How To Calculate Business Energy Consumption?

Many businesses today are actively searching for ways to cut energy costs and improve overall efficiency. The best place to begin is by understanding your company’s energy consumption, which serves as the foundation for achieving meaningful energy efficiency goals. This article explains how to measure and calculate energy use and includes a helpful business energy consumption calculator.

Whether you own a small business, oversee corporate finances, or work as an energy broker helping clients reduce expenses, knowing how to calculate and forecast energy consumption is an essential skill. In this guide, we’ll examine the main factors influencing energy use in commercial buildings, average consumption levels for different equipment types, energy use by industry, step-by-step methods for calculating business energy consumption, and proven strategies for reducing energy costs.

Why It’s Important To Calculate Your Business Energy Consumption

Knowing how much energy your business uses is essential for managing and controlling costs. Whether you’re planning to implement an energy efficiency strategy or considering a switch to a new energy supplier in a deregulated market, understanding your total energy consumption should always be the first step. Let’s explore some key situations where calculating your business’s energy usage becomes especially important.

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Energy Efficiency Projects Require Energy Usage Calculations

Today, many energy efficiency solutions can help businesses lower peak demand and cut energy costs. From installing LED lighting systems to joining demand response programs, there are several effective ways to reduce commercial energy expenses. However, it’s important to first establish a baseline of your business’s energy consumption before starting any efficiency project. This allows you to measure whether the project actually delivers savings. To do that, you need a clear plan for calculating and tracking your energy usage.

Energy Usage & Switching Retail Energy Suppliers

If your business operates in a deregulated energy state, you can often save a lot by switching to a retail energy supplier. However, to get the best energy rate, you first need to understand your usage patterns.

Did you know that a building with steady and efficient energy use can qualify for lower energy rates? Retail energy suppliers often assess this by calculating your building’s load factor. The higher your load factor, the cheaper it is for the supplier to serve your business. Learning how to improve your load factor can help you secure better rates.

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How Energy Brokerage Firms Negotiate the Best Rates for Your Business

In addition, some suppliers offer lower prices when their contracts include an energy bandwidth clause. This means you agree to use a set amount of energy over a certain period, within a specific range. To enter this type of agreement, you must be able to accurately calculate your total energy consumption first.

Hybrid Energy Supply Products

Some hybrid energy supply options, like block + index contracts or contracts with capacity and transmission pass-through charges, let customers save money by lowering their energy use. If you can reduce your peak energy demand in the summer or use less power during a billing cycle, you may qualify for lower energy rates under a hybrid plan.

Unlike fixed-rate energy contracts that bundle all costs together, pass-through contracts give you the chance to cut transmission and capacity charges during the contract period.

Having tools to predict your energy use and manage consumption at the right times can help you take full advantage of these savings and improve your bottom line.

What Consumes the Most Energy in a Business?

Every business is different, and many activities happen inside a company that impact energy use. Because of this, several factors determine which equipment or processes use the most energy. Let’s take a closer look at some of the main contributors below:

Business Type Matters

The kind of business you run and how it operates have a big impact on total energy use. For example, a manufacturing plant will use far more electricity and natural gas than a small retail shop.

Equipment and Motors

Another major factor is the type of equipment and motors used in the facility. For instance, a processing plant may have large machines that use a lot of electricity, while an office building mainly relies on lighting, HVAC systems, and computers.

Hours of Operation

The number of hours a business runs has a big impact on total energy use. For example, a restaurant that’s open 24 hours a day will use much more energy than one that operates only 10 hours daily.

Employee Habits

Employee behavior also plays a major role in energy consumption. Workers who forget to turn off lights or leave the AC running in empty rooms can waste a lot of power. Teaching employees to be more energy-conscious can significantly reduce costs.

Weather & Business Location

Weather and location greatly influence how much energy a business uses. Companies in colder areas may rely more on natural gas for heating, while businesses in hot climates—like Phoenix, Arizona use much more electricity for cooling.

Electricity Usage by Equipment & Industry Type

One of the biggest factors affecting energy use in a commercial building is the type of equipment and motors it contains. According to the U.S. Department of Energy, the average commercial building uses about 22.5 kilowatt-hours (kWh) of electricity per square foot each year. The table below shows the average kWh usage per square foot by equipment type.

Because a building’s equipment depends largely on the industry it serves, energy use also varies by sector. Here’s a look at the average electricity use by industry type:

How to Calculate Business Energy Consumption (Formulas, Examples & Costs)

Electricity for a business is measured in kilowatt-hours (kWh) and kilowatts (kW). On an electric bill, you may notice that energy supply charges are usually billed in kWh, while delivery or demand charges are billed in kW.

Understanding both units is important for accurately predicting your business’s energy costs. Let’s take a closer look at how to calculate kWh and kW usage, with examples and formulas to help you estimate total energy consumption.

Kilowatt-Hours (kWh) Calculator for Businesses

Kilowatt-hours (kWh) are the standard unit for measuring total energy use in a building. Since each motor or piece of equipment has a watt rating, calculating kWh is straightforward.

