Office building client in Charlotte converting from natural gas furnaces to electric heat pumps as part of their sustainability initiative. The building currently peaks at 310 kW in summer from cooling. The heat pump system will handle both heating and cooling. Engineering estimate says winter demand will increase to 380 kW because heat pumps draw more power in cold weather. The client expects utility costs to decrease because they eliminate the gas bill. But the increased electric demand charges may offset much of the gas savings.
Demand charges when switching from gas heating to electric heat pumps
Angela here ? electrification demand impacts are the emerging audit issue in Charlotte. Duke Energy Progress demand charges at $12.80 per kW mean that 70 kW of additional winter demand costs $896 per month or $10,752 annually in demand charges alone. If the gas bill for heating was $14,000 annually, the net savings from electrification are only $3,248 before considering the higher electric consumption charges. Much less than the client expected.
In Boise, Idaho Power has recognized this electrification challenge and introduced a heat pump rate rider that reduces demand charges for verified heat pump installations. The rider discounts demand charges by 15% during winter months for accounts with qualifying heat pump systems. Specifically designed to encourage electrification by offsetting the demand charge penalty. Check if Duke EP has anything similar.
Natalie ? Duke Energy Progress does NOT have a heat pump rider. But they do have Schedule HP for residential heat pumps. No commercial equivalent. Ill file a request with Duke suggesting a commercial heat pump tariff provision. In the meantime the client needs to understand the true cost comparison including demand charges, not just energy costs.
The electrification demand impact is a huge issue in New England too. Connecticut clients converting to heat pumps are seeing winter demand peaks that exceed summer peaks for the first time. Eversource has no heat pump incentive on the demand side ? only energy rebates for installation. The rebate helps with the capital cost but does nothing about the ongoing demand charge increase.
Demand charge impact of electrification is going to be the defining issue for commercial utility auditors over the next decade. As buildings convert from gas to electric heating, summer-peaking accounts become winter-peaking accounts with higher overall demand. Auditors who can accurately model the pre- and post-electrification demand cost comparison will be essential to helping clients make informed conversion decisions.
TVA is seeing this already. Chattanooga is pushing building electrification aggressively. TVA demand rates actually favor electrification because the three-part demand structure treats winter and summer peaks differently. A building that converts from gas heat to heat pumps in TVA territory may see a smaller demand charge impact than the same building in Duke or Eversource territory because of how TVA calculates excess demand. Territory matters enormously for electrification economics.
Excellent thread. Summarizing for my client: the gas-to-electric conversion will increase electric demand charges by approximately $10,800 annually. Gas bill elimination saves $14,200 annually. Net savings of $3,400 ? real but modest. The client expected $14,200 in savings. Managing expectations about demand charge impacts BEFORE the conversion decision is critical. If they proceed without understanding the demand impact, they will feel misled about the financial benefit.