They’re connected but not the same, and it’s worth knowing the difference.
This is your pattern of electricity usage both on a daily basis – i.e. on-peak and off-peak* – and a seasonal basis – i.e. summer/winter.
Energy Suppliers like, and will give better prices to load-profiles that are evenly balanced – ideally 24×7. Loads that are heavily on-peak or heavily seasonal are less attractive to them and will receive higher prices.
How to Improve Load Profile.
To the extent possible, power usage should be moved from on-peak periods to off-peak periods – e.g from daytime to evening or nighttime. From a seasonal point of view, usage should be curtailed during periods of high loads on the grid – e.g. late summer afternoons.
Load factor is the relationship between a user’s peak power demand for a given period (aka Capacity) measured in kW and their average usage for that period measured in kWh.
Obviously nobody can operate at 100% maximum operating demand all the time, so another way to think about it is how much time does the user operate flat out relative to how much time they operate at less than 100%.
Load factors can vary from about 80% for a 24×7 user down to about 40% for a user with a lot of equipment down time. In general, the higher the load factor, the better suppliers like that customer’s efficiency in using energy.
How to Calculate Load Factor
In the example below, the user’s monthly consumption is 36,000 kWh and the peak demand is 100 kW. There were 30 days in the billing period.
Load Factor = 36,000kWh/(100kW x 30 days x 24 hours/day) = 50%
Why is Load Factor Important?
Electricity Distribution Companies must meet the customers ‘peak demand’ at all times. The demand rate structure automatically rewards customers for improving their load factor.
For instance, comparing two summer months in which the customer used the same amount of electricity (kWh) overall, but with different peak demands, the power cost could be 12 cents/kWh with a 40% load factor, and 8 cents/kWh for an 80% load factor.
How to Improve Load Factor
Lowering the facility’s peak demand is the primary step for improving load factor and will reduce the amount paid monthly for electricity.
One solution is to switched on large horsepower equipment sequentially not concurrently schedule processes to minimize the simultaneous operation of high such equipment.