The Relationship Between Electricity Tariffs and Business Activity

Adjusting the Organisation of Work and Scheduling

In business, the organisation of production times, the coordination of activities in the same period of time can make all the difference to their effectiveness:

• On the one hand, concentration can encourage the creation and strengthening of connections. It is easier to collaborate and solve problems when everything is operating. There are fewer delays, jobs move forwards and products arrive sooner and cost less.
• On the other hand, however, the concentration of activities can cause congestion in the use of certain shared resources. The example of traffic illustrates the problem very clearly, because if all drivers take the motorway at the same time, the traffic will soon grind to a halt.

There is no easy solution to this problem. It would be ideal if only complementary activities were to coincide. In the real world, however, we often find that something stops working just when you are using it or when you need it. The decisions about timetables taken by the different economic agents are not always the best for everyone.

Fortunately, companies are good at finding ways to balance their options. They try to adapt their organisation and scheduling to the demands of the environment and do this by looking for indicators.

The Electricity Tariff as Business Organiser

One of the most important indicators for companies is the electricity tariff. Those that consume less electricity have more freedom to set their own timetables, so they tend to work in timetables with high concentration. They can therefore take advantage of all that is going on to reduce their costs and improve their revenues.

In contrast, companies that make intensive use of electricity usually face larger problems, because these hours of high concentration are normally when the electricity tariff is highest, which is why they usually have to face strong organisational challenges.

In general, they tend to move part of their activities to times of lower concentration. Even so, many of their tasks still have to be done in office hours, especially those related to management and contacts with other companies, public bodies and consumers.

This organisational effort encourages a more rational use of shared resources. For example, there is less consumption of peak rate electricity in telecommunications, transport infrastructures, etc. This reduces congestion and enables all the users of these resources to make better use of them for their businesses. The overall effect is therefore greater harmony. It means that activities that consume the most can coincide, while the rest are spread out across other times and require more organisation.

The Benefits of the Time Tariff

If more intensive electricity usage were not moved to less congested times, the tariff would be more expensive and more complex. Essentially, we would have peak hours for electricity consumption that were strongly marked by the working day. This also depends on the time of year we are in, when we need more hours of lighting and air-conditioning.

At this point, if the demand cannot move to another time, we need to have greater capacity to generate electricity at the peak hours of the year. This generally means investing in new facilities for generating electricity.

Normally, the best options to produce electricity are those employed from the start. This means that any new investment usually means dealing with complex projects and high fixed costs. This makes it harder to set suitable tariffs, which have to ensure that these major investments make more sense.

Lowering demand for electricity during peak hours offers great advantages for the tariff and for electricity generation. Besides, lowering the fixed costs for the whole electricity generation system can make the tariffs lower.

Consuming in off-peak hours helps to develop other technologies for generating electricity. For example, wind power can be produced in the hours which the energy intensive activities have been moved to.

A More Secure Tariff

Moving business activities to other times helps to make the tariff more secure. This movement acts as a ‘buffer’ for the times when the electrical system is under the greatest stress. There are many companies that stop consuming when necessary. This considerably lowers the risk that energy production is insufficient to meet all the demand at a specific time.

This offers all electricity consumers peace of mind, including domestic users, public bodies and other types of organisations. They know that demand and fluctuations will not condition the continued supply that some electrical devices rely on.

In short, the electricity tariff helps to organise business activity, and this effort explains and ensures the prices charged for electricity. It is therefore a mutually beneficial arrangement.

At Endesa we recommend that you choose the electricity tariff that best suits your needs and the activity of your business. It is the best way to control your consumption and monthly spending on your company’s electricity bills.