This article was researched and drafted by Allison Ullenius and reviewed by the ELM MicroGrid marketing team.
What Is Peak Shaving?
In commercial and industrial settings, power usage changes throughout the day. Powering up equipment, speeding up production, and cooling buildings on hot afternoons all contribute to higher electricity demand. Consequently, utilities must constantly manage these peaks and valleys of energy use, adjusting grid output so electricity generation continuously matches consumption.
Utilities must also maintain enough grid capacity to satisfy periods of peak demand. While these peaks may occur only a few times each year, utilities must remain prepared to ensure reliable service. Maintaining this excess capacity is complex and expensive, leading both utilities and consumers to seek ways to minimize—or “shave”—these peak power periods.
How Does Peak Shaving Work?
One can think of peak shaving like avoiding rush-hour traffic. Instead of everyone needing power at the same time, some of that demand is reduced or shifted so the system doesn’t become overloaded.
Peak shaving is the practice of reducing electricity consumption during periods of highest demand. Utilities charge customers not only for the total electricity they consume but also a demand charge based on the highest level of power used during the billing period. These demand charges are often calculated over intervals as short as 15 minutes, meaning even brief spikes in electricity usage can significantly increase energy costs.
Peak shaving reduces these spikes by decreasing the amount of power drawn from the utility grid while supplementing energy needs with alternative power sources.
Using Battery Energy Storage for Peak Shaving
One of the most common methods of peak shaving is using a Battery Energy Storage System (BESS).
For example, imagine a facility that normally draws 1 MW of power but experiences a temporary peak of 1.5 MW on a particularly busy afternoon. Instead of drawing the full 1.5 MW from the grid, a battery system can supply the additional 0.5 MW, allowing the facility to maintain a consistent 1 MW demand from the utility.
Battery storage allows facilities to store energy when electricity prices are low or renewable energy is abundant, then use that stored energy during periods of peak demand. This enables organizations to maintain production schedules while avoiding costly demand charges and reducing strain on the electrical grid.
Why Microgrids Are Ideal for Peak Shaving
Microgrid integration is particularly effective for peak demand reduction because they combine local energy resources with intelligent controls.
Advanced microgrid controllers continuously monitor electricity demand in real time and automatically dispatches power from battery energy storage while coordinating additional distributed energy resources such as solar panels or wind turbines.
By supplying a portion of a facility’s load locally, the microgrid acts as a utility energy storage system, reducing the amount of electricity purchased from the utility during peak periods. Microgrid control systems can also determine the most cost-effective times to charge batteries—whether from on-site solar generation, or from the grid during off-peak pricing.
The battery management software within a microgrid’s design allows energy from distributed energy storage to be deployed precisely when it has the greatest impact, reducing demand charges, improving energy resilience, and supporting overall grid stability.
How ELM MicroGrid Supports Peak Shaving
ELM MicroGrid offers scalable microgrid solutions designed to support microgrid integration in any facility’s by matching its unique energy requirements and operational goals.
Powered by FieldSight®, ELM’s intelligent microgrid control systems provide advanced, real-time monitoring and management of energy resources. FieldSight automatically optimizes battery storage, renewable generation, and utility power to reduce demand charges, lower operating costs, and improve overall energy reliability.
The Benefits of Peak Shaving
Peak shaving can significantly reduce electricity costs.
Depending on utility tariff structures and facility load profiles, demand charges can account for 30–70% of a commercial or industrial electricity bill. Peak shaving projects can reduce total electricity costs by 10–40% by minimizing these expensive demand peaks.
Peak shaving delivers the greatest value for facilities that:
- Experience frequent fluctuations in electricity demand
- Operate in areas with high demand charges
- Have short but significant spikes in electrical load
- Need to improve energy resilience while controlling operating costs
Industries That Benefit from Peak Shaving
While peak shaving is commonly associated with commercial and industrial facilities, many organizations can benefit from reducing demand charges, including:
- Manufacturing facilities
- Data centers
- University campuses
- Healthcare facilities
- Municipal buildings
- EV charging hubs
- Water and wastewater treatment plants
- Utilities and cooperatives
Peak Shaving Is a Smart Energy Strategy
As electricity demand continues to rise and energy costs become increasingly unpredictable, peak shaving has become one of the most effective ways for organizations to control operating expenses while supporting a more resilient electric grid.
By combining battery energy storage, renewable energy, and intelligent microgrid controls, organizations can reduce demand charges, improve reliability, and make better use of their energy resources.
With scalable microgrid solutions and the FieldSight® intelligent energy management platform, ELM MicroGrid helps customers unlock the full value of peak shaving while building a more resilient energy future.