Who should use this guide?
Production and cost teams
Establish utility cost per accepted kilogram, pack or batch using one reporting period.
Utility engineers
Separate consumption, peak demand, generation efficiency, losses and unloaded operation.
Equipment project teams
Compare operating scenarios without treating connected ratings as continuous use.
Three calculator formulas
These are screening formulas. Taxes, time-of-use periods, demand ratchets, fixed charges, power-factor penalties and other tariff items must be added when applicable.
Worked monthly example
A food line operates 16 hours per day for 22 days and produces 250,000 kg of accepted product per month.
| Utility | Inputs | Monthly result | Cost/kg |
|---|---|---|---|
| Electricity | 60 kW average; 0.12/kWh; 100 kW billed demand at 10/kW | 21,120 kWh; 2,534 energy + 1,000 demand = 3,534 | 0.0141 |
| Steam | 500 kg/h; 35/tonne; 10% distribution/operating loss | 193.6 tonnes billed basis = 6,776 | 0.0271 |
| Compressed air | 1.2 m³/min; 7 kW/(m³/min); 15% idling; 0.12/kWh | 9.66 kW; 3,400 kWh = 408 | 0.0016 |
| Combined screening total | Only when system boundaries do not overlap | 10,718/month; 128,616 annualized | 0.0429 |
Electricity: separate kW from kWh
Energy consumption
Accumulated energy. Estimate from measured average power multiplied by operating time, or use interval/submeter data.
Billing demand
Peak demand determined under the utility's interval and tariff rules. It is not the monthly energy divided by hours.
DOE guidance notes that energy charges are based on kWh while demand charges are typically based on maximum kW during a defined period. Time-of-use rates, seasonal prices and demand ratchets can make one short coincident peak affect several bills.
- Do not use total motor nameplate kW as average operating demand.
- Do not add individual equipment peaks unless they truly occur together.
- Include refrigeration, heaters and auxiliaries on the selected meter boundary.
- Review power factor, fixed, transmission, distribution and fuel-adjustment charges.
- Use interval data to test scheduling and peak reduction.
Steam: define the cost at the correct point
The steam calculator starts with a cost per generated tonne. Document the steam pressure and condition, fuel price, boiler efficiency, feedwater temperature, make-up water, water treatment, blowdown, auxiliary electricity, labor and maintenance included in that value. Then add only the downstream losses not already included.
| Steam cost component | Measurement or basis | Improvement question |
|---|---|---|
| Fuel conversion | Fuel use, heating value and boiler efficiency | Is combustion and heat recovery controlled? |
| Feedwater and chemicals | Make-up water, treatment and blowdown | Can cycles and water quality be optimized? |
| Condensate | Return flow, temperature and contamination status | Can clean hot condensate be returned? |
| Distribution | Header meter, traps, leaks and insulation survey | Where are pressure and thermal losses occurring? |
| Process use | Meter or batch heat balance at equipment | Is steam applied only when useful? |
DOE identifies condensate return, insulation, steam-trap maintenance, blowdown control and combustion efficiency as system-level opportunities. Savings must be based on the actual system and steam condition.
Compressed air: use free air and system specific power
Equipment demand should be stated as free-air delivery under declared reference conditions. Compressor system specific power is electrical kW divided by delivered free-air m³/min under a stated pressure and operating condition. Include dryers, cooling fans, pumps and other auxiliaries when they are inside the cost boundary.
- Measure part-load and unloaded power, not only full-load nameplate data.
- Record operating pressure at the compressor and critical point of use.
- Include pressure drop through dryers, filters and distribution.
- Quantify leakage during non-production periods.
- Review inappropriate uses before adding compressor capacity.
- Sequence multiple compressors against real demand.
DOE's compressed-air sourcebook recommends a systems approach covering both supply and demand. Leak detection alone is not a complete assessment.
Normalize cost against accepted output
Utility unit cost = total utility cost / accepted output
Use accepted output, not nominal throughput or total input, unless another basis is explicitly intended. Separate SKUs with different cooking, cooling, drying or pneumatic requirements. Track both consumption intensity and monetary cost because tariff movement can change cost without changing physical efficiency.
Build a meter and cost hierarchy
- Freeze the boundary. Define plant, line, machine or process-step scope.
- Map physical meters. Record meter IDs, units, coverage and reading intervals.
- Map tariff items. Separate energy, demand, fixed, taxes, penalties and adjustments.
- Align production time. Match utility and accepted-output periods.
- Separate production and idle use. Measure shutdown, standby, sanitation and non-production baseload.
- Allocate shared utilities. Prefer submeters; use documented drivers only when measurement is unavailable.
- Validate the balance. Reconcile submeters with parent meters and invoices.
- Track intensity and peak. Use both cost/unit and physical/unit indicators.
- Verify projects. Normalize before/after results for product mix, schedule and weather where relevant.
Common costing mistakes
Wrong load basis
Using connected kW, rated steam consumption or compressor capacity as continuous average use.
Wrong tariff basis
Using one blended rate while ignoring demand, time-of-use, ratchet or fixed charges.
Wrong production basis
Dividing one month's utility bill by another month's output or by rejected plus accepted product.
- Adding compressor cost to an electricity meter that already includes it.
- Applying a steam loss factor to a delivered-steam rate that already contains loss.
- Ignoring unloaded compressors and boiler short cycling.
- Using a volume flow without declared reference pressure and temperature.
- Claiming monetary savings from tariff changes as physical efficiency.
Minimum utility-cost record
Meter and system boundary; billing period; operating and sanitation hours; accepted output by SKU; electricity kWh and billing kW; full tariff components; steam flow, pressure, generated cost scope and loss allowance; compressed-air free-air demand, pressure and system specific power; auxiliary inclusion; allocation method; data source; calibration or invoice reference; reviewer and revision date.
Frequently asked questions
What is the difference between kW and kWh?
kW is power or demand; kWh is energy accumulated over time. Their tariff charges must remain separate.
Should connected load be used for cost?
No. Use measured or estimated simultaneous average demand for energy and the tariff-defined billing peak for demand.
What belongs in generated steam cost?
State whether fuel, efficiency, feedwater, treatment, blowdown, electricity, labor, maintenance and condensate credit are included.
Can compressed-air cost be added to electricity cost?
Only when the electricity boundary excludes compressor and auxiliary power.
Is utility cost per kilogram enough to prove efficiency?
No. Review physical intensity, product mix, operating schedule, tariff and accepted quality together.
Calculate each utility on a controlled boundary
Use actual tariffs and accepted output, then reconcile the three estimates before combining them.
Electricity Cost Calculator | Steam Cost Calculator | Compressed-Air Cost Calculator
Primary references
- U.S. Department of Energy FEMP, Evaluating Your Utility Rate Options - energy, demand, time-of-use, ratchet and fixed-charge structures.
- U.S. DOE Energy Data Management Guide - consumption, demand, cost, power factor and billing data fields.
- U.S. DOE Industrial Technologies Office, Steam Systems - system tools and current technical resources.
- U.S. DOE, Improving Steam System Performance: A Sourcebook for Industry, Second Edition - generation, distribution, end use and recovery.
- U.S. DOE Industrial Technologies Office, Compressed Air Systems - system assessment and technical publications.
- U.S. DOE, Improving Compressed Air System Performance: A Sourcebook for Industry - supply-demand systems approach, measurement and operating cost.
Tariffs, fuel prices and regulatory requirements change by location and contract. Use current invoices, supplier schedules and calibrated project measurements.