Peak Shaving and Load Shifting: How Battery Energy Storage Can Reduce C&I Electricity Costs

Commercial and industrial electricity demand rarely stays constant throughout the day.

A factory may operate at moderate power for most of the morning, then experience a sharp increase when several production lines, compressors, pumps, HVAC systems or other large electrical loads operate at the same time.

Commercial buildings can show a similar pattern. Electricity demand may remain relatively low overnight, increase rapidly when employees arrive, reach a peak during working hours and then fall again in the evening.

These changing load patterns create an important opportunity for battery energy storage.

Instead of allowing every increase in facility demand to be supplied entirely by the utility grid, a Battery Energy Storage System, or BESS, can charge during suitable low-demand periods and discharge when electricity demand increases.

Two important strategies are commonly involved:

Peak Shaving reduces the highest level of power drawn from the grid.

Load Shifting moves part of the facility’s grid energy consumption from one time period to another.

When combined with an appropriate Energy Management System, these strategies can help create a smoother grid-demand profile and, where the local tariff structure supports it, potentially reduce electricity costs.

Why C&I Electricity Demand Is Not Flat

Consider a factory operating throughout a typical working day.

During the night, only essential equipment may be operating, and facility demand may remain around 100kW.

When production begins in the morning, demand might rise to 180kW. By midday, several production lines may be running simultaneously, increasing demand to 250kW. During the busiest production period, the facility could briefly reach 300kW.

Later in the evening, as equipment is switched off, demand may fall back toward 100kW.

A simplified daily profile might look like this:

00:00 — 100kW
08:00 — 180kW
11:00 — 250kW
14:00 — 300kW
18:00 — 180kW
23:00 — 100kW

The facility may consume a substantial amount of energy throughout the day, but the 300kW peak can be especially important.

Depending on the electricity tariff, commercial and industrial customers may pay not only for the total number of kilowatt-hours consumed but also for demand-related charges or higher electricity prices during certain periods.

This means two facilities using similar amounts of energy can still have very different electricity costs if their load profiles are different.

That is where peak shaving and load shifting become useful.

What Is Peak Shaving?

Peak shaving means using battery storage to reduce the maximum amount of power a facility draws from the utility grid.

Suppose a factory reaches a total electrical load of:

Facility Load = 300kW

At that moment, the battery supplies:

Battery Discharge = 100kW

The grid therefore needs to provide only:

Grid Demand = 300kW − 100kW = 200kW

The factory still receives the full 300kW required by its equipment.

What changes is the source of that power.

Without battery storage, the utility grid supplies the entire 300kW.

With peak shaving, the grid supplies 200kW while the battery provides the remaining 100kW.

The battery therefore reduces the peak visible on the grid-demand curve.

Why Peak Demand Matters

In some commercial electricity tariffs, part of the electricity bill is related to the highest demand recorded during a billing period.

For example, a facility may normally operate below 220kW but briefly reach 300kW when several large machines operate simultaneously.

If the local tariff includes demand charges, controlling that short-duration peak may have financial value.

However, electricity tariffs vary significantly by country, utility, region and customer contract.

Peak shaving should therefore be evaluated against the site’s actual tariff structure rather than assuming that reducing peak demand will always produce the same savings.

A serious C&I energy storage project should consider both the technical load profile and the economic tariff structure.

What Is Load Shifting?

Load shifting focuses on when electricity is drawn from the grid.

Instead of drawing all required energy during a high-demand or high-price period, the battery stores energy earlier and uses it later.

During a suitable off-peak period, the energy flow may be:

Grid → Facility Loads + Battery Charging

Later, when electricity demand rises:

Grid + Battery → Facility Loads

The facility still consumes the energy it needs, but part of that grid consumption has effectively been moved from one time period to another.

This is the basic idea behind load shifting.

What Does Valley Filling Mean?

The term valley filling is often used together with peak shaving.

If a 24-hour load curve is shown on a graph, low-demand periods appear as valleys while high-demand periods appear as peaks.

When the battery charges during a low-demand period, grid demand rises slightly in the valley.

When the battery later discharges during a high-demand period, grid demand falls at the peak.

The result is a flatter overall grid-load curve.

