Peak demand charges vary by circumstance; however, they typically account for 30%-70% of a C&I customer bill, according to the National Renewable Energy Laboratory (NREL). Utilities are challenged with higher power usage during peak hours of energy consumption, which can cause a lag on the grid and lead to expensive energy and more power outages. Peak shaving is a strategy that is gaining traction to combat this issue. Here, we’ll review what peak shaving is, how it works and why it’s essential to include it in any C&I energy optimization plan.
What are demand charges?
To understand peak shaving, knowing more about demand charges is essential. Demand charges help utilities recover costs for electricity generation and distribution. These charges, part of the customer's bill, are based on peak electricity demand, ensuring those needing more capacity pay more. "Commercial demand charges" refer to an additional fee levied on businesses by utility companies based on their highest rate of energy consumption during a specific time period, essentially charging them for the peak power they draw from the grid, often representing a significant portion of their total electricity bill, particularly for large commercial customers; this charge is usually calculated per kilowatt (kW) and can vary depending on the utility provider and the time of day when peak usage occurs. This is calculated on the highest average use in a specific interval, usually 15 minutes, during the billing cycle; demand charges differ from consumption charges based on total electricity used (kWh). They measure the highest consumption rate (kW) in the cycle. Rates for demand charges vary widely, depending on utility, location and building type. As these charges can vary, understanding how they are calculated and billed is crucial, yet it often needs to be better understood by customers.
What is peak shaving?
Peak demand is the time of day or season when energy consumption is at its peak. It usually occurs in the morning and afternoon.
Peak shaving occurs when energy users reduce their consumption during peak periods by drawing some or all of the power for their loads from batteries, alleviating grid strain and saving money on power bills.
What's the difference between peak shaving and demand response?
Demand response, or load shifting, differs from peak shaving as it involves shifting energy usage to off-peak hours before or after high-demand hours. Load shifting changes when energy is used, not necessarily reducing energy usage from the grid. With peak shaving, battery storage or facility-owned power generation is used rather than grid usage during peak time.
How does battery storage support peak shaving and demand response?
Battery storage plays a critical role in both peak shaving and demand response. In peak shaving, batteries store energy during periods of low demand and discharge it when demand surges, helping to reduce the strain on the grid and avoid costly peak energy prices. For demand response, battery storage systems provide flexibility by storing excess energy when demand is low and supplying it when the grid requires additional capacity. This capability allows utilities to balance supply and demand more effectively lower operational costs, and improve overall energy resilience. Both functions work together to optimize energy use and provide unique value streams for commercial facilities.
Knowing when to use either strategy for C&I applications depends on the circumstances.
For C&I customers that experience high demand charges (billing based on the top increment of power consumption) battery storage can be used to lower energy usage from the grid. Smoothing out periods of high demand can reduce energy bills.
For industrial facilities with predictable and inflexible energy loads that can't be shifted to off-peak hours, it may make more sense to leverage energy storage and bring down demand during high-peak hours.
One of the most beneficial ways C&I facilities can control their energy is by incorporating on-site energy generation coupled with battery storage. With current incentives and the opportunity to control peak demand, this combination is a timely strategy to adopt while incentives are high. The on-site energy can be used during peak demand periods, and charge energy storage systems can be used for peak shaving.
Considerations for Optimizing Peak Shaving
The higher the peak demand charges, the greater the cost savings that can be seen using battery storage discharge during peak hours. Another factor contributing to the cost savings is the size of the system and its efficiency. A more extensive battery storage system with high efficiency can store more power, offer extended outage coverage, and be used at high peaks.
Ideal loads for peak shaving are energy-intensive and can easily be used to power up the BSES. For C&I purposes, those loads can include:
- HVAC system operations
- High-voltage appliances
- Power your EV fleet
- Energy-intensive industrial processes
Gaining control of the systems throughout your facilities to optimize energy loads is the key to successful peak shaving.
To fully understand the potential of using battery storage for peak shaving, you must have a detailed understanding of your particular energy circumstances.
Considerations should be made about the incentives for ESS, costs for the system, installation, O&M requirements, and the potential savings you can reap.
Briggs & Stratton brings over 115 years of experience to battery storage, so you can rely on the equipment and the company that built it. Contact our C&I team to understand your potential for peak shaving with an energy storage system.
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