In many production plants, logistics warehouses, or large service facilities, one of the biggest – and at the same time least noticed – energy costs is contracted power.
Companies very often pay for power they do not actually use most of the time. As a result, every month they incur high fixed charges for something that is only needed occasionally – for example during machine startup or short-term energy consumption peaks.
The good news is that there are solutions that can significantly reduce the cost of contracted power, and one of the most effective is energy storage with an energy management system (EMS).
Table of contents:
- What is contracted power and why do companies pay for it
- Cost of contracted power – what companies really pay
- Manufacturing company example
- How energy storage helps reduce contracted power
- How EAB Solutions helps reduce contracted power
- When reducing contracted power pays off
- How to check if your company pays for too much contracted power
- Frequently asked questions
What is contracted power and why do companies pay for it
Contracted power is the maximum electrical power that the grid operator commits to deliver to a given facility.
It is specified in the distribution agreement and expressed in kW or MW. The grid operator must maintain adequate infrastructure to ensure availability of this power, which is why the company pays for it regardless of actual energy consumption.
In practice, this means that even if the facility uses only a fraction of the available power for most of the month, the contracted power charge remains the same.
Cost of contracted power – what companies really pay
For many companies, the contracted power charge represents a significant portion of the energy bill. For example:
Manufacturing company
Contracted power: 500 kW
Distribution cost may be approximately: 500 kW × 15–25 PLN per month
which gives:
- 7,500 – 12,500 PLN per month
- 90,000 – 150,000 PLN per year
This is a cost the company bears regardless of how much energy it actually consumes.
Manufacturing company example
Consider a production plant with:
- contracted power: 600 kW
- average consumption: 320 kW
- short-term power peaks: 550 kW
These peaks occur for example during:
- production line startup
- compressor startup
- simultaneous startup of several machines
It is precisely these momentary spikes that necessitate maintaining high contracted power.
How energy storage helps reduce contracted power
Energy storage acts as an energy buffer.
When demand is low – the storage charges. When a power peak appears – the storage delivers energy.
As a result, grid draw remains stable. The effect:
- contracted power can be reduced
- distribution charges decrease
- the company avoids penalties for power exceedance
How EAB Solutions helps reduce contracted power
The process always starts with analysis of measurement data. We analyze:
- energy consumption profile in 15-minute intervals
- occurrence of power peaks
- distribution agreement parameters
- cost of contracted power
Based on this, we prepare a concept including:
- energy storage
- EMS system
- contracted power optimization
The goal is real energy cost reduction, not just technology installation.
When reducing contracted power pays off
The greatest potential exists in companies that:
- have large fluctuations in energy consumption
- experience short-term power peaks
- use high-power equipment
- operate in shift mode
In such cases, energy storage can bring significant savings for many years.
How to check if your company pays for too much contracted power
The simplest approach is to analyze:
- energy consumption profile (15-min or hourly)
- energy supply agreement
- distribution agreement
- recent invoices
Even a preliminary analysis can determine whether reducing connection capacity makes sense.
See also
When does energy storage really pay off in a production plant?
When does energy storage pay off in a production plant? Check 5 situations where the investment really lowers energy costs.
How to Increase Power Capacity for Your Plant without Waiting 3–5 Years for a New Connection?
Production growth is increasingly stalling not at technology level, but at available electrical capacity. Energy storage, peak shaving and EMS – practical solutions.
Energy storage in manufacturing – how to avoid power exceedances and high penalties
Contractual power exceedances can lead to high penalties. See how energy storage and peak shaving help reduce industrial energy costs.
Want to reduce energy costs?
Contact EAB Solutions and order a free energy audit – we will check whether your company can save on contracted power.
Frequently asked questions
Contracted power is the maximum electrical power that the grid operator commits to deliver to the facility and which forms the basis for distribution charge calculation.
Most often through analysis of energy consumption profile and deployment of energy storage or an energy management system (EMS).
Yes. Energy storage helps limit power peaks and reduce distribution charges.
When the maximum power drawn from the grid is significantly lower than the contracted power in the agreement.