Three different strategies, routinely used as if they were one. The difference determines what equipment gets specified, and specifying against the wrong one is expensive.
Full detail below.
These three terms get treated as interchangeable in casual usage, in search queries, and unfortunately in a fair amount of sales material. They are not the same thing. Each one is triggered by something different, optimises for something different, and changes a different line on your invoice.
Getting them confused has a practical cost. A facility told it needs peak shaving, when what it actually has is two schedulable processes colliding at shift change, buys a battery to solve a calendar problem. A facility sold on arbitrage economics, when its real exposure is a ratcheted demand charge, optimises for the wrong number and can watch its demand charge go up.
Temporarily discharging stored energy (battery) during a facility's highest-demand intervals to lower the peak kW that sets the demand charge, without necessarily reducing total energy consumed.
| What triggers the battery or action | A metered demand peak is about to form. |
| What it optimises for | The demand charge line item. |
| What changes on the bill | The kW peak falls. Total kWh consumed stays broadly the same. |
Any strategy, load-shifting, efficiency upgrades, curtailment, that lowers peak kW demand generally. Peak shaving is one tactic under this broader umbrella, not a synonym for it.
| What triggers the battery or action | Whatever the chosen strategy triggers on: a schedule, a control setpoint, an operator decision. |
| What it optimises for | Peak kW demand generally, by any available means. |
| What changes on the bill | The kW peak falls. Total kWh may also fall, depending on the tactic used. |
Charging the battery when energy is cheap (off-peak) and discharging or offsetting usage when energy is expensive. A financial or rate-spread play, not primarily targeted at the demand-charge line item at all.
| What triggers the battery or action | A price signal, not a load event. |
| What it optimises for | The spread between cheap and expensive energy pricing. |
| What changes on the bill | The energy charge falls. The demand charge may be unaffected, or may rise if charging coincides with a peak. |
| Peak shaving | Demand reduction | Arbitrage | |
|---|---|---|---|
| Category | A tactic | The umbrella category | A separate financial strategy |
| Triggered by | An imminent demand peak | Schedule, setpoint or operator | A price signal |
| Targets | Demand charge (kW) | Peak kW by any means | Energy charge (kWh rate spread) |
| Requires storage? | Yes | No | Usually |
| Reduces total kWh? | Not necessarily | Sometimes | No |
The clearest proof of the distinction is a before and after pair of bills from the same site on the same rate schedule, with the demand charge broken out separately from the energy charge. When storage is dispatched against the peak specifically, the two lines move independently, and the demand line moves for reasons that have nothing to do with how much power the facility used in total.
The honest answer is that nobody can tell you from the outside. It depends on what is creating your peak and which billing determinant is binding on your account, and both of those live in your interval data rather than in a brochure. A site whose peak is set by an unschedulable motor start is a genuine storage candidate. A site whose peak is set by a habit is a scheduling problem, and we will tell you so.
The relevant terms are defined in the glossary, and the practical options are laid out in how to reduce demand charges.
Peak shaving is temporarily discharging stored energy from a battery during a facility's highest-demand intervals, to lower the peak kilowatt figure that sets the demand charge. It does not necessarily reduce the total energy the facility consumes. It changes where that energy comes from at the few moments that matter to the bill.
Demand reduction is any strategy that lowers peak kilowatt demand generally, including load shifting, efficiency upgrades and curtailment. Peak shaving is one tactic under that broader umbrella, not a synonym for it. A facility can achieve demand reduction with scheduling changes alone and no battery at all.
Energy arbitrage means charging a battery when energy is cheap, typically off-peak, and discharging or offsetting usage when energy is expensive. It is a financial play on the spread between rates. It is not primarily aimed at the demand charge line item at all.
No. Demand reduction is the category; peak shaving is one tactic inside it. Conflating them causes real specification errors, because a site whose peak comes from two schedulable processes colliding may need a scheduling change rather than storage, while a site whose peak comes from an unschedulable motor start genuinely needs stored power.
Not reliably, and it can work against them. An arbitrage-optimised battery charges when energy prices are low, and if that charging window coincides with an existing load peak, the act of charging can raise your metered demand and increase the demand charge even while the energy charge falls.
It depends on what is creating your peak and which billing determinant is binding. Interval data answers that. If the peak comes from processes that can be moved, demand reduction through scheduling is the cheapest fix. If it comes from loads that cannot be moved, peak shaving with storage is the usual answer. Arbitrage is a separate question driven by your rate structure, not your peak.
