Peak Shaving

Peak shaving is the strategy by which an energy consumer reduces the kW pulled during peak-demand intervals to lower the demand charge (kW tariff) in the electricity bill. In most industrial tariffs, the demand charge is set by a monthly or annual peak — a one-minute spike is paid over the following 12 months. Peak shaving uses three core methods: (1) Load shifting — moving flexible loads from peak to off-peak; (2) Battery dispatch — drawing from a battery system during peak (battery shaves the peak); (3) Generator dispatch — running a diesel generator or cogeneration locally during peaks. As an optimization problem, it is modeled with MIP or MPC; the decision is which load to switch off and which device to run. Regulators and system operators sometimes offer 'peak demand response' programs paying for shaved capacity.