Energy Action helps Australian organisations better understand energy usage, procurement and cost-management opportunities. By combining energy data with practical energy strategies, businesses can make more informed decisions and take greater control of electricity costs. Visit Energy Action to explore solutions for improving your business energy strategy.
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For many Australian organisations, reducing electricity consumption is only part of controlling energy costs. A business can lower its total electricity use yet still face substantial charges because of high maximum demand.
That is why understanding how to reduce peak demand business costs is important. Peak demand occurs when a site draws its highest level of electricity during a defined measurement period. When several large electrical loads operate at once, even a relatively short spike can contribute to higher demand-related charges.
Peak demand management therefore focuses not only on how much electricity a business consumes, but also on when and how intensely it uses electricity.
For manufacturers, warehouses, offices, shopping centres, cold-storage facilities and other energy-intensive sites, practical demand management can help flatten electricity loads and improve overall energy performance.
A reduce peak demand business strategy aims to lower the maximum electrical load a commercial or industrial site places on the electricity network.
Electricity consumption and demand are different. Consumption measures the total electricity used over time, generally in kilowatt-hours. Demand measures how much electrical capacity a site requires during a particular interval.
For example, two factories could consume similar amounts of electricity each day. However, if one starts multiple production lines, compressors and HVAC systems simultaneously, it could create a much higher demand peak.
Demand management is therefore about controlling these concentrated periods of electricity use.
Demand charges can form part of commercial electricity costs. Depending on the tariff and network, demand may be measured in kilowatts or kilovolt-amperes and calculation methods can vary.
Consequently, businesses should understand their actual tariff before investing in peak reduction measures.
Energy Action's existing business energy guidance also identifies demand management as a cost-saving strategy, including off-peak electricity use, battery storage, smart controls and demand response.
The first step is understanding when demand peaks occur.
Monthly electricity bills provide useful cost information, but interval meter data gives businesses a clearer picture of how electricity demand changes throughout the day.
Analyse when maximum demand occurs and compare those periods with production schedules and equipment operation.
Key areas to investigate include:
| Demand factor | What to investigate |
| Peak time | When does maximum demand normally occur? |
| Frequency | Is the peak daily, occasional or seasonal? |
| Equipment | Which major systems operate during the peak? |
| Start-up | Do several large loads start simultaneously? |
| Weather | Do hot or cold days increase demand? |
| Production | Does a particular process create the peak? |
| Power factor | Is poor power factor increasing kVA demand? |
Where possible, analyse 12 months of interval data. This provides a better view of seasonal changes.
Once the business understands what creates its peaks, it can target those loads rather than applying broad energy-saving measures that may not reduce maximum demand.
Simultaneous equipment start-ups can create significant demand spikes.
At the beginning of a shift, for example, HVAC equipment, compressors, machinery, refrigeration systems and other electrical loads may all start within a short period.
Instead, businesses can stagger these loads.
A facility could start HVAC equipment first, followed by compressors and then production lines at planned intervals. Flexible charging equipment could start later when other loads have stabilised.
Timers, programmable controllers and building management systems can automate this process.
Importantly, staggered start-ups may require relatively little capital investment. Therefore, they are a practical first option for businesses with predictable daily peaks.
Load shifting moves electricity-consuming activities away from periods when site demand is already high.
Suitable loads may include:
For example, instead of charging electric forklifts while production machinery is operating at maximum capacity, a warehouse could schedule charging after production demand falls.
However, businesses need to coordinate shifted loads carefully. Moving several processes to the same new period could simply create another peak.
The objective is to flatten the load profile rather than move the problem.
Manual peak demand management can be difficult because demand changes quickly.
Energy management systems and building management systems can monitor electricity loads continuously. When demand approaches an internal threshold, the system can automatically adjust selected equipment.
Automated controls can:
For example, if demand approaches a site's predetermined limit, the system could temporarily reduce EV charging or adjust HVAC settings. Once demand falls, those loads can return to normal operation.
Businesses that are not ready for full automation can start with demand alerts. Staff can then follow a documented response plan whenever demand approaches a target.
Energy efficiency and peak demand management work particularly well together when inefficient equipment operates during the site's maximum demand period.
Potential upgrades include:
| Equipment | Potential improvement |
| HVAC | Efficient systems and improved controls |
| Lighting | LEDs, sensors and zoning |
| Motors | Efficient motors and appropriate controls |
| Pumps and fans | Variable speed drives where suitable |
| Refrigeration | Efficient compressors and controls |
| Compressed air | Leak reduction and system optimisation |
An efficient system uses less electricity to perform the same task. Therefore, when upgraded equipment operates during peak periods, it can reduce both total consumption and maximum demand.
Businesses should consequently evaluate efficiency projects against both potential kilowatt-hour savings and demand reduction.
HVAC and refrigeration systems can represent substantial commercial electricity loads.
However, they may also provide opportunities for demand management because buildings and refrigerated spaces can retain thermal conditions for a period.
