Understanding demand charges, and why batteries can outperform solar

Demand charges on commercial electricity bills: what they are, how they're calculated, why they can represent 30 to 50% of a commercial bill, and why a battery often reduces them more effectively than solar alone.

Key findings

• Demand charges are based on your highest power draw in any 30-minute interval. One brief spike can set the charge for the entire month.
• For many commercial sites, demand charges are 30 to 50% of the total bill. Solar alone doesn't reduce them.
• A battery dispatching during peak windows lowers your peak interval reading - reducing the demand charge for that month.
• On industrial tariffs with high demand charges, battery storage often delivers returns comparable to the solar generation itself.
• To assess the opportunity you need your interval data and a clear view of which tariff components are demand vs consumption.

What demand charges actually are

Households pay by the kilowatt-hour. Commercial and industrial tariffs often charge for consumption AND for the peak rate at which you draw power.

Why solar doesn't fix this on its own

Solar lowers consumption during generation hours. But peak events often happen outside those hours - early morning startups, evening shift changes, brief production spikes. A 200kW startup demand reading at 7am sets the charge for the month, regardless of how much solar you generate at noon.

What a battery does differently

A battery programmed for peak demand management charges from solar (or cheaply from the grid overnight) and dispatches during identified peak windows. When demand is about to spike, the battery supplies power, lowering your peak interval reading and the demand charge that follows it.