Few things impact a commercial or industrial facility’s utility bill more than peak demand. These are periods of high energy use, usually in the evening or during extreme weather, when the grid is strained. To meet this demand and avoid blackouts or brownouts, utilities often rely on fossil fuel peaker plants, causing electricity rates to soar.
For facilities, this becomes especially problematic when most energy use occurs during peak-cost periods, resulting in costly demand charges and capacity charges. Some facilities can see monthly demand and capacity charges of more than $100,000.
No universal measure exists for when these charges become excessive. Even so, all facility managers should know the most effective strategies for reducing them. Two of the most effective are peak shaving and load shifting. Both use battery energy storage to lower peak-related costs and increase flexibility without disrupting facility operations, but they work differently and address different parts of the bill.
This post explains how to identify peak-cost exposure, then compares peak shaving and load shifting: what each strategy does, which charges it addresses, and how a battery supports it. While both energy management approaches reduce stress on the grid and reduce demand costs, they differ in their timing, approach, and objectives.
Finally, it lays out a five-step framework for identifying demand-charge savings and other economic benefits, helping you build a dependable business case and decide which strategy, or combination of strategies, fits your facility.
Identifying Peak-Cost Exposure
Large energy users generally see three major components on the electric bill: energy consumption charges, demand charges, and capacity charges.
While tariffs, supply contracts, and market rules differ across energy markets, these three economic exposures consistently affect large energy users the most.
- Energy charges (kWh): Commodity charges based on energy usage, plus delivery charges or riders based on consumption. Some of these charges vary by time of use or wholesale market exposure.
- Demand charges (kW): Charges based on the facility’s highest demand during the billing period, known as the non-coincident peak. A single interval of high demand can set the charge for the entire period. Under some tariff provisions, that peak can also set a minimum billing level for up to 11 subsequent months.
- Capacity charges (kW): Charges based on the facility’s demand during grid-wide peak hours, known as coincident peak. These charges may appear on the bill as a capacity or transmission tag, Global Adjustment, peak load contribution, or others, depending on your region and utility. Because peak hours are often confirmed only after they occur, managing this exposure requires accurate grid forecasting.
Demand and capacity charges are highly variable components of a facility’s energy bill and can exceed 50 percent of the entire bill. Some facilities can see monthly demand and capacity charges of more than $100,000.
How large they become depends on factors such as the facility’s highest power draw during the billing period and the costs the grid operator incurs for generation, transmission and distribution infrastructure. Facility managers who monitor and analyze these charges can better understand how much of them energy storage may address and, more importantly, whether demand-charge reduction and other value streams merit an energy storage system.
When Peak Power considers the feasibility of battery energy storage at any given commercial or industrial facility, we review four things: the facility’s utility bills; interval consumption data (15-minute interval data); the tariffs that determine how the facility is charged for usage; and whether energy storage can satisfy the facility’s needs.
Specifically, we review the following:
- 12-24 months of utility bills and supply contracts
- Demand, capacity, transmission and other peak-related charges on the bills
- Interval data showing peak magnitude, duration, frequency and predictability
- Tariff provisions such as time-of-use periods and coincident peak charges
- Loads that can be adjusted without affecting production, safety or uptime
- Achievable savings relative to costs and operating constraints of the solution
Strategies to Reduce Peak Costs
Once you understand where peak-related costs come from, the next step is to determine which strategy can reduce them. Peak shaving reduces the maximum demand recorded at the facility meter. Load shifting changes when the facility draws electricity from the grid. A battery can support both by charging from on-site generation such as solar, or from the grid during a lower-cost, lower-demand period, then discharging during a peak event.
Peak Shaving Explained
Peak shaving reduces energy consumption during peak demand. As its name suggests, it involves ‘shaving’ facility demand peaks behind-the-meter. Often, peak shaving is easiest with a demand-side battery that stores energy during off-peak times and then discharges during grid peaks, with zero impact to a facility’s operations.
