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The Power of Peak Shaving: A Complete Guide

Managing peak electricity demand is a pressing concern in today’s ever-evolving energy landscape, with global consumption predicted to surge in the near future. Utilities often struggle with high power consumption throughout peak hours, which can strain the grid leading to the deployment of costly infrastructure upgrades and an increase in power outages and blackouts. One solution that is gaining traction is peak shaving. But what is peak shaving, how does it work, and why is it vital in today’s energy mix? This guide to peak shaving helps answer these questions. It demonstrates why more and more businesses are looking at peak shaving as a solution to manage peak energy demand proactively.

WHAT IS PEAK SHAVING?

Peak shaving is a term used in energy management to describe reducing the energy consumed during peak demand on the electric grid. 

Peak demand is a period when energy consumers use the most amount of electricity. Peak demand is usually in the morning when people wake up and in the evening when they return home from work. This sudden surge in electricity demand can strain the electric grid and potentially result in power outages and blackouts if the electricity supply cannot match the demand.

Typical daily electricity demand with peak demand curve - peak shaving
An illustration of peak shaving

HOW DOES PEAK SHAVING WORK?

Peak shaving works by energy consumers reducing their power usage from the electric grid throughout these peak periods. Reducing power usage from the grid is possible by either scaling down on power usage (through lower production), using stored energy from a battery, or activating a non-grid power generation source on site. Essentially, this shaves off the top of the power demand curve, hence the term peak shaving.

LOAD SHIFTING VS. PEAK SHAVING

Load shifting, or demand response, optimizes electricity use and can reduce energy costs. While similar to peak shaving, with its goal to relieve stress on the electric grid within peak demand periods, the way load shifting achieves this is different.

Load shifting involves moving energy consumption from high-demand (peak hours) to low-demand (off-peak hours) periods. The aim is to lower demand at peak times and increase it at off-peak times to smooth out the demand curve over the day.

For example, instead of charging electric fleet vehicles or running large industrial machinery in peak hours, those activities could be scheduled for the middle of the night or very early morning when demand on the electric grid is lower.

How does it differ from peak shaving? As we know, peak shaving lessens the energy demand at peak times, usually through energy storage or on-site generation. In other words, peak shaving cuts off the tops of the demand peaks.

Whereas load shifting redistributes energy demand from peak times to off-peak times. Load shifting doesn’t necessarily reduce the total energy used. Instead, it changes when that energy is used to achieve a more level or balanced daily demand. See below illustrations which highlight the differences of load shifting vs. peak shaving.

An illustration showing how peak shaving works
illustration showing how load shifting works

Energy storage can facilitate both peak shaving and load shifting. For example, a battery energy storage system (BESS) can store energy generated throughout off-peak times and then discharge it during peak times, aiding in both peak shaving (by supplying stored energy at peak periods) and load shifting (by charging at off-peak periods). Below shows examples of a BESS being used for peak shaving and load shifting.

Examples of battery energy storage used for load shifting and peak shaving

WHEN TO USE PEAK SHAVING INSTEAD OF LOAD SHIFTING

The decision between using peak shaving or load shifting within an energy management strategy depends on the specific application and scenario. Elements that need to be considered include the energy demand profile, the variability of electricity prices, and the loads’ flexibility.

Here are a few scenarios where peak shaving might make more sense than load shifting:

  • High Demand Charges: Commercial and industrial electricity customers often face demand charges based on their highest power consumption rate during any interval (typically 15 minutes) within a billing period. Utilizing energy storage to decrease these peaks can dramatically lower demand charges. In this case, it’s not about shifting the load to a different time but reducing those highest peaks.
  • Inflexible Loads: Peak shaving is a better choice when loads are less flexible and their operation can’t be shifted to different periods. An example of this could be a manufacturing process that must run continuously; therefore, its operation can’t be changed to off-peak times. In this scenario, using battery energy storage for peak shaving will help downscale demand from the grid over peak times.
  • Renewable Energy Integration: If a company has intermittent renewable energy sources such as solar PV, or wind turbines, peak shaving can help balance the generation with the load. For example, a business can store excess solar energy generated throughout the day in a battery energy storage system and then use that stored energy amid peak times in the evening, effectively using the battery to shave the peak.

It is essential to understand the specifics of an application and the overall objective of choosing the right energy management strategy. Sometimes, a combination of load shifting and peak shaving could result in the most optimal solution.

STRATEGIES OF PEAK SHAVING

Peak shaving can be achieved using various strategies, each with strengths and considerations. Here are the main approaches to peak shaving:

  • Battery Energy Storage System (BESS): Batteries can store energy when demand on the electric grid is low and release it when demand is high. A BESS is the most direct and flexible strategy for achieving peak shaving. It can respond quickly to changes in demand and supply, ensuring critical loads are running without straining the electric grid at peak periods. A BESS is equally beneficial when dealing with the intermittency of renewable energy sources by storing excess energy to be released later.
  • On-site Generation: If a facility has its own generation capabilities, such as a natural gas generator, solar panels, or wind turbines, these can produce electricity in peak demand periods, reducing the need to draw electricity from the grid. On-site generation is often combined with energy storage for optimal results.
  • Energy Efficiency Improvements: By improving the energy efficiency of buildings and equipment, the overall electricity demand can be decreased, which will, as a result, shave the peaks as well. Improving energy efficiency might involve upgrading to greater energy-efficient lighting and equipment, improving insulation, or streamlining operations.
  • Demand Response Programs: These programs incentivize energy users to minimize electricity usage during peak periods, often in response to signals from the utility. Energy users may receive a monetary incentive or a discount on their electricity bill in return for their participation. There are several types of demand side response programs available in different regions worldwide.