Before battery storage, the site may have a very low overnight demand and a very high afternoon peak.

After applying peak shaving and valley filling, the overnight demand increases slightly because the battery is charging, while the afternoon grid peak becomes lower because the battery is discharging.

This is why the phrase “peak shaving and valley filling” is often used to describe the complete operating strategy.

In international C&I storage projects, terms such as load shifting, off-peak charging and time-of-use energy management are also commonly used.

How Peak Shaving and Load Shifting Work Together

Peak shaving and load shifting are closely related, but they are not exactly the same.

Imagine a factory where electricity demand is relatively low overnight.

The battery can charge during this lower-demand period while total site demand remains comfortably below the facility’s maximum peak.

Later, production increases and facility demand begins approaching its daily maximum. The battery then starts discharging.

The overnight charging represents load shifting or valley filling.

The daytime battery discharge that prevents the grid demand from reaching its original maximum represents peak shaving.

A typical daily operating cycle may therefore look like this:

Off-Peak Period → Battery Charging → Energy Storage → Peak Period → Battery Discharging → Reduced Grid Peak

After the peak ends, the battery waits for the next suitable charging window and prepares for another cycle.

Peak Shaving vs. Energy Arbitrage

Peak shaving is often discussed together with energy arbitrage, but the two strategies have different primary objectives.

Peak Shaving

The main objective is to reduce maximum grid demand in kW.

For example:

Original Grid Peak = 300kW
Target Grid Peak = 200kW
Required Peak Reduction = 100kW

The battery is used to prevent grid demand from exceeding the desired threshold.

Energy Arbitrage

The main objective is to take advantage of electricity price differences between different periods.

The battery charges when electricity is relatively inexpensive and discharges when electricity is more expensive.

The basic strategy is:

Low-Price Period → Battery Charging

High-Price Period → Battery Discharging

Load Shifting

Load shifting describes the broader process of moving grid energy consumption from one time period to another.

A single C&I battery system may potentially support peak shaving, load shifting and energy arbitrage at the same time, provided the tariff structure, battery system and EMS strategy support these functions.

Why Both kW and kWh Matter

One of the most important concepts in C&I energy storage is the difference between power and energy.

Power is measured in kilowatts (kW).

Energy is measured in kilowatt-hours (kWh).

For peak shaving, power determines how much of the grid peak can be reduced at one moment.

Energy determines how long that reduction can be maintained.

Suppose a facility needs to reduce grid demand by 100kW for two hours.

The theoretical energy requirement is:

100kW × 2 hours = 200kWh

This means the storage system needs enough power to provide approximately 100kW and enough energy to maintain that output for the required duration.

A battery with 300kWh of energy but only 50kW of discharge capability would not be able to reduce a 100kW peak by the full amount.

Similarly, a system with 150kW of power but only 50kWh of usable energy may have enough power to begin peak shaving but not enough stored energy to continue for two hours.

Proper C&I storage sizing therefore requires the correct balance between kW and kWh.

Example: A Factory With a 300kW Peak

Consider a factory whose normal daytime load ranges between 180kW and 220kW.

During the afternoon, production activity causes demand to temporarily rise to 300kW.

The facility wants to limit grid demand to 200kW.

The required battery power during the highest peak would therefore be:

300kW − 200kW = 100kW

If the relevant peak lasts for two hours, the theoretical energy requirement becomes:

100kW × 2 hours = 200kWh

The initial requirement therefore appears to be approximately:

Power Requirement = 100kW

Energy Requirement = 200kWh

However, this is only a preliminary calculation.

Actual system sizing also needs to consider usable battery capacity, SOC limits, PCS efficiency, battery degradation, reserve requirements, changing load profiles and the possibility of multiple peaks occurring during the same day.

This is why real C&I BESS sizing should begin with actual load data rather than relying on a single maximum-demand figure.

Understanding a 125kW / 258kWh BESS

A 125kW / 258kWh C&I battery energy storage system provides a useful example of how power and energy capacity work together.

The 125kW figure describes the system’s power capability.

The 258kWh figure describes its stored energy capacity.

A simple theoretical calculation gives:

258kWh ÷ 125kW ≈ 2.06 hours

This does not mean the system will always provide exactly 125kW for 2.06 hours in practical operation.