Peak shaving can be achieved with different strategies:
- Battery energy storage systems + on-site generation: Solves the intermittency of renewables by storing energy when renewables are producing it, so stored clean energy is discharged at peak times. This is particularly valuable for facilities that have installed solar arrays.
- Curtailment: A facility intentionally limits or reduces its power consumption by powering down non-essential machinery and operations or adjusting lighting and temperature set points.
Load Shifting Explained
Load shifting is similar to peak shaving in that it aims to alleviate stress on the grid during peak times. But it works differently. With load shifting, energy consumption is shifted from peak hours to off-peak hours when demand is the lowest. This helps balance the grid by moving demand to off-peak times. Load shifting is all about redistributing energy consumption.
A good example is an industrial facility that could schedule its machines to run during the middle of the day, when demand on the grid is lower. Of course, this would only work if the machines aren’t mission-critical and can be operated at another time. And that’s one of the biggest drawbacks of load shifting.
Load shifting is all about when you use energy. In other words, when you use energy is just as important as how much you use. That means that load shifting doesn’t actually reduce energy consumption (kWh). It simply changes when you use energy.
There are several strategies for load shifting:
- Battery energy storage systems: In industrial facilities, energy storage systems can charge from the grid during low-cost, off-peak hours and discharge during peak demand events.
- Operational load shifting without energy storage: A facility’s operation can pre-cool, or schedule energy-intensive processes to off-peak hours.
Peak Shaving vs. Load Shifting
The table below summarizes how the two strategies compare. In practice, a facility does not have to choose only one, because the same battery can support both.
| Factor | Peak Shaving | Load Shifting |
| What Changes | The maximum demand recorded at the facility meter | When the facility draws electricity from the grid |
| How a Battery Helps | Discharges during a facility peak or grid peak to reduce the demand drawn from the grid | Charges during a lower-cost or lower-demand period and discharges during a higher-cost or peak period |
| Impact on Charges | Reduces demand charges and capacity charges tied to peak demand | Charges that vary by when electricity is used |
| What to Analyze | Interval data showing peak magnitude, duration, frequency and predictability | Tariff provisions and loads that can be adjusted without affecting production, safety or uptime |
Batteries are an essential resource for reducing a facility’s energy bills because they reduce reliance on the grid during peak times, when energy is most expensive. Behind-the-meter battery energy storage systems can also be used for grid services and demand response, adding an additional revenue stream the battery system can capitalize on while supporting broader grid resilience.
For example, a 1 MW battery system with 4-hour storage duration that Peak Power manages at a manufacturing site in San Diego, California serves as a flexible grid resource for the CAISO market. The system generates revenue by dispatching energy to support grid reliability and resilience, in addition to savings from time-of-use rate shifting, demand charge reduction, and demand response. This project, operating since 2019, has delivered over $554,000 in value.
Peak Demand Charge Reduction in Ontario: Global Adjustment
Lactalis Canada, a major dairy product manufacturer, operates several processing plants in Ontario that have experienced rising energy costs and power disruptions, adding unacceptable risk for an essential food supplier. The industrial facility has a variable load profile that can fluctuate at all hours, yet load remains consistently high throughout the day.
Peak Power developed battery energy storage for several Lactalis facilities in Ontario to reduce peak-related electricity costs while allowing production to continue as normal. A 980 kW / 2,436 kWh battery system at one of the Lactalis facilities in Ontario demonstrates how to build strong project economics around battery sizing, the facility’s load profile, and electricity market dynamics.
Ontario’s grid operator, IESO, recovers capital costs for energy generation through a billing mechanism known as Global Adjustment (GA). IESO sets the GA rate for each facility based on its demand during the Top 5 system-wide peak periods from the prior year. In 2025, a year when GA rates were especially high, Peak Power successfully forecasted those GA hours to strategically discharge the battery during those times.
During one hour of high system-wide demand—6-7 p.m. on June 25, 2025—the building’s gross load was 1,572 kW. However, the battery discharged on command, delivering nearly 887 kW during the same interval and reducing the demand recorded at the utility meter by 56 percent.
