I get a lot of questions about load factor. What is it? How is it calculated? Is a high load factor good or bad?

Simply put, load factor is a ratio of your facility’s average load over your peak load. The formula is relatively simple.

First, divide your monthly electricity usage in kilowatt-hours (kWh) by the number of hours. That number is your average load.

Second, divide your average load by your peak demand, which is what your energy company charges you for every month. The result is your load factor, which is expressed as a percentage.

But what does that number mean? A high load factor — anything over 70% — is considered good. It means your peak demand curve is relatively level. It’s an indication you’re spreading out your demand, resulting in a lower peak demand charge.

A lower load factor means you have a higher peak demand compared to your average load. That sounds like an opportunity to flatten your load curve by spreading out usage more effectively throughout the day.

Simple strategies such as staggering scheduling, charging equipment during off hours and running processes at different times can all lead to higher load factors, lower peak demand charges and lower energy bills without reducing total production output.

Load factor is a good indicator of your opportunity to level peak demand, and that’s something you should factor into your planning. It can save you quite a load of money.