Procure Smart

Understanding kVA and its charges

Blue electricity jumping between two connectors

An increasingly important part of a business’ energy bill, kVA stands for Kilo Volt Amperes and is a term used to describe the amount of electrical capacity a business’ system draws through a meter.

One kVA equals 1,000 Watts of power and businesses are usually assigned a capacity per meter.  You can usually find your kVA on your business’ energy bill.

Pro-actively managing your kVA is important for larger consumers.  However, smaller businesses should always understand elements within their energy costs to ensure they are set at appropriate levels.

How kVA varies between businesses

kVA can be drastically different, even between two businesses with the same annual consumption.

It is determined by the maximum amount of power demanded by a building’s electrical system.  A simplified example of how this works is shown below when both businesses consume 240,000 kWh of electricity per year.

 Consumption profileResult
Business ARegular consumption of 20,000 kWh monthly for 12 months.In a 20-day working month, the max kVA demand is 1,000 kWh
Business BSeasonal peak consumption of 40,000 kWh for May to October and no consumption for January to April or November to DecemberIn a 20-day working month during July, the business’ kVA demand is 2,000 kWh

As you can see, the consumption for Business B would require a higher kVA than Business A.  Due to the higher requirements on the local electrical infrastructure, they would be charged more via their electricity bill.

Why kVA is in the news

Perhaps not on the front pages, but kVA has had a significant impact on larger consumers’ energy bills following the Targeted Charging Review (TCR) implementations in April 2023.

A rebalancing of distribution charges (DUoS) saw kVA used to classify businesses in bandings depending on the demand they placed on local distribution systems.  This penalised many pro-active businesses who manage their consumption closely and practiced load shedding strategies.

You can find out how your business was classified via the Energy Networks Association.

Reducing your kVA to save costs

If you suspect your kVA demand is set higher than you need, you can apply to have it adjusted.  You might employ this tactic if you have taken over a building and plan to consume significantly less electricity than its previous tenant.  Or possibly if you are reducing the equipment or operational schedule on your premises.

Lowering your kVA can result in lower costs, however it comes with some risks.

District Network Operators (DNOs) have a certain allocation of kVA per area, depending on the infrastructure they have installed.  If you relinquish some of your capacity, it can be reallocated, meaning that you may lose the ability to get it back without paying for infrastructure upgrades.

Equally, if you lower your kVA and exceed it, you will be heavily penalised.  The DCP 161 legislation introduced in 2018 changed the Distribution Connection and Use of System Agreement (DCUSA) for the UK and introduced significant fines of up to three times their usual rates for those who exceed their allocated capacity.

As well as the financial penalties enforced by the DNO, if you significantly exceed your capacity, you could cause damage to your own building’s infrastructure and run the risk of brown-outs or system breakdowns.

Strategies to lower kVA demand

Minimising kVA will result in lower charges.  It is another opportunity for businesses to be pro-active in their energy management and procurement strategies.

Equipment efficiency is a good place to start.  Inefficient equipment will draw or waste more power than it needs to run.  Standard examples include lighting, heating, air conditioning and office equipment.  For more specialist businesses, equipment such as fridges, large printers, manufacturing machinery and heaters should be given special attention to ensure they are optimised.

Power factor correction is another option to lower kVA.  In short, this involves the installation of equipment which ensures no excess power (reactive power, or kVAR) is drawn from the grid at the same time as the power being used (real or active power).

More can be done to reduce a business’ kVA demand and working with an energy expert can realise genuine savings for businesses over payback periods.  Speak to our experts at Procure Smart if you are interested in this specialist area of energy procurement.

Looking to lower costs?

Business energy is a jungle, however avoiding the pitfalls and opportunities can deliver significant savings for your business.

Speak to us at Procure Smart for a holistic discussion about how you deal with this vital area of utility procurement.

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