The best approach to peak shaving is a combination of strategies selected based on the specific energy demands of the user, the infrastructure and availability of the local electric grid, the budget, and of course, the objectives of the business. With advanced grid technologies, including IOT devices and smart meters, detailed data on energy usage can help understand how energy is used and how to implement peak shaving strategies for the best results.

BATTERY ENERGY STORAGE FOR PEAK SHAVING

Energy storage technologies, such as battery energy storage systems (BESS), can be crucial in peak shaving. Within off-peak hours, energy consumers can store energy in these battery systems. Then, in peak hours when demand is high, this stored energy can be dispatched to the load, effectively shaving off the peak demand the grid would’ve had to supply. 

Discharging a BESS within peak hours improves the stability and reliability of the power grid and can provide considerable cost savings. These savings are realized as the cost of electricity often changes throughout the day based on demand – it tends to be expensive during peak hours. Consumers can avoid these higher costs by using stored energy at these times instead of drawing from the electric grid.

A BESS can also be used to feed energy back to the grid rather than to a load. In this scenario, the grid will have additional energy to supply during this peak time. Various BESS locations worldwide are used solely to help improve the stability and reliability of the electric grid.

Battery systems for peak shaving and load shifting

PEAK SHAVING COST SAVINGS

The potential for cost savings when utilizing battery energy storage systems for peak shaving is significant. Considerable savings are even further evident for high-power demand loads like DC fast electric vehicle charging stations. The rapid increase in power demand while charging an EV can strain a local grid. However, these charging stations can benefit from a more consistent, resilient, and affordable power supply by integrating with a BESS for peak shaving. 

The extent of these savings depends on various factors. For instance, the electricity pricing structure in your area plays its part. If electricity prices experience wide day-to-day fluctuations, or if you’re a commercial customer subjected to high demand charges, peak shaving can lead to substantial energy cost savings. The higher the demand charges, the higher the potential savings.

The size and efficiency of the BESS also matter. Systems with larger capacities and higher round-trip efficiencies can store and use greater energy throughout peak periods, potentially leading to significant savings. The energy consumption profile also impacts savings. For instance, if usage has pronounced peaks when a DC fast charger is used, there’s extensive scope for savings by shaving these high peaks.

How often peak demand events happen also matters. More frequent peaks allow enhanced opportunities to use stored energy rather than drawing from the electric grid, which can result in higher savings.

A detailed analysis of your situation is essential to understand the potential savings. This analysis should consider the cost of the BESS itself, including the initial investment, installation, operation and maintenance costs, and system life. The savings gained from peak shaving should be compared to these costs to understand the return on investment (ROI) and the payback period. Analyzing payback and ROI is something EVESCO does for its customers when reviewing BESS applications, including peak shaving.

TYPES OF LOADS SUITABLE FOR PEAK SHAVING

Certain types of loads are more suitable for peak shaving, particularly those with a high power draw, and can be flexible when operating. Here are a few examples:

Electric Vehicle (EV) Charging Stations

In the case of DC fast charging stations, the power demand can be substantial with 360 kW chargers and above. Battery energy storage systems can help control and manage the energy drawn from an EV charging station by peak shaving during high-demand periods to minimize the impact on the grid and decrease demand charges.

HVAC Systems

Heating, ventilation, and air conditioning (HVAC) systems can consume significant power, especially in large commercial buildings and manufacturing facilities. The operation of these systems can be optimized to reduce energy usage within peak times through energy storage or integrated on-site generation. 

Industrial Processes

Many industrial processes consume large amounts of power. If these processes can be scheduled or adjusted to lower demand over peak periods, they can be a good fit for peak shaving. Examples could include manufacturing processes, data centers, oil refineries, or chemical companies. Many commercial businesses use battery energy storage combined with on-site generation to peak shave.

Energy-Intensive Appliances

Large energy-intensive appliances in commercial buildings or residential communities, like water heaters, refrigeration, washers, dryers, or pool pumps, can also benefit from peak shaving if their operation can be controlled or scheduled to avoid peak times.

The key thing is flexibility. Any substantial load or loads that can be shifted, controlled, or managed to reduce demand over peak periods will likely benefit from peak shaving. The availability of battery energy storage systems can provide even more flexibility, as these can store energy throughout off-peak times and provide it in peak times, facilitating peak shaving even for loads that need to operate during peak periods.

Strategies like peak shaving will become increasingly vital as the energy landscape evolves. Battery energy storage offers a practical, flexible, and increasingly affordable solution for peak shaving, supporting grid stability, enabling the integration of renewables, and reducing electricity costs. As we transition towards a sustainable, net-zero energy future, solutions like battery energy storage for peak shaving will undoubtedly play a pivotal role.

Categories: Blog, Evesco

Containerized battery energy storage system (bess)

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Discover the advantages of harnessing battery storage to reduce demand charges significantly. Equip yourself with essential insights, understand the dynamics of energy consumption, and redefine your energy management strategy. Start your journey towards smarter energy management by reading our guide to reducing demand charges with battery storage.

Reduce Demand Charges with Battery Storage

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