Demand charges: one bad half-hour can bill for a year.
Most business energy advice is about using less electricity. Demand charges are not about that at all. They bill you on the single worst half-hour your site recorded, measured in kVA rather than kWh — and on an annual demand tariff, that half-hour can keep billing for the next twelve months. It is the line on a commercial bill that solar is worst at fixing, and the reason a battery sometimes stacks up when the feed-in tariff says it should not.
Reviewed by the Mission Green commercial team · Updated August 2026
It is not about
how much you use.
Consumption and demand are two different things billed two different ways.
A usage charge is $/kWh — energy, over time. A demand charge is $/kVA/day — the rate at which you were drawing power at your worst moment, charged every day of the billing period regardless of what you did the rest of the time.
SA Power Networks' published 2026-27 structures make this concrete. On its Small Business Time of Use tariff, the demand component is "Demand – Annual $/kVA/day — Highest 30 minute demand interval during the last 12 months."
Read that carefully. Not the highest interval this month. The highest interval in the last twelve months. One compressor start, one hot afternoon where everything ran at once, one day you tested the backup — and that half-hour sets a daily charge you keep paying until it rolls out of the window a year later.
Its Large Low Voltage Business Annual Demand tariff goes further and charges two demand components at once: a Peak Annual $/kVA/day based on "highest daily average demand during the last 12 months" inside defined seasonal windows — 11:00am to 5:00pm weekdays in the CBD, 5:00pm to 9:00pm all days outside it, November to March — with those peak demand values billed all year round; plus an Anytime Annual $/kVA/day on the highest 30 minute interval in the last 12 months.
Why the unit
is kVA and not kW.
This is the part that makes power factor a billing issue rather than an engineering curiosity.
Real power
The power actually doing work — turning the motor, running the light, heating the element. This is what a kWh meter totals up.
Apparent power
The total the network has to deliver, including the reactive component motors and transformers pull but do not convert into work. Always equal to or larger than kW.
Power factor
The ratio between them. A site full of motors can be billed on noticeably more kVA than the kW it actually used — and the demand charge follows the kVA.
Because demand is billed in kVA, a site can cut its energy use and see its demand charge barely move. It can also carry a demand charge inflated by reactive power it never consciously used.
Networks price that gap directly. SA Power Networks lists an Excess kVAr incentive charge, applied "in accordance with Power Factor requirements outlined in SA Power Networks' Service & Installation Rules", measured on the most recent regulatory year and applied to the upcoming one. It is a real line item, not a theoretical one.
Why solar is bad
at fixing this.
The honest limitation, and it is a significant one.
Solar reduces the energy you import. It does very little for a demand peak that happens at the wrong time of day, and on some tariffs it can do almost nothing at all.
Look at the windows above. A non-CBD peak demand window of 5:00pm to 9:00pm is largely after useful generation has gone. A CBD window of 11:00am to 5:00pm overlaps generation much better. Two businesses on the same tariff class, with the same solar array, can therefore get very different demand outcomes purely from where they sit.
Worse, the annual ratchet is unforgiving of a single bad day. A cloudy afternoon in January when your generation collapsed and your load did not can set a demand figure you pay for the rest of the year. Solar reduces your average import beautifully and does nothing to guarantee your worst half-hour.
So what should
your business actually do?
Short version.
Find your peak before you buy anything. In the interval data, the demand charge is one number: the worst half-hour. Knowing when it happened, and what was running, is often worth more than any equipment. Sometimes it is a single machine started at the wrong time.
Reschedule before you spend. Staggering start-ups, sequencing plant, or moving one process off the peak window costs nothing and attacks the charge directly. This is the cheapest intervention available and it is routinely skipped because nobody sells it.
Then check whether a battery earns its keep. A battery can shave a demand peak, which is the one thing solar struggles with — and on a site with a high demand charge that is often where the business case actually lives, not in the feed-in tariff. But it has to be sized against your real peaks and controlled to target them.
Check the power factor question separately. If your site is motor-heavy and your kVA runs well above your kW, correction may be worth investigating — but it is a different intervention with a different payback, and it does not reduce the energy you use.
Confirm all of this against your own network. Everything quoted here is SA Power Networks' published structure. Every distributor sets its own windows, its own measurement basis and its own rates, and yours will differ.
Demand charges:
your questions, answered.
A charge based on the rate at which your site draws power at its peak, rather than on total energy consumed. It is typically billed in dollars per kVA per day, applied every day of the billing period, and set by a short measured interval rather than by your overall usage.
It depends on the tariff. On SA Power Networks' published Small Business Time of Use structure, the demand component is charged per kVA per day on the highest 30 minute demand interval during the last 12 months. Its Large Low Voltage Business Annual Demand tariff charges two components: a peak annual charge based on the highest daily average demand in defined seasonal windows, billed all year round, plus an anytime annual charge on the highest 30 minute interval in the last 12 months.
kW is real power — the power doing work. kVA is apparent power, the total the network must deliver including the reactive component that motors and transformers draw but do not convert into work. Networks size their infrastructure for apparent power, so they bill for it. The ratio between the two is your power factor.
Much less than people expect. Solar reduces imported energy, but the demand charge is set by a short peak that may fall outside generating hours — a 5:00pm to 9:00pm peak window largely misses useful solar. It also cannot protect you from a single bad half-hour on a cloudy day, which on an annual tariff can set the charge for the following twelve months.
It can, and this is often where a commercial battery business case actually lives. A battery can discharge into a demand peak, which is the thing solar struggles with. It has to be sized against your measured peaks and controlled to target them specifically — a battery installed to maximise self-consumption is not automatically doing demand management.
Ask your retailer for your interval data and for the network tariff code your site is assigned to, then read that tariff's published structure. The interval data shows the peak; the tariff tells you how that peak is measured and priced. Any commercial proposal made without both is estimating your largest controllable cost.
Where these figures come from.
The tariff mechanics below are quoted from one distributor's published structures, because a real example beats a generalisation. Your network will differ in its windows and its rates — the mechanic is what carries across.