What is Load Factor:
Load Factor (LF) is a parameter which compares average consumption of electricity against peak demand. Load Factor is indexed on a scale from “0 to 1,” with a Load Factor of “1” being the best, as it implies that the consumer’s demand is constant. The lower the Load Factor the greater the difference is between average consumption and peak demand. Utilities prefer even or constant demand, as it is easier to plan for power production and supply. This is why utilities place a premium on demand charges (kW).
LF = [(Total kWh)/(# Days in Bill Cycle x 24 hrs/day)] x [Peak kW Demand]
A simpler, more intuitive way of looking at Load Factor is to think of it as average demand ÷ peak demand. If the LF is low, one should look for ways to level the electrical usage (i.e., shift energy intensive processes to periods of otherwise low usage). By increasing LF, the impact of monthly demand (kW) charges will be reduced. Peak demand (kW) in a billing period is what Austin Energy utilizes in its demand charge calculations discussed earlier in this section.
If a Load Factor of “1” is achieved, it does not mean that demand charges will not be incurred or that a building is operating efficiently from an energy point of view. For example, if all lights and HVAC systems in a building were left running all the time, a very high LF would be observed. The theoretical ideal Load Factor is a LF close to “1” with the fewest kWh possible consumed.