Actual discharge duration depends on usable energy, SOC limits, efficiency, operating strategy and system configuration.

However, the example clearly illustrates why both numbers matter.

Whether a 125kW / 258kWh BESS is appropriate for a particular peak-shaving project depends on the site’s actual load curve, the size of the peak, how long that peak lasts and the customer’s operating objectives.

What Happens During Off-Peak Charging?

After the high-demand period ends, the battery needs to recover the energy it discharged.

An EMS may schedule battery charging during a lower-demand or lower-cost period.

Suppose facility demand falls to:

Facility Load = 100kW

The battery begins charging at:

Battery Charging Power = 80kW

Total grid demand temporarily becomes:

100kW + 80kW = 180kW

This is still below the facility’s previous 300kW peak.

In this example, the system uses available grid capacity during a lower-demand period to prepare the battery for the next peak.

However, battery charging also needs to be controlled carefully.

If the battery charges aggressively while facility demand is already high, the charging process itself could create a new grid peak.

The EMS therefore needs to coordinate battery charging power with the site’s real-time load.

How an EMS Controls Peak Shaving

The Energy Management System, or EMS, plays a central role in C&I battery operation.

Instead of simply charging and discharging according to a fixed schedule, an EMS can continuously monitor facility demand and control the BESS according to a predefined grid-demand target.

Suppose the site wants to limit grid demand to:

Target Grid Demand = 200kW

If facility demand remains below 200kW, the battery may not need to discharge.

If facility demand rises to 230kW, the battery may provide approximately 30kW.

If facility demand reaches 280kW, the battery may provide approximately 80kW.

In simplified form:

Battery Discharge Power ≈ Facility Load − Target Grid Demand

This calculation is still subject to PCS power limits, battery SOC, battery discharge limits and other system constraints.

Dynamic EMS control can be much more effective than simply discharging the battery at full power whenever a predefined peak period begins.

Why the Load Profile Matters

A monthly electricity bill alone does not provide enough information to design an effective peak-shaving system.

Consider two factories that each consume approximately 3,000kWh per day.

Factory A may operate at a relatively stable 150kW throughout most of the day.

Factory B may normally operate between 100kW and 150kW but experience repeated peaks above 300kW.

Their total daily energy consumption may be similar, but their ideal battery systems could be very different.

For peak shaving, the shape of the load curve matters.

Useful project information includes:

• Maximum grid demand
• Normal base load
• Time of peak demand
• Peak duration
• Number of daily peaks
• Weekday and weekend differences
• Seasonal load changes
• Production schedules
• Existing solar generation
• Electricity tariff structure

The more detailed the load data, the more accurately the BESS can be matched to the real application.

Why 15-Minute or 30-Minute Load Data Can Be Useful

Interval load data is particularly valuable for C&I storage projects.

Instead of looking only at monthly energy consumption, project designers can analyze actual demand in 15-minute, 30-minute or other available intervals.

This helps determine whether a peak lasts for only a short period or continues for several hours.

For example, consider two peak-shaving scenarios.

Scenario A: Short Peak

Required Peak Reduction = 100kW

Peak Duration = 30 minutes

The theoretical energy requirement is:

100kW × 0.5 hours = 50kWh

Scenario B: Long Peak

Required Peak Reduction = 100kW

Peak Duration = 3 hours

The theoretical energy requirement is:

100kW × 3 hours = 300kWh

Both projects require approximately 100kW of peak-shaving power.

However, their energy requirements are completely different.

This is why peak duration is just as important as peak magnitude.

How Solar PV Changes the Load Curve

For facilities with solar PV, the grid-load curve may be quite different from the facility’s actual electricity consumption.

During periods of strong solar generation, PV can directly supply part of the facility load.

The simplified energy flow is:

Solar PV → Facility Loads

This reduces the amount of electricity required from the grid.

If the system architecture allows it, available excess solar energy can also charge the battery.

Later, when solar generation falls while facility demand remains high, the battery can discharge to reduce grid consumption.

A PV + BESS project may therefore combine several operating strategies:

• Solar self-consumption
• Peak shaving
• Load shifting
• Energy arbitrage
• Energy management through EMS control

This can make an integrated solar-plus-storage system more flexible than either technology operating alone.

