Manage electricity costs on your farm


By Chris Zoller and Eric Romich

Energy is consumed in a variety of ways in modern-day agriculture. In 2014, agriculture consumed 1,714 trillion BTU of energy, with electricity representing 17% of the total energy consumed in agriculture.

Electricity costs average 1-6% of total expenses for a farm business. With the current state of the agricultural economy, managing electricity costs may be a way to reduce operating expenses.

Review your billdairy excel

Are you interested in reducing electric costs on your dairy farm? More than likely you answered yes! Have you taken the time to review your electric bill and rate tariff? Do not worry, most have not. However, before evaluating savings strategies, you must first understand how you are charged for electric.

While the layout of each electric bill is unique, common charges in commercial rate tariffs include:

Customer charge, sometimes referred to as a service fee, convenience fee or basic charge. This is a fixed monthly fee, typically associated with infrastructure and maintenance.

Transmission charge, the charge for transporting electricity from the generation plant to a local electric utility.

Distribution charge, the charge for moving electricity over local distribution lines and delivering the electricity to your location.

Generation charge, sometimes called a supplier charge, covers the cost of purchasing electricity, and is calculated on a per kilowatt hour.

Cost adjustments may be listed as riders, surcharges, cost trackers and cost recovery.

Demand charges

Most consumers are familiar with energy consumption measured in kilowatt hours during a billing period, but fewer are familiar with energy demand charges, which are based on the maximum amount of electricity drawn from an electric power system, generally measured in magawatts or kilowatts.

Demand charges cover the cost of the electric utility to providing energy to their customers. Maintaining the infrastructure to satisfy customer demand is expensive and these charges help offset the costs.

If you have demand charges on your rate tariff, it is important to understand how they are calculated. It is also important to analyze your load profile or usage patterns to understand when your farm is setting its peak demand and what equipment is causing the spike in usage.

Once you understand what is causing these spikes, demand management strategies and equipment can be implemented to reduce electricity use and costs.

Power Factor

Another factor that can influence your billing demand is power factor.

To understand how this is calculated you must know the difference between apparent power, reactive power, and real power.

Apparent power is the total amount of power delivered by the utility and includes real power and reactive power.

Reactive power is the portion of electricity used to establish and maintain the electric and magnetic fields of induction loads, including electric motors, transformers, and lighting ballasts.

Real power is the portion of electric power that actually performs the work.

Power factor is the ratio of real power transmitted to the apparent power and is calculated using this formula: Power Factor = Real Power/Apparent Power

Example Power Factor Calculation: Real Power (100kW)/Apparent Power (142 kVa)= Power Factor (.70 or 70%)

This indicates that only 70% of the current provided by the electric utility is being used to produce useful work.

Load Factor

Load factor is a ratio of the average demand used by your farm to the measured peak demand. A load factor of one is good and indicates perfectly consistent use of electricity during a billing period, while anything less indicates greater variation in consumption.

Using the information from your electric bill, you can apply the following formula to calculate: (kW x 720 hr.)


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