Peak Shaving: Using Battery Storage & Solar to Reduce Peak Load
In most commercial and industrial buildings, electricity consumption fluctuates throughout the day. As equipment starts up, production ramps up, or HVAC systems respond to changing conditions, the building’s demand for electricity rises and falls.
Utilities must constantly balance this changing demand by adjusting the output of power plants so that electricity generation always matches what consumers are using. To ensure reliability, they also maintain enough generation and grid capacity to supply the highest demand that may occur during the year, even if that peak happens only a few times.
Maintaining this capacity comes at a cost, which is reflected in electricity tariffs. For many commercial and industrial customers, electricity bills include two components: an energy charge based on the total electricity consumed (kWh), and a demand charge based on the highest level of power required during the billing period (kW). Demand charges are typically calculated using the highest average demand measured over a short interval, often 15 minutes.
This means that even a brief spike in electricity use, such as several large systems starting at the same time, can significantly increase a building’s electricity bill.
So how can a building reduce these costs without changing how it operates? One answer is peak shaving.
While peak shaving is often associated with demand charges in North America, similar cost mechanisms exist worldwide under different names and tariff structures. Electric utilities must size generation, transmission, and distribution infrastructure to meet periods of highest demand. As a result, many electricity tariffs include charges based on peak power consumption, not just total energy used.
These mechanisms vary by region but share the same objective: recovering the cost of maintaining grid capacity for short periods of high load.
Common examples include:
- Demand charges based on maximum power usage during a billing period, typically expressed in $/kW (widely used in the United States and Canada)
- Contracted capacity limits, with penalties for exceeding subscribed power (common in countries such as France, Germany, Spain, and Italy)
- Maximum demand billing applied to industrial customers in markets including India and several Southeast Asian countries
- Capacity-based network tariffs reflecting infrastructure requirements for peak supply (used in parts of the United Kingdom, Japan, and South Korea)
- Power subscription systems, where customers pay for reserved capacity regardless of actual energy consumption (found in various regions including parts of Europe, the Middle East, and Africa)
In many tariff structures, peak demand is determined using the highest average load recorded over a fixed measurement interval, commonly 15 minutes, though this can vary by region. This means that even brief periods of high consumption within that interval can significantly influence charges for the entire billing cycle.
Regardless of terminology, the financial impact is similar: short demand spikes can substantially increase electricity costs, even if total energy consumption remains unchanged. Peak shaving strategies using load management, on-site generation, or battery energy storage systems (BESS) reduce these peak power requirements and therefore lower costs across a wide range of tariff structures worldwide.
What is peak shaving and how does it reduce electricity costs?
Peak shaving is the practice of reducing electricity consumption during periods of highest demand in order to limit demand peaks and lower electricity costs.
Instead of allowing consumption to briefly spike above a certain level, peak shaving strategies smooth the building’s load profile by keeping demand below a defined threshold. This helps avoid high demand charges, which are often triggered by a single short period of very high consumption.
In practice, facilities can achieve this in several ways. They may temporarily reduce non-critical loads, shift certain processes to a different time, activate on-site generation, or use battery storage to supply part of the demand during peak periods.
By limiting short spikes in electricity consumption, peak shaving allows buildings to maintain their operations while reducing the demand charges that can significantly impact their monthly electricity bill.
Peak Shaving with Solar and BESS
For many industrial facilities, significantly changing the load profile is not always feasible. Production processes, operational schedules, and equipment requirements often limit how much electricity consumption can be shifted or reduced.
However, peak shaving can still be achieved by combining on-site solar generation with battery energy storage systems (BESS).
Battery storage allows a facility to store electricity when it is inexpensive or readily available, and use it later when demand is high. For example, a battery can charge during periods of low electricity prices or when excess solar energy is being generated on site. The stored energy can then be discharged during peak demand periods to reduce the amount of power drawn from the grid.
By doing so, facilities can limit demand spikes and lower the demand charges associated with them.
In practice, this strategy can reduce electricity costs in several ways:
- Limiting peak demand, which helps avoid demand charge penalties
- Lowering the contracted maximum demand with the utility over time
- Using stored energy instead of expensive grid electricity during peak periods
Managing peak shaving with battery storage
One of the advantages of using battery storage for peak shaving is that the process can be largely automated.
A solar or energy management controller can monitor the building’s electricity consumption, solar production, and battery state in real time. Based on predefined rules, the system can decide when to charge the battery and when to discharge it to keep grid consumption below a defined demand threshold.
When properly configured, the system continuously optimizes energy flows without requiring constant manual intervention. This ensures that the battery is used at the right moments to reduce demand peaks while maximizing the value of locally generated solar energy.
Smarter peak shaving with advanced energy controllers
While batteries and solar panels provide the physical infrastructure for peak shaving, an intelligent controller is what allows these systems to work together effectively.
An advanced energy controller can analyze real-time consumption data, predict potential demand peaks, and automatically coordinate solar production, battery charging, and battery discharge. This ensures that stored energy is used precisely when it has the greatest impact on reducing grid demand.
Our ePowerControl series is designed to make this process simple and reliable. By continuously monitoring energy flows and applying control strategies, it helps facilities maximize the benefits of solar and battery storage while reducing electricity costs and protecting operations from unexpected demand spikes.
FAQ
1) What is peak shaving in electricity?
Peak shaving is the practice of reducing power consumption from the grid during periods of highest demand. Instead of allowing electricity usage to spike above a certain level, facilities use strategies such as load management, on-site generation, or battery energy storage systems (BESS) to supply part of the demand. This helps limit peak power draw and avoid costly demand-based charges.
2) What is a demand charge?
A demand charge is a fee based on the highest level of power (kW) a customer draws from the grid during a billing period, rather than the total energy consumed (kWh). Utilities use demand charges to recover the cost of maintaining infrastructure capable of supplying peak loads. Even a short spike in power usage can significantly increase electricity bills.
3) How does BESS enable peak shaving?
A battery energy storage system (BESS) enables peak shaving by supplying electricity during periods of high demand, reducing the amount of power drawn from the grid. The battery typically charges when demand is low or when excess solar generation is available, then discharges during peak periods to keep grid consumption below a defined threshold.
4) How much can peak shaving reduce electricity costs?
Savings vary depending on the tariff structure, load profile, and system design. In many commercial and industrial settings, demand charges can represent 30 – 70% of the electricity bill, so reducing peak demand can lead to substantial cost reductions. Peak shaving projects typically reduce total electricity costs by 10 – 40%, with the greatest savings occurring at sites with highly variable loads, high demand penalties, or frequent short-duration peaks.
5) Is peak shaving only useful for industrial facilities?
No. While peak shaving is most commonly applied in commercial, industrial, and utility-scale contexts, it can benefit any site subject to demand-based tariffs or capacity limits. Large commercial buildings, data centers, campuses, EV charging hubs, and microgrids can all use peak shaving to control costs and improve grid interaction.