Example: Peak Shaving With Solar PV

Suppose a commercial facility reaches a load of:

Facility Load = 300kW

At the same time, the PV system is producing:

Solar Generation = 70kW

Without battery storage, grid demand becomes:

300kW − 70kW = 230kW

If the BESS then supplies another 30kW:

230kW − 30kW = 200kW Grid Demand

The facility’s total 300kW load is now supplied by:

Grid = 200kW

Solar PV = 70kW

Battery = 30kW

This simple example demonstrates why solar production, facility demand and battery operation should be analyzed together.

When Does Peak Shaving Make Sense?

Peak shaving is especially worth evaluating when a facility experiences noticeable load spikes and the local electricity tariff makes those peaks economically significant.

Potential applications can include factories with large production equipment, warehouses with refrigeration or charging loads, commercial buildings with strong HVAC demand, hotels with variable daily consumption, shopping centers with daytime and evening peaks, and other facilities with significant power fluctuations.

However, simply having a large electrical load does not automatically mean that installing a BESS will be financially attractive.

Project economics depend on several factors, including:

• Load profile
• Electricity tariff
• Demand charges
• Peak duration
• Battery utilization
• System cost
• EMS strategy
• Expected operating life

A proper project evaluation should therefore combine technical load analysis with economic analysis.

Peak Shaving Does Not Mean Discharging the Battery All Day

A common misunderstanding is that a battery used for peak shaving should discharge whenever the facility is consuming electricity.

That is usually not the objective.

If facility demand remains below the target grid threshold, unnecessary battery discharge may simply consume stored energy before the real peak arrives.

A more effective operating strategy is:

Low Load → Preserve Battery Energy

Load Approaches Target → Prepare for Discharge

Load Exceeds Target → Battery Discharges

Peak Ends → Battery Stops Discharging

Suitable Low-Demand Period → Battery Recharges

The EMS therefore needs to decide both when to discharge and when to preserve stored energy.

Why Battery SOC Strategy Matters

State of Charge, or SOC, indicates how much energy remains in the battery.

Suppose a facility normally experiences its most important peak at around 4:00 PM.

If the battery has already been heavily discharged earlier in the day, there may not be enough stored energy available when the main peak occurs.

The EMS may therefore maintain a predefined SOC reserve so that sufficient battery energy is available during the most important period.

Charging can also be scheduled to ensure that the battery reaches the required SOC before the expected peak.

Effective C&I energy management is therefore not simply about deciding how much energy should be discharged.

It is also about deciding when stored energy should be saved for later.

Peak Shaving and Backup Power Are Different

A C&I battery system may sometimes support several applications, but peak shaving and backup power are not the same function.

Peak shaving normally takes place while the utility grid is available.

The battery operates alongside the grid and reduces the amount of power drawn from it.

Backup power becomes relevant when the utility grid is unavailable and the system architecture is designed to continue supplying selected loads.

If a project is expected to perform both functions, the system design and EMS strategy need to account for both objectives.

Using too much battery energy for daily peak shaving could reduce the reserve available for emergency backup unless the control strategy maintains sufficient SOC.

What Data Should Be Collected Before Designing a Peak-Shaving BESS?

Before selecting a battery system, several pieces of project information should be collected.

1. Load Profile

Preferably use interval data showing actual facility demand throughout the day.

2. Maximum Demand

Determine the highest grid-demand level currently being recorded.

3. Target Demand

Define the desired maximum grid-demand level after peak shaving.

4. Peak Duration

Determine whether the relevant peak lasts minutes, one hour or several hours.

5. Number of Daily Peaks

Some sites experience one major peak, while others may have several.

6. Electricity Tariff

Understand demand charges, time-of-use prices and other relevant tariff structures.

7. Solar Generation

If PV is already installed, its production profile should be included in the analysis.

8. Charging Window

Determine when the battery can recharge without creating another undesirable grid peak.

9. Backup Requirements

If the BESS also needs to provide backup power, determine how much SOC must remain available.

10. Future Expansion

Additional production equipment, EV charging or additional PV may change the site’s future load profile.

These inputs provide the foundation for proper system sizing.

