Peak Shaving with Battery Storage: How Demand Charge Savings Work
Updated October 28, 2026
Peak shaving uses a battery to supply part of a site's load during its highest-demand intervals, so the utility meter records a lower peak and the monthly demand charge falls.
What a demand charge is
Many commercial tariffs bill a demand charge based on the highest average power, in kW, recorded in any short interval (often 15 minutes) during the month. One short spike can set the charge for the whole month, which is why shaving that spike is valuable.
How to size a battery for peak shaving
Power sets how many kW you can remove; energy sets how long you can hold that reduction. A site that needs to cut 200 kW for 2 hours needs at least 400 kWh of usable energy, plus margin for depth of discharge and efficiency. Try your own numbers in the peak shaving calculator.
What limits the savings
- Wide peaks: flat, long peaks need much more energy per kW shaved.
- Forecasting misses: if the battery is empty when the real peak arrives, that month's savings are lost.
- Tariff changes: utilities revise rate structures, so check the tariff's history.
Stacking other value
The same battery can also provide backup power, time-of-use arbitrage or paid demand response. Stacking uses can improve payback but must not leave the battery empty at the monthly peak.
Frequently asked questions
Does peak shaving reduce my energy charges?
Mostly it reduces demand charges. Energy use stays about the same, and battery losses add a little energy consumption.
What sites benefit most from peak shaving?
Sites with high demand charges and short, predictable peaks, such as facilities with large motors, EV fleet charging or batch processes.