Electricity costs for most commercial buildings are based both on the maximum power and the total amount of energy you use. Power and energy are different concepts, with very different costs, yet financiers, journalists, and pretty much everyone struggles to differentiate them. We will try to explain the difference in this post.

Let’s start with energy. Energy is a measure of how much work it takes to do something. It takes a fixed amount of energy to lift a can of soda from a table to your mouth. Your body burns calories, which is a form of chemical energy, to be able to lift that soda to your mouth. It turns that energy into gravitational energy, that is, if you dropped the soda from the height it is at your mouth it would do create a louder thud when it hit the floor than if you knocked the soda off the table. The soda can has more potential energy when it up high at your mouth then down low on the table.

The scientific unit of energy is the Joule. It takes about 1 Joule of energy to lift a can of soda from a table to your mouth. It doesn’t matter if it takes you a second to lift that can of soda to your mouth, or if you spend an incredibly boring minute slowly, slowly lifting that can to your mouth. It will take the same amount of energy: 1 Joule.

Power, on the other hand, is how much energy gets use how quickly. It is a rate. To use an automotive analogy, it is equivalent to how fast you are driving. If you lift a can of soda to your mouth in one second, then you are exerting one Joule per second, also known as one Watt, of Power. If you spend 60 seconds lifting that can to your mouth, you will be exerting 1/60^{th} of one Watt of Power continuously for 60 seconds.

Now let’s get to the units most commonly used in buildings: kilowatts and kilowatt-hours. One thousand Watts is one kilowatt, abbreviated kW. That’s a measure of power. If you use one kilowatt of Power for an hour, you have used 1 kilowatt-hour, abbreviated kWh, of energy. One kilowatt-hour is equivalent to the energy of 1,000 joules used for 3,600 seconds or 3.6 million Joules. In equation form: 1 kWh = 3.6 million J.

So if your building uses 5000 kWh each day, you building is consuming the same amount of energy that would be required to lift 18 billion cans of soda per day.

A confusing aspect about kWh is that although mpg stands for miles __per__ gallon, kWh stands for kilowatts __times__ hours. kWh again, is a quantity of energy, it measures the amount of energy you have used after a set amount of time, just like miles driven in a day.

Utilities charge buildings both based on the total amount of energy you use (kWh) in the course of the month, as well as the maximum demand of power (kW), like the maximum speed, you requested at any fifteen-minute interval during the month. Keeping the concepts of energy and power clear and separate is an important aspect of implementing the strategies to best reduce utility costs.