A Simple Preliminary Peak-Shaving Calculation

A preliminary calculation can begin with four steps.

Step 1: Identify the Current Peak

Assume the facility reaches:

Current Peak = 300kW

Step 2: Define the Target Grid Peak

Assume the desired maximum grid demand is:

Target Grid Peak = 200kW

Step 3: Calculate Required Battery Power

The required peak reduction is:

300kW − 200kW = 100kW

The BESS therefore needs approximately 100kW of discharge power during the highest part of the peak.

Step 4: Estimate Peak Duration

Suppose the required reduction lasts for two hours.

The theoretical energy demand is:

100kW × 2 hours = 200kWh

This provides an initial requirement of approximately:

100kW / 200kWh

However, actual system selection also needs to consider efficiency, usable capacity, SOC reserve, repeated peaks, battery degradation and project-specific operating conditions.

The preliminary calculation is therefore a starting point, not the final system design.

Peak Shaving Is an Energy Management Problem, Not Just a Battery Problem

A successful C&I storage project depends on much more than battery capacity.

The complete system may include:

• Battery Packs
• BMS
• PCS
• EMS
• Metering Equipment
• Electrical Protection
• Utility Grid Connection
• Solar PV, where applicable
• Facility Loads

Each component has a different role.

The battery stores energy. The PCS manages power conversion. The BMS monitors and protects the battery. The EMS determines when the system should charge or discharge and how much power should be used. Metering provides the real-time information required for those decisions.

This is why C&I battery storage is better understood as an energy-management system that includes battery storage, rather than simply a large battery installed beside a factory.

Frequently Asked Questions

What is peak shaving in battery energy storage?

Peak shaving uses battery discharge to reduce the amount of power a commercial or industrial facility draws from the utility grid during periods of high demand.

What is valley filling?

Valley filling refers to charging the battery during relatively low-demand periods so that stored energy can later be used during higher-demand periods.

Is load shifting the same as peak shaving?

Not exactly. Load shifting moves grid energy consumption from one time period to another, while peak shaving specifically focuses on reducing the maximum level of grid demand. The two strategies are often used together.

What is the difference between peak shaving and energy arbitrage?

Peak shaving mainly focuses on reducing demand in kW. Energy arbitrage focuses on charging during lower-price periods and discharging during higher-price periods to take advantage of electricity price differences.

How do you estimate battery size for peak shaving?

A basic estimate is:

Required Energy = Required Peak Reduction (kW) × Peak Duration (hours)

For example, reducing grid demand by 100kW for two hours requires approximately 200kWh of theoretical delivered energy. Practical sizing requires additional system-level analysis.

Can solar and battery storage work together for peak shaving?

Yes. Solar PV can reduce daytime grid demand directly, while battery storage can provide additional power when solar generation alone is not enough to keep grid demand below the desired threshold.

Does a larger battery always provide better peak shaving?

No. Effective peak shaving requires the correct combination of power and energy. A large battery with insufficient discharge power may still be unable to reduce a short, high-power peak effectively.

Can one BESS provide peak shaving and backup power?

Potentially, provided the system architecture supports both functions and the EMS maintains enough battery reserve for backup requirements.

Conclusion

Peak shaving and load shifting are two closely related energy-management strategies for commercial and industrial battery storage.

Peak shaving reduces the highest level of power drawn from the utility grid, while load shifting moves part of the site’s grid energy consumption from one time period to another.

A typical operating cycle can be summarized as:

Off-Peak Charging → Energy Storage → Peak-Period Discharging → Reduced Grid Demand → Recharge for the Next Cycle

However, successful implementation requires more than choosing a battery with a large kWh rating.

The system needs enough kW to reduce the required peak and enough kWh to maintain that reduction for the necessary duration.

It also needs an appropriate charging window, compatible PCS, effective EMS control and a clear understanding of the site’s actual load profile and electricity tariff.

For this reason, the best starting point for a C&I battery-storage project is not simply asking:

“How large should the battery be?”

A better starting point is:

“When do the site’s peaks occur, how high are they, how long do they last, and what exactly should the battery achieve?”

Once those questions are answered, peak shaving, load shifting and other energy-management strategies can be designed around the actual operating conditions of the facility.