Use this formula to calculate kilowatt-hours:

(Total watts × Hours) ÷ 1000

Remember, 1,000 watts = 1 kilowatt. Because electricity is billed in kilowatt-hours, you first need to find the total watts or kilowatts consumed.

For example, imagine a building has 10 motors with a combined rating of 3,000 watts. If these motors run 10 hours per day for 30 days in a month:

3,000 watts × 300 hours = 900,000 watt-hours

Convert this to kilowatt-hours by dividing by 1,000:

900,000 ÷ 1,000 = 900 kWh

To find total electricity supply costs, multiply total kWh by your supply rate.

If you prefer, you can use an electricity supply cost calculator:

• Cost of Electricity Supply (¢/kWh)
• Power Consumed by Motor(s) (Watts)
• Average Usage per Day (Hours)
• Average Usage per Month (Days)

Calculator Results Example:

• Total Monthly kWh: 2,160
• Total Monthly Supply Cost: $22,680

Average kWh Usage for Small Businesses

The amount of electricity a small business uses depends on its type, operations, and equipment. Let’s look at some common small business types and their estimated annual kWh usage:

The examples above are for illustration only. Actual energy use will vary depending on building size, motor efficiency, customer activity, and other factors.

Calculating Kilowatts (kW)

Calculating kilowatts (kW) is simpler than kWh. Total kW is measured by your building’s peak demand during a billing cycle. To find it, add up the wattage of all motors running at the same time.

For example, imagine you have 10 motors running at once, with a total rating of 300,000 watts. That would be your peak demand for the billing period.

Remember, 1,000 watts = 1 kilowatt. Divide by 1,000 to convert:

300,000 watts ÷ 1,000 = 300 kW

Kilowatts are important because they affect the other part of your electricity bill: delivery or utility distribution costs. Each utility sets delivery rates using a published tariff, which shows the cost per kW of demand for each billing period. You can find your rate tariff on your local utility’s website.

Tips for Reducing Commercial Energy Consumption

Now that you understand how to calculate energy use, let’s look at ways to lower it and save on utility bills. Each tip can help reduce your total energy footprint and cut costs.

Hire an Energy Broker

Working with an energy broker can help you lower your energy consumption. Energy brokers understand how usage affects energy rates and can suggest strategies to improve your energy profile. Their goal is to find the lowest energy prices for your business, so they are motivated to help you use less energy.

A good energy broker can also offer other services beyond traditional supply agreements. For example, some brokers provide LED lighting upgrades, demand response programs, and even commercial solar installation services.

Install Third-Party Electric Meters

Today, there are many devices available to monitor electricity use. Some can be installed on individual equipment, while others attach to the main electrical panel. Electric sub-meters let you track energy consumption in detail throughout your building.

Installing energy monitors also helps you respond quickly if a piece of equipment malfunctions and uses more energy than normal.

Stagger Motor Schedules

If you usually run all your equipment at once, or turn everything on in the morning, staggering motor start times can lower your peak energy demand. This is an easy practice to implement. Check your meter’s reading interval (most smart meters record every 15 minutes) and wait that long before starting the next group of motors.

If you have a hybrid energy plan, like an on-peak/off-peak rate, staggering motors can save even more. For example, if electricity costs less after 7 PM, shifting some production to off-peak hours reduces your energy bills.

Conclusion

Understanding your business’s energy use is the first step to saving money and improving efficiency. By tracking energy consumption, calculating costs, and using smart strategies, you can reduce waste and lower utility bills. Small changes, like upgrading equipment, using energy-efficient lighting, or adjusting schedules, can make a big difference.

Whether you are a small business owner, a facility manager, or an energy broker, knowing how to measure and manage energy is a valuable skill. Following the tips in this guide will help your business use energy wisely, save money, and operate more efficiently.

FAQ: Business Energy Consumption & Costs

How do I calculate kWh per month for my business?

To calculate monthly kWh, multiply each device’s wattage by the number of hours it’s used per day, then divide by 1,000 to convert to kilowatt-hours (kWh). Add all devices to get your daily total, then multiply by the number of days in the month. For example, a 2,000-watt heater used 5 hours per day uses 10 kWh daily, or about 300 kWh per month. Your utility will report monthly kWh readings on your bill and often compare them with previous periods.

What’s the average electricity usage per square foot for commercial buildings?

Commercial buildings usually use 15–20 kWh per square foot each year, but it depends on the industry. Offices often use around 15 kWh, while restaurants or buildings with heavy AC use can exceed 30 kWh per square foot. Comparing your usage to industry averages helps evaluate efficiency.

How do I calculate the cost of electricity?

Multiply your total monthly kWh by your utility’s rate per kWh. For example, if your business uses 5,000 kWh in a month at $0.12/kWh, your electricity cost is $600. Keep in mind that additional charges, like demand charges, are often billed in kilowatts (kW), reflecting your peak demand during the billing period.

How much electricity does a small business use per month?

The average small business in the U.S. uses between 6,000 and 10,000 kWh per month. Usage varies by industry: manufacturers and industrial businesses use more, while small offices and retail shops use less. Knowing your business type and usage patterns helps manage energy costs effectively.