By moving load to off-peak hours, either in the morning or overnight, the battery allowed the site to curtail its load further than it could have without storage.
Choosing a Strategy: Building a Business Case for Energy Storage
Your facility’s electricity costs stem from your energy usage, the timing of your consumption, and the grid’s capacity to supply energy when you use it.
A battery gives you more control over when you consume energy. You can charge the battery when grid prices are low and discharge when grid prices are high, or you have another economic justification for discharging energy.
The key question is how much electricity costs can be addressed by battery energy storage, and whether peak shaving, load shifting, or a combination of the two fits your facility best.
Peak Power follows a five-step framework to build a business case for energy storage and identify which strategy fits your facility.
- Assess the facility’s electricity-cost exposure using bills, tariffs and supply contracts.
Energy market volatility, grid infrastructure upgrades, and changing tariff structures can make year-over-year power prices unpredictable for large energy users. Our initial assessment seeks to gauge the level of risk affecting your facility.
- Analyze interval data to understand when peaks occur, how long they last and how predictable they are.
A single demand peak in one 15-minute or hourly interval can impact billing for a full year. Battery energy storage projects must be paired with reliable grid event forecasting to capture the greatest value.
- Identify what flexibility is operationally feasible, including manual curtailment, controls-based automation and battery storage.
Each industrial facility has unique operational criteria based on when it consumes electricity and how much energy it consumes. By considering critical loads, priority loads, operations, equipment maintenance needs, and more, we select strategies that put facility operations at the heart of every decision.
- Model and size the solution against expected savings, market revenue, site constraints and project costs.
Peak Power’s battery sizing approach is conservative by design. We base system sizing on conservative scenarios to ensure reliable performance and protect against load variability, operational changes, and market changes.
- Implement the strategy, optimize it as facility and grid conditions change, and measure the results.
Battery energy storage development, interconnection, and construction typically take 12 to 18 months, which is still shorter than the timeline for many other types of energy infrastructure. Once the system begins commercial operations, we continue forecasting grid events and optimizing battery operation to capture the greatest economic value.
Peak Shaving Vs. Load Shifting: Which is Right For You?
While both peak shaving and load shifting enhance demand-side flexibility, peak shaving reduces peak loads while load shifting optimizes energy usage based on price or grid conditions.
For many industrial facilities, battery storage is the best option, as it reduces heavy demand charges and energy usage without affecting operations. This is key. Generally, facilities have inflexible loads that can’t simply be curtailed or shifted to off-peak hours. For example, there might be an HVAC system that’s crucial to the facility’s operations, a machine that needs to run continuously, or refrigeration that cannot simply be turned off.
Combining renewables, such as solar, with behind-the-meter energy storage further enhances the appeal of peak shaving for industrial facilities. In this case, batteries store the renewable energy generated during the day, which can be utilized during peak times when the grid is under strain. Beyond the financial and grid benefits, peak shaving also supports a facility’s sustainability efforts. This comprehensive approach not only slashes energy bills but also supports the transition to a cleaner tomorrow.
Take Control of Peak-Related Electricity Costs
Reducing peak-related costs starts with understanding your facility’s energy, demand charges, and capacity charges. Peak shaving lowers the maximum demand recorded at the meter, while load shifting changes when the facility draws electricity from the grid, and battery energy storage can support both while cutting energy costs and creating opportunities for grid revenue.
The Lactalis example shows how targeted battery dispatch can reduce demand during system peaks without disrupting production. A strong business case brings together bill and interval-data analysis, reliable forecasting, operational constraints, conservative system sizing, and ongoing optimization to determine the best strategy.
Peak Power’s commercial model also provides these battery energy storage systems at no cost to our clients. We can provide either a guaranteed fixed payment or a shared savings agreement.
Ready to assess your facility’s potential? Contact Peak Power to review your utility bills, tariffs, and interval data, and explore how battery storage can reduce peak-related costs with no impact on your operations.