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Most people read an electricity bill as a single number: pence per kilowatt-hour, multiplied by units consumed. But for any sizeable industrial or commercial site, a large share of the bill has nothing to do with how much energy you use — and everything to do with the rate at which you draw it and the capacity you reserve. These are your demand and kVA charges, and they are frequently the biggest single component of the bill that you can actually move.
They go by several names depending on the country and tariff — maximum demand charge, kVA demand charge, availability or capacity charge, authorised supply capacity, peak demand penalty. The mechanics are the same everywhere: you are billed not just for energy, but for the size of the connection you draw against. This guide explains how those charges work, why they are usually higher than they need to be, and the practical levers — in order — for bringing them down.
The Mechanics
Two numbers describe the power your site draws. Real power (kW) is the useful work — turning motors, heating, lighting, producing output. Apparent power (kVA) is the total electrical load your connection actually carries, including the reactive current your equipment needs but never converts into work. The ratio between them is your power factor:
kVA = kW ÷ power factor. The same useful work (kW) costs you more apparent power (kVA) the lower your power factor falls. Demand and capacity charges are almost always billed on kVA — so a poor power factor inflates the number you are charged on, for no extra production.
The arithmetic is unforgiving. Suppose a process draws a steady 800 kW of real work. At a healthy power factor of 0.98, that is 800 ÷ 0.98 = 816 kVA on your connection. At a poor power factor of 0.80 — common on motor-heavy sites — the same 800 kW becomes 800 ÷ 0.80 = 1,000 kVA. That is roughly 22% more kVA for identical output, billed at your demand and capacity rate, every single month. You are paying for capacity you only need because the current is dirty.
The Hidden Inflator
Two electrical effects quietly inflate the kVA your meter records, and both are correctable.
Reactive power (poor power factor). Motors, transformers, drives and welders draw reactive current to build the magnetic fields they need. It does no useful work, but it flows through your connection all the same and counts toward your kVA. Pull your power factor back toward 1.0 and that reactive current — and the kVA it represents — falls away. This is the single largest lever on most sites, which is why it leads the list below. Our dedicated guide on power factor correction covers the mechanism in depth.
Harmonic distortion. Variable-speed drives, rectifiers, UPS systems and other non-linear loads draw current in distorted, non-sinusoidal pulses. That distortion shows up as harmonic current that, like reactive power, adds to the kVA flowing through your connection without doing useful work — and on some metering it inflates the recorded demand directly. It also overloads neutrals and overheats transformers. Reducing it with an active harmonic filter strips out that wasted current and, with it, part of the demand you are billed on.
The important point: a meaningful slice of your maximum demand is not real work at all. It is reactive and harmonic current padding the kVA figure. Remove it and the billed demand falls — without touching a single production schedule or buying a single battery.
The Levers
There is no single answer, and any honest guide should rank the options by how much they typically move the number, how disruptive they are, and what they cost to run. Here they are in the order we’d generally consider them for a site with significant motor and drive load.
Pull power factor toward 0.98+ and you directly shrink the kVA you’re billed on, clear reactive-power penalties, and free connection capacity — with no change to how or when you run. On most motor-heavy sites this is the biggest single lever and the first one to pull. The HarmoniQ Booster does this dynamically, across the whole network rather than only at the meter.
Strip the distorted, non-working harmonic current that non-linear loads inject into your network. This lowers the apparent power flowing through your connection, relieves overloaded neutrals and transformers, and removes resonance risk. The HarmoniQ Filter cancels harmonics in real time — the right lever where drives, UPS and rectifiers dominate the load.
Stagger large start-ups, shift non-critical loads off the peak window, and avoid coincident demand spikes that set your monthly maximum. Free to trial and worth doing — but bounded by what your production can flex, and it manages when you draw rather than removing the wasted current itself.
Solar, CHP or battery storage can shave peaks by supplying load behind the meter at the critical moment. Genuinely effective and the right answer for some sites — but the most capital-intensive option, with its own footprint, maintenance and payback to weigh. We’d size this after first removing the reactive and harmonic current inflating the peak, so any storage is sized to a real demand, not an inflated one.
Why do batteries get all the attention if power factor is the bigger lever? + Read more− Close
Peak-shaving with batteries is visible, easy to picture, and increasingly marketed — so it dominates the conversation about demand charges. It can genuinely help. But it treats a symptom: it discharges to mask a peak that is often inflated in the first place by reactive and harmonic current. Storage is also the most capital-intensive lever, with its own space, cooling, degradation and replacement cycle to fund.
The disciplined sequence is to clean the current first — correct power factor, reduce harmonics — so the billed demand reflects only real work. That alone removes a large slice of the charge on most sites at far lower cost and no disruption. If a residual peak still justifies storage afterwards, you then size it against a true demand figure rather than paying to shave kVA that should never have been there. Batteries are a fine tool; they just shouldn’t be the first one you reach for.
Where HarmoniQ Fits
HarmoniQ addresses the first two levers directly — the ones that shrink the kVA figure itself. The HarmoniQ Booster corrects power factor to 0.98 or better, dynamically and across your whole network. The HarmoniQ Filter cancels harmonic current in real time. Used together, they remove the reactive and harmonic load padding your apparent power, so the demand you are billed on drops toward the real work your site actually does — and the headroom that frees on your existing connection is often enough to add load or defer a costly utility upgrade. (The HarmoniQ Alpha handles voltage optimisation where that is also in play.) See the full system on the product overview.
Both install in parallel at the switchboard with no circuits broken and no production interruption, and both can be switched on and off in software — so the reduction in your kVA is proven at your own meter, not promised on a datasheet, and held to a minimum performance guarantee.
The Impact
| Metric | Before | After HarmoniQ | Improvement |
|---|---|---|---|
| Power factor | 0.80 | 0.98 | +22.5% |
| Billed maximum demand (kVA) | 1,000 | 816 | −18.4% |
| Reactive-power (kVArh) penalty | Charged monthly | Eliminated | −100% |
| Spare connection capacity | Near limit | ~180 kVA freed | Capacity released |
| Indicative annual saving | £45,000–£90,000 | demand + penalties + losses | |
Every site’s loads, tariff and charge structure are different — demand charges in particular vary widely between regions and suppliers. Our engineers will model the exact kVA reduction, penalty savings and capacity released for your specific connection — get in touch for a site assessment.