What is Electric Capacity?

Capacity is the maximum amount of output an electric generation facility can produce if fully operational. In the retail markets, electric capacity refers to the total amount of energy a facility could consume if all motors were running 24/7. Electric capacity is important in the retail energy markets as capacity affects retail energy pricing. In fact, capacity accounts for approximately 30% of an electricity supply price.

How Is Capacity Measured?

Since capacity is the total potential energy a facility could use if all of its motors were turned on, capacity is a measurement of peak kW demand (see kW vs. kWh). Since grid operators and utilities are concerned with balancing electricity demand with supply, capacity is measured during certain peak periods, typically in the summer. For example, a customer’s average peak kW reading during the 5 peak days over the summer sets its capacity rating for the following year. This peak demand measurement also helps determine the customer’s capacity tag as it relates to load factor (see article on Load Factor here).

Why Is Capacity Important to Energy Customers?

Capacity accounts for a large percentage of your total retail electricity supply rate. Customers have the option to lock in capacity costs in a fully-bundled fixed-rate product or pay for capacity as a pass-through charge (see Pass-Through Charges). Good energy brokers understand how to read capacity tags and help their customers take advantage of capacity billing rules to save on energy costs.

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