What is Peak Shaving? 3 Strategies for Slashing Energy Costs

What Is Peak Shaving?

A: Cutting your costs during the time periods you use the most energy

For most businesses, saving money on energy is a frequent topic on the minds of the stakeholders. This leads some of them to take action, which includes everything from energy efficiency improvements in their infrastructure to integrating renewable energy — like solar power — to campaigning to change the habits of employees in order to use less energy.  

One lesser-known way to save money on energy is through the use of peak shaving. 

What is peak shaving?

Peak shaving refers to the idea of trying to reduce energy costs during the times of day when you use the most energy. That’s a general definition. We’ll get more specific in a moment.

For many businesses, peak energy consumption happens throughout the day during business hours. For others, they might see the peak loads during meal times, at midday, or at other times of day. For others, it will be during the evening hours.

Benefits of peak shaving

Peak shaving has one primary benefit — to reduce utility costs for businesses and any other power consumers using it. By strategically shifting where your energy comes from during the times of day when your electricity usage is at its highest, you can make the greatest impact on your energy bills.

A secondary benefit is that you reduce demand on the power grid during times of day when it may be most strained. This helps other customers who can’t reduce their electricity consumption during these times by ensuring their power will stay on. 

Blackouts and brownouts can happen. Peak shaving reduces the likelihood.  

What are your energy usage habits?

Peak shaving, or peak load shaving, can be visualized with the idea of a bell curve, like the one you see here.

The black line represents one possible power demand curve. This is fairly accurate for many businesses, most of whom experience peak periods of energy use during the day, except perhaps for restaurants and other nighttime businesses. 

During the day at most businesses, their computers are on, lights are humming, phones are charging, and all the rest. For big companies, you’re talking hundreds or thousands of people in one building. Their energy use goes up as the day progresses, hits peak power demand somewhere in the afternoon, and then declines as people go home. 

In warmer climates and certain times of year, air conditioning costs accelerate with each hour, peaking in the mid-afternoon sometime. In colder climates, the same is true, but for heating.

The green line on the same graph represents the idea behind peak shaving. It’s the attempt to drastically reduce power consumption at the times of day when energy costs are at their highest. 

Peak demand — How the utilities see it

The other factor in play here is known as peak demand. We have a limited electricity supply. 

Across the power grid, electricity consumption tends to peak at certain times of day. So, the utility seeks to reduce the strain and maintain grid stability during those times. 

They can also monitor individual businesses, farms, and even residences to determine their peak demand periods, and then encourage them to reduce their power consumption during those times.

Demand charges

Sometimes, friendly letters and energy conservation campaigns aren’t enough. And power plants can only crank out so much power. So, some utilities try a more attention-getting tactic — raising energy prices during peak demand periods. 

Not every utility does it, but when energy consumption rises across the power grid or with specific customers, they’ll increase demand charges during these times. In doing this, they increase profits and also encourage people to shift their behaviors and reduce electricity usage during these times.

If your highest power consumption is happening during the same peak times of day the utility is charging peak demand pricing, you are paying lots more money in electricity costs.

But while you can’t make the utility stop using demand charges, you can reduce or avoid them using strategies like peak shaving and load shifting.

How is load shifting different from peak shaving?

Load shifting is the “lower tech” way to avoid peak demand charges. Here, you do things like shut off and stop using equipment and other energy consuming devices and processes during peak demand periods. 

The thought process is, if the utility company is charging us big money from, say, noon to 4pm, then we’ll do our most power intensive tasks before and after that. 

With peak shaving, you’re playing the game a little more creatively. With this strategy, you’re paying attention to the specific limits separating peak charges from regular utility costs. And when you are near the limits, you switch the source of energy production so you can keep operating your usual tasks, but without the energy coming through the power grid.

Now, not every utility uses demand charges. But even if they don’t, you still have high demand periods of time when your business uses the most of its energy. So with peak shaving, you stand to save big money no matter what.

Let’s get more specific with how to actually conduct peak shaving.

Suppose your business spends $20,000 a month on your electricity bills. A large chunk of this energy is used between 10am and 3pm. So if you could cut your costs during that time by 50%, you’re eliminating a huge portion of your energy bill. With peak shaving, you can do it.

3 strategies for peak shaving 

Now that you know the benefits of peak shaving and how it works, here are the three primary ways to save on energy costs through peak shaving.

Use alternative localized power source during peak times

Alternative power sources could be a number of energy sources such as:

• An on-site generator

• Solar panels

• Wind or other renewable energy sources

• Propane or natural gas

Each of these power generation methods brings its own set of costs, so the key is to track those costs versus the savings on your electricity bill. 

Of these, a generator system is the worst option since it depends on the cost of fuel — something also outside your control (not to mention the noise or the smell). 

But all these work for peak shaving because now you’re providing energy that doesn’t get billed by the power company. You’re not reducing usage; you’re altering the source of the energy. 

We talk about the hours between 10am-3pm for two reasons. First, these are the hours when many businesses are using the most energy — their “peak” energy usage. Second, this is when the sun is highest in the sky. So with some nice afternoon sun, solar panels can provide a good portion of your energy during the time of day you need it most. Solar is ideal for peak shaving for any daytime business.

Improve your energy efficiency

The concept of “green buildings” is one attempt to accomplish this. With more windows, for example, you need less indoor lighting during certain times of day. With rooftop greeneries, the building itself absorbs less heat. But most existing buildings can’t make these kinds of improvements.

Still, you do have other options. You can change the lighting you’re using. Compact fluorescent bulbs and LED lights use a lot less energy than traditional bulbs. You can improve the air conditioning and heating efficiency by using adjustable speed drives for the fans. 

You may be able to reduce hot water usage, which could mean just lowering the maximum temperature in your hot water heaters. There are tons of ways to improve efficiency in addition to these that you can research.

Combine the first two strategies and you’ll experience some real energy cost savings.

Utilize a solar battery energy storage system

This is actually the most profound method of peak shaving — especially if your peak energy usage isn’t during the hours of 10am – 3pm. If you combine battery storage with the first two strategies, your new and permanently lower electricity bills will put a big grin on your face.

How does this work? From 10am – 3pm, when the sun is highest in the sky, solar panels will collect the most energy. But what happens if they collect excess energy, more than you need in those hours? Solar batteries will store that extra energy so you can use it later when you need it. 

If your peak usage happens later in the day or in the evening, your batteries will use their energy storage reserves at that time. If your utility charges peak demand prices, you’ll be cutting into those as well. 

Solar battery energy storage systems, combined with solar panels and energy efficiency improvements, will cut your peak energy costs more than any other peak shaving approach. 

Especially if your optimal peak shaving time is in the evening, battery energy storage systems make even more economic sense if you also have solar panels. Even if the sun doesn’t shine during your peak times of usage, you can still slash utility costs using peak shaving, without having to adjust your power consumption. 

The bonus benefit of batteries

As an additional benefit, even if the power goes out, certain solar storage battery solutions will provide backup power to keep your lights on.

Normally, grid-connected solar panels also stop working during a power outage because of the safety risks of an overload when the power gets restored. But with the right solar batteries, you can keep using the stored energy while other businesses have to turn people away. 

Want to see how you can utilize peak shaving with solar panels or battery energy storage?