Businesses use peak shaving to lower electricity bills, reduce demand charges, and improve energy efficiency.

What Does Peak Shaving Mean?

Electric utilities often charge commercial and industrial customers based on two factors:

1. Total electricity consumption (kWh)
2. Peak demand (kW)

Peak demand is the highest amount of electricity a facility uses during a specific billing period.

Even if a peak only lasts a few minutes, it can significantly increase monthly electricity costs.

Peak shaving reduces these short-duration spikes by supplying power from a Battery Energy storage system instead of drawing all electricity from the grid.

How Peak Shaving Works

A battery energy storage system continuously monitors facility load.

When electricity demand rises above a predefined threshold:

• The battery automatically discharges.
• Grid power consumption decreases.
• Peak demand is reduced.

When electricity demand falls:

• The battery recharges.
• The facility returns to normal grid operation.

  Example of Peak Shaving

  Consider a manufacturing plant with:

  Parameter	Value
  Average Load	350 kW
  Peak Load	600 kW
  Demand Charge	$20/kW

  Without peak shaving:

  Peak demand = 600 kW

  Monthly demand charge:

  600 × $20 = $12,000

  With a 250 kW battery system:

  New peak demand:

  600 - 250 = 350 kW

  Monthly demand charge:

  350 × $20 = $7,000

  Monthly savings:

  $5,000

  Annual savings:

  $60,000

• Industries That Benefit from Peak Shaving

  Peak shaving is particularly valuable for:

  Manufacturing Facilities

  High motor startup loads and production equipment often create demand spikes.

  Warehouses and Logistics Centers

  Forklift charging and refrigeration systems can generate peak loads.

  Data Centers

  Critical infrastructure requires stable and predictable energy costs.

  Commercial Buildings

  HVAC systems frequently cause electricity demand peaks.

  Hospitals

  Continuous operations make energy cost optimization important.

  Peak Shaving vs Load Shifting

  Feature	Peak Shaving	Load Shifting
  Goal	Reduce Peak Demand	Move Energy Usage
  Focus	kW	kWh
  Primary Savings	Demand Charges	Time-of-Use Rates
  Battery Use	During Peaks	During High Price Periods

  Benefits of Peak Shaving

  Lower Electricity Bills

  Reduces demand charges.

  Faster ESS Payback

  Peak shaving often provides the highest ROI for Commercial Battery systems.

  Improved Grid Stability

  Reduces stress on utility infrastructure.

  Better Renewable Integration

  Solar generation can support peak reduction strategies.

  

  Frequently Asked Questions

  Is peak shaving worth it?

  For facilities with high demand charges, peak shaving is often one of the most profitable battery storage applications.

  What size battery is needed for peak shaving?

  Battery size depends on load profile, peak duration, and target demand reduction.

  Can solar panels perform peak shaving?

  Solar can help reduce peak demand, but battery storage provides more reliable and controllable peak reduction.

  What Is Demand Charge Management?

  Quick Answer

  Demand Charge Management (DCM) is the process of reducing or controlling a facility's peak electricity demand to minimize utility demand charges.

  Battery energy storage systems, energy management software, and load control strategies are commonly used to manage demand charges.

  Understanding Demand Charges

  Many commercial and industrial electricity bills contain two separate charges:

  Energy Charge

  Based on total electricity consumption.

  Measured in:

  kWh

  Demand Charge

  Based on maximum power demand.

  Measured in:

  kW

  In some regions, demand charges can account for 30%–70% of a commercial electricity bill.

  

  Why Demand Charges Matter

  A facility may consume relatively little energy overall but still face high electricity costs if it experiences occasional demand spikes.

  Example:

  A factory operates at:

  300 kW

  Most of the month.

  For 15 minutes:

  Demand reaches:

  800 kW

  The utility may bill the customer based on that 800 kW peak.

  How Demand Charge Management Works

  Modern energy management systems monitor electricity usage in real time.

  When load approaches a predefined threshold:

  The system can:

  • Discharge batteries
  • Delay non-critical equipment
  • Adjust HVAC operation
  • Shift loads to off-peak periods

  This prevents demand spikes from increasing utility costs.

  Technologies Used in Demand Charge Management

  Battery Energy Storage Systems (BESS)

  Most effective solution.

  Energy Management Systems (EMS)

  Provide real-time control and forecasting.

  Smart Meters

  Track consumption patterns.

  Building Automation Systems

  Optimize energy-intensive equipment.

  

  Demand Charge Management vs Energy Arbitrage

  Feature	Demand Charge Management	Energy Arbitrage
  Focus	Peak Demand Reduction	Electricity Price Differences
  Unit	kW	kWh
  Savings Source	Demand Charges	TOU Pricing
  Battery Duration	Short	Longer

  

• Frequently Asked Questions

  What is a demand charge?

  A demand charge is a utility fee based on the highest level of electricity demand during a billing period.

  Can battery storage eliminate demand charges?

  Battery systems can significantly reduce demand charges but may not completely eliminate them.

  What businesses benefit most?

  Manufacturing plants, warehouses, data centers, hospitals, and large commercial buildings.