Demand Charges Explained for Businesses and Their Impact on Solar ROI in Minnesota

How demand charges work in Minnesota

In the Twin Cities and across much of Minnesota, many medium and large business customers are billed for both energy in kilowatt hours and demand in kilowatts. The utility records your highest 15-minute average power draw during the month. That number becomes your billing demand. Riders and adjustments apply on top of that. Your solar array can reduce total energy, yet a short chiller starts, or a stack of motor starts in the same 15 minute window can still set a high peak. If that peak remains high, your demand charges remain high.

Why solar alone may not fix the peak

Solar often lines up with daytime usage, which is helpful for energy. Peaks can still occur when clouds roll in, when a production line ramps, or when HVAC starts after a setback. If that peak sits outside the strongest solar window, the array will not shave it. This is why many Minnesota businesses pair solar with battery storage and simple operational controls that shape the load curve.

Practical ways to cut the peak

• Battery storage for peak shaving. A right sized battery discharges during the steepest 15-minute windows and trims the top of your load curve.

• Operational scheduling. Stagger large loads such as compressors, chillers, and process motors. Avoid stacking starts within the same 15-minute interval.

• Controls and soft starts. Motor soft starts and basic demand management logic smooth out draw during shift changes and restarts.

• Program participation. Some utilities in Minnesota offer demand response or interruptible options that pay credits when you reduce load during peak events. If your process can flex, these can add value alongside solar and storage.

A Minnesota based example

• Facility: 120,000 square foot food processor in the Twin Cities on a demand billed tariff.

Baseline:

• Summer peak at 800 kW around 3:30 pm when a chiller restarts and a packaging line ramps

• Monthly energy use around 220,000 kWh

• Solar installed at 600 kWdc. Energy use drops, but the 3:30 pm peak still sets billing demand on cloudy days or during restarts

Solution modeled:

• Battery: 500 kW with 1,000 kWh dedicated to peak shaving, with a discharge window from 2:30 pm to 5:30 pm on weekdays. The actual battery size and duration will depend on your load shape and when your peaks occur.

• Controls: Chiller restart offset by 20 minutes from the packaging line, with soft starts on two large motors

• Summer peak falls to about 600 kW. Energy stays similar, with a modest reduction from steadier operation

• Participation in a demand response program adds small monthly credits

• The energy line moves a little. The demand line moves a lot. That is where payback improves Minnesota demand metered tariffs. Exact results depend on your tariff, riders, season, weather, and how consistently you trim those top 15-minute windows.

Incentives and financing that often apply in Minnesota

• Federal Investment Tax Credit at 30 percent. Commercial solar can qualify for the ITC. Storage that charges from solar can also qualify. Projects may also use 5-year MACRS for depreciation. Confirm details with your tax advisor. Incentive levels and eligibility can change, so check current rules as you plan your project.

• Minnesota and utility programs. Xcel Energy and other utilities periodically open programs that support renewables, storage, or demand management for business customers. Availability and budgets change each year, so check status during early planning.

• MinnPACE financing. Commercial Property Assessed Clean Energy can fund solar, storage, and efficiency upgrades with long-term, property-tax-assessed repayments. This can improve cash flow and transfer on sale.

What we need to help

Send twelve months of interval data and your current tariff. Greenway will model solar, storage, and demand controls using Minnesota conditions. We will quantify savings and incentives, outline a step-by-step plan, and provide a sensitivity range, so you see how the project performs in different seasons.

If you want a quick read on your demand profile, reach out to Greenway. We will run the numbers and show a Minnesota based ROI you can explain to finance and operations.

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