4.2 Peak shaving; storing cheap off-peak power and releasing it at demand peaks

Arbitrage at grid scale

Electricity demand follows a daily pattern. Overnight demand is low — residential loads drop, commercial and industrial facilities reduce or shut down. Midday demand rises but is often offset by solar generation in markets with significant PV penetration. The evening peak — roughly 5pm to 9pm in most US markets — is where demand spikes hardest as residential loads come online simultaneously.

Peak shaving exploits this pattern. A BESS charges during low-demand periods when power is cheaper and generation is available. It discharges during the evening peak when power is expensive and grid operators are straining to meet demand without running expensive and inefficient peaker plants. The BESS earns revenue from the price differential and reduces the system cost of meeting peak demand.

For a project manager or field professional, understanding peak shaving matters because it defines the operating cycle the system is designed around. A system built for peak shaving cycles once per day, charges in the morning, discharges in the evening. That daily cycle drives battery selection, thermal management sizing, and long-term degradation projections. It also defines what the commissioning team needs to demonstrate during performance testing.