How Battery Storage Retrofits Can Reduce Demand Charges Through Peak Shaving
Why More Commercial Facilities Are Adding Battery Storage to Existing Solar Systems
For many commercial and industrial facilities, reducing electricity costs is a constant priority. While solar energy has helped thousands of businesses lower their utility bills, many facility owners are discovering that a significant portion of their monthly electric costs comes from something entirely different: demand charges.
As utility rates continue to rise and battery technology becomes more accessible, battery energy storage system (BESS) retrofits are emerging as an effective strategy for reducing demand charges through peak shaving.
For facilities with existing solar systems, adding battery storage can unlock new savings opportunities without requiring a complete redesign of the existing solar installation.
What Are Demand Charges?
Most commercial utility bills consist of two primary components:
Energy Charges
These charges are based on the total electricity consumed over a billing period, typically measured in kilowatt-hours (kWh).
Demand Charges
Demand charges are based on the highest level of power demand recorded during a specific interval, often 15 or 30 minutes, during the billing cycle.
This means a facility may experience a brief spike in electricity usage that lasts only a few minutes, yet that spike can significantly impact the monthly utility bill.
For many commercial customers, demand charges can represent 30% to 70% of total electricity costs.
What Is Peak Shaving?
Peak shaving is the practice of reducing a facility’s maximum power demand during periods of high electrical consumption.
Instead of drawing all required power from the utility grid during a demand spike, a battery energy storage system can discharge stored energy to support facility loads.
As a result:
- The facility continues operating normally.
- The utility sees a lower peak demand.
- Demand charges are reduced.
The concept is simple, but the financial impact can be substantial.
How a BESS Retrofit Works
A battery storage retrofit involves integrating a battery energy storage system with an existing electrical infrastructure and, in many cases, an existing solar PV system.
During periods of lower demand, the battery charges using either:
- Excess solar production
- Grid power during lower-cost periods
- A combination of both
When facility demand begins approaching a predefined threshold, the battery automatically discharges to reduce the amount of power being imported from the grid.
This process helps flatten demand peaks and improve overall energy management.
Visualizing Peak Shaving with Battery Storage
The concept of peak shaving is often easier to understand when visualized.
In the example below, a commercial facility experiences a significant increase in power demand during the afternoon. Without battery storage, the facility’s peak demand reaches 1.8 MW, which determines the demand charges applied by the utility.
After installing a Battery Energy Storage System (BESS), the battery automatically discharges during the highest demand periods, reducing the amount of power imported from the grid. As a result, the facility’s peak demand is reduced to approximately 1.3 MW while maintaining normal operations.
This reduction in peak demand can significantly lower monthly demand charges and improve overall project economics.
Figure 1. Peak shaving example using a Battery Energy Storage System (BESS). During periods of high facility demand, the battery discharges to reduce power imported from the grid. In this example, the facility’s peak demand is reduced from 1.8 MW to 1.3 MW, lowering demand charges while maintaining normal facility operations.
Existing 1 MW rooftop solar system
Peak facility demand of 1.8 MW
Demand charge of $22 per kW
Frequent afternoon demand spikes
Without BESS
- Peak Demand: 1.8 MW
- Demand Charge: $39,600/month
With BESS
- Peak Demand: 1.3 MW
- Demand Charge: $28,600/month
Estimated Savings
- $11,000/month
- $132,000/year
That visual would likely become the most shared image from the entire article because it immediately translates peak shaving into dollars and cents.
Peak Shaving with Battery Energy Storage
Illustrative facility demand profile before and after a BESS retrofit.
| time | without BESS | with BESS |
|---|---|---|
| 6 AM | 600 | 600 |
| 8 AM | 850 | 850 |
| 10 AM | 1,100 | 1,100 |
| 12 PM | 1,400 | 1,100 |
| 2 PM | 1,800 | 1,300 |
| 4 PM | 1,600 | 1,250 |
| 6 PM | 1,200 | 1,200 |
| 8 PM | 800 | 800 |
Why Existing Solar Facilities Are Strong Candidates
Many commercial solar systems installed over the past decade were designed primarily to offset energy consumption.
At the time, battery storage economics were often less attractive, and many projects focused exclusively on reducing kilowatt-hour purchases.
Today, the economics have changed.
Battery costs have declined, utility demand charges have increased, and many facility owners are looking for additional ways to maximize the value of their existing solar investments.
For these facilities, a battery retrofit can serve as the next phase of their energy strategy.
Additional Benefits Beyond Demand Charge Reduction
While peak shaving is often the primary driver, battery storage can provide several additional benefits.
Backup Power and Resilience
Battery systems can support critical loads during utility outages, reducing operational disruptions and improving business continuity.
Time-of-Use Optimization
Facilities subject to time-of-use utility rates may be able to charge batteries during lower-cost periods and discharge during higher-cost periods.
Improved Solar Self-Consumption
Battery storage can capture excess solar energy generated during the day and utilize it later when facility demand remains high but solar production decreases.
Future Energy Flexibility
Battery systems can help facilities prepare for future electrification initiatives, EV charging infrastructure, and evolving utility rate structures.
Key Considerations Before Installing a BESS Retrofit
Not every facility will achieve the same results from a battery storage retrofit.
Several factors should be evaluated before moving forward.
Utility Tariff Structure
Facilities with high demand charges generally see the strongest economic benefits.
Load Profile Analysis
Understanding when and how demand spikes occur is critical for proper battery sizing.
Existing Electrical Infrastructure
Switchgear, transformers, and interconnection requirements should be reviewed to determine retrofit feasibility.
Battery Sizing
Oversizing a battery system can negatively impact project economics, while undersizing may limit achievable savings.
The most successful projects begin with a detailed analysis of utility bills and facility load data.
How AmeriSol Energy Solutions Can Help
At AmeriSol Energy Solutions, we help commercial and industrial clients evaluate opportunities to reduce energy costs through solar, battery storage, and advanced energy management strategies.
Whether a facility already has solar installed or is evaluating energy storage for the first time, our team can help assess demand charge reduction opportunities, battery storage options, equipment procurement strategies, and project feasibility.
By combining solar generation with battery storage, many facilities can improve resilience, reduce operating costs, and increase the long-term value of their energy investments.
Conclusion
As utility rates continue to evolve, many commercial facilities are finding that demand charges represent one of the largest opportunities for cost savings.
Battery energy storage retrofits offer a practical way to reduce peak demand, lower monthly utility expenses, and improve overall energy resilience.
For facilities with high demand charges and existing solar installations, a properly designed battery storage system may be one of the most effective investments available today.
References
- National Renewable Energy Laboratory (NREL) – Battery Storage for Commercial Applications
- U.S. Energy Information Administration (EIA) – Electricity Explained
- National Renewable Energy Laboratory (NREL) – Behind-the-Meter Battery Storage Analysis
- National Renewable Energy Laboratory – Commercial Battery Storage Economics