The distinction between how much electricity you need right now and how much you need in total over time is important. Imagine you want to fill a swimming pool with water. You could fill it in minutes with a fire hose. Or you could fill it in hours with a trickle from a garden hose. In both cases, you get the same amount of water. But how much water you get how fast is quite different, and that difference incurs costs to the system.

That cost to the system is where demand comes in— the cost to deliver what the customer wants and when they want it.

rmi.org/residential-demand-charges-next-big-thing-electricity-rate-design