Using solar to reduce commercial demand charges
Demand charges are fees based on a facility's peak power draw during a billing period and can be a large portion of commercial electric bills. Solar combined with storage and demand-side controls can help reduce those peaks and lower demand charges.
Why demand charges matter
- Measured in kW, demand charges bill for the highest short-term power demand and can be triggered by brief spikes.
- Reducing the peak can result in significant monthly savings for businesses with high demand charge exposure.
Strategies to reduce demand charges
- Battery energy storage: Store solar energy or pre-charge batteries and discharge them during peak demand windows to shave spikes.
- Load management: Shift non-critical loads to off-peak times or sequence equipment startups to avoid simultaneous large draws.
- Solar production timing: While daytime solar can help lower daytime peaks, batteries are often required to cover brief late-afternoon or evening peaks.
Implementation steps
- Perform a demand analysis: Identify when peaks occur and which equipment contributes most to the peak.
- Model combined systems: Simulate solar plus battery dispatch strategies to quantify demand charge reductions.
- Consider controls and automation: Smart control systems can optimize battery dispatch and load shedding for maximum savings.
Financial considerations
- Batteries often improve the economics of demand charge reduction more than solar alone.
- Measure payback on combined investments using historical demand data and utility tariffs.
For many commercial customers, a tailored mix of solar, storage and demand management provides the most cost-effective solution to reduce demand charges and overall energy costs.