours – kWh) delivered in a designated period of time, as opposed to the total possible energy (kWh) that could be delivered in that same designated period of time. A high load factor indicates that the load (energy being used) is using the electric system more efficiently, whereas consumers that underutilize the electric power distribution system will have a low load factor. Electric utilities must provide power to everyone within their service area and they have to be prepared to supply it even if everyone used the maximum amount needed (peak demand) at any given time.  In other words, the utility might not have to actually supply that maximum power amount, but they have to have the capacity to do so.   If they do have to provide electricity at those peak times, it can be expensive.  It’s simple supply and demand.

Power is expensive during peak periods.  Customers who use electricity in a way that reduces or smoothes out those peaks help put less strain on the power infrastructure.   That translates to the possibility for lower rates for those customers.

Load Factor is a number that gives you an idea of what kind of energy consumer you are; everything you need to calculate it can be found by looking at your electricity bill.   The value of the Load factor will always be less than one.   A lower number means that your general energy demand is far away from what your peak demand is and that you could be more efficient in your energy consumption.   The closer you get to 1 (or 100%), means you have fewer peaks in the way you consume energy and are more efficient in the way you consume electrical energy.


How is Load Factor Calculated?

Electrical (demand or power) Load factor is a measure of the utilization rate or efficiency of electrical energy usage. It is the ratio of total energy (KWh) used in the billing period divided by the possible total energy used within the period if used at the peak demand (KW) during the entire period. Demand Load Factor is useful in qualifying the benefits of demand control and battery energy storage strategies.

Thus, The Electricity Demand Load Factor Calculation is:

Demand Load Factor = KWh/(KW*hours in the period)

To calculate your load factor take the total electricity (KWh) used in the month and divide it by the product of: peak demand (power)(KW), the number of days in the billing cycle, and 24 hours in a day. The result is a ratio between zero and one.

An Electric demand Load Factor Calculation Example

  • Monthly Energy Use 2000 KWh
  • Monthly Peak Electric Demand 35 KW
  • Days in the Month 30
  • Hours in a Day 24 days
  • Power Load Factor = 2000/ (35*30*24) = .0794 x 100 = 7.94% –> you could benefit from better management of your energy usage.
Load Factor >0.75 0.50 – 0.75 0.35 – 0.50 0.20 – 0.35 0.10 -0.20 < 0.10
The benefit of Demand Control Limited Benefit Possible Benefit Yes Depends Upon Return Good Potential Excellent Potential Easy Money

If your load factor ratio is above 0.75 your electrical usage is reasonably efficient. If the load factor is below 0.5, you have periods of very high usage (demand) and a low utilization rate. Low load factor customers would benefit from a peak demand control system or from a Battery Energy Storage System to distribute electrical usage out over longer intervals of time and smooth the peaks.

Low load factors, such as, below .4, contribute significantly to the overall monthly electric bill in the form of demand charges. These demand charges are listed on the bill as coincident demand, facilities demand, and summertime related demand.

How to Improve Load Factor

The higher the load factor the better, but how do you get it closer to the 1 mark? Improving load factor is primarily about controlling peak demand. Lowering the peak demand will automatically help to increase the load factor percentage.

One way you can do this is by shifting some of your energy usage away from peak times.  For example, you may want to shift your washing and drying of clothing to the late evening. A programable thermostat could also help by increasing your thermostat setting throughout the day when peak demand is high and then reducing it in the early evening. You’ll be relieving the electric grid and your wallet at the same time.

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