What a demand charge is
Commercial electricity tariffs usually have two parts: an energy charge per kilowatt-hour consumed, and a demand charge per kilowatt of peak power drawn. The demand charge is based on the highest average power over a short interval - commonly 15 minutes - during the billing month. A site that draws 600 kW for a single 15-minute window pays for 600 kW of "demand" even if the rest of the month hovers at 100 kW.
Why it hurts charging sites
Fast charging is inherently peaky. Several vehicles arriving together can push a site's draw to several times its average. In many markets the demand charge is 40-60% of a fast-charging site's bill, and it is charged year-round against a single monthly peak. For a site with a 400 kW peak assessed at $15/kW, that is $6,000 per month, $72,000 a year - often more than the energy itself.
How peak shaving works
A battery sits behind the meter and discharges whenever site load would otherwise exceed a set threshold. If the threshold is 200 kW and four chargers together demand 500 kW, the battery supplies 300 kW and the grid supplies 200 kW. The grid never sees the spike, so the demand charge is calculated against the lower figure. The battery then recharges during off-peak hours, ready for the next event.
Worked example
Take a highway hub with four 240 kW chargers (960 kW theoretical peak) on a 400 kW connection. Without storage, a busy evening could push the 15-minute peak to 700 kW. With a 700 kWh battery and a 400 kW cap, the grid peak is held at 400 kW. The demand-charge saving is 300 kW times the tariff - at $15/kW, $4,500 per month, or $54,000 a year. Against a battery cost of roughly $150,000-$200,000 installed, payback from demand charges alone is three to four years, before any capacity-deferral or arbitrage benefit.
The control system matters as much as the battery
Peak shaving is only as good as the controller that decides when to discharge. A good energy management system forecasts the site's 15-minute peak using recent session data, holds enough battery reserve for unplanned arrivals, and never lets the battery run flat before an event. It also coordinates with time-of-use pricing so the battery charges when energy is cheapest. OpenADR or utility demand-response signals can stack extra revenue on top.
Beyond demand charges
The same battery that shaves demand also enables capacity deferral (avoiding a transformer upgrade), energy arbitrage (buying low, discharging high), resilience (islanding during outages) and renewable capture (absorbing solar surplus). Operators should value all of these together, because the battery is usually justified by the sum, not by any single benefit.
Getting started
Pull twelve months of interval data from the utility, identify the peak-driving hours, and model shaving scenarios in a spreadsheet or supplier tool. Most battery suppliers will run this for you with their sizing software. Start conservative: shave to the 90th-percentile load rather than the absolute peak, and expand once the site's real behaviour is known.