A business may, for example, pre-cool a building before a critical demand period and then reduce cooling output temporarily. Similarly, refrigeration controls can coordinate compressor operation to avoid unnecessary simultaneous loads.
Suitable strategies include optimising HVAC start times, improving insulation, maintaining filters and coils, using variable speed drives and coordinating multiple compressors or chillers.
Any strategy must maintain workplace safety, equipment requirements and product-quality standards.
Commercial solar can reduce the amount of electricity drawn from the grid during daylight hours.
However, its impact on peak demand depends on timing.
A business whose highest demand occurs around midday could receive meaningful peak reduction from solar. Conversely, a business that reaches maximum demand after sunset may achieve substantial energy savings from solar but little direct reduction in its maximum grid demand.
Therefore, businesses should compare solar generation profiles with interval electricity data.
Flexible operations can also be scheduled to coincide with periods of strong onsite solar generation. This can improve self-consumption while reducing reliance on grid electricity.
Battery storage can provide a targeted way to reduce peak grid demand.
When site demand rises towards a predetermined threshold, a battery can discharge and supply part of the required electricity. Consequently, the site's grid demand can remain lower even though operations continue.
For example, if a facility requires 500 kW during a peak interval and a battery provides 80 kW, grid demand could theoretically fall to approximately 420 kW, subject to system capability and losses.
However, businesses should assess the full financial case, including battery cost, capacity, charging costs, efficiency losses, degradation, tariff structure and the frequency of demand events.
Battery storage can become particularly valuable when combined with solar and intelligent energy controls.
Some commercial customers have demand measured in kilovolt-amperes rather than only kilowatts.
In these circumstances, poor power factor can increase apparent demand.
Motors, transformers and other inductive equipment may contribute to low power factor. Properly designed power factor correction equipment may reduce kVA demand where the tariff makes this financially relevant.
However, businesses should first confirm how their tariff calculates demand and obtain appropriate technical advice before investing in correction equipment.
Reducing demand should not be a one-off project.
Production schedules change, equipment is replaced, businesses expand and new electrical loads such as EV charging can alter the site's demand profile.
Therefore, establish an ongoing demand management process.
| Management area | Action |
| Responsibility | Assign an energy or facilities manager |
| Target | Establish an internal demand threshold |
| Monitoring | Track interval demand |
| Alerts | Set warnings before thresholds are exceeded |
| Scheduling | Coordinate large electrical loads |
| Reporting | Review demand performance monthly |
| Improvement | Investigate unusual peaks |
Regular monitoring also helps businesses determine whether demand reduction projects actually deliver the expected results.
Peak shaving and load shifting are related but different strategies.
| Strategy | Purpose |
| Peak shaving | Reduce electricity use during the highest-demand interval |
| Load shifting | Move consumption to another period |
| Energy efficiency | Reduce electricity required for the same task |
| Battery dispatch | Supply stored electricity to limit grid demand |
| Demand response | Adjust loads in response to energy system requirements |
Many businesses will achieve better results by combining several approaches rather than relying on one solution.
For instance, a manufacturer could stagger machinery start-ups, improve motor efficiency, shift charging loads and use battery storage for occasional remaining peaks.
One common mistake is focusing exclusively on total electricity consumption. Reducing kilowatt-hours does not necessarily reduce maximum demand if the affected equipment is not operating during the peak.
Another mistake is shifting loads without coordination. Moving several large loads to the same period can simply create a new maximum.
Businesses can also overestimate the effect of solar. Solar only reduces peak grid demand when generation aligns with the relevant demand period.
Finally, avoid investing in expensive technology before analysing interval data.
The preferred sequence is straightforward: measure demand, identify its cause, model potential solutions and then invest.
Businesses can use the following process:
This structured approach helps businesses prioritise measures that directly address the causes of peak demand.
Learning how to reduce peak demand business costs starts with understanding when and why electricity peaks occur.
Interval data can reveal the equipment and operational activities responsible for maximum demand. Businesses can then use practical strategies such as staggered equipment start-ups, load shifting, automated controls, HVAC optimisation and targeted energy-efficiency upgrades.
Solar and battery storage can provide further opportunities where their operating profiles align with site demand. However, every investment should be assessed against the business's actual tariff, electricity data and operational requirements.
Energy Action helps Australian organisations better understand energy usage, procurement and cost-management opportunities. By combining energy data with practical energy strategies, businesses can make more informed decisions and take greater control of electricity costs. Visit Energy Action to explore solutions for improving your business energy strategy.
Reducing peak demand means lowering the highest rate at which a business draws electricity during the measurement periods relevant to its tariff. This differs from reducing total electricity consumption because demand focuses on the intensity of electricity use during specific intervals. Businesses can reduce peaks by staggering equipment, shifting flexible processes and using automated controls.
Calculation methods vary between electricity networks, tariffs and contracts. Demand may be measured in kilowatts or kilovolt-amperes, while charging periods and maximum-demand methodologies can also differ. Therefore, businesses should review their actual network tariff and electricity contract before estimating potential savings.
Yes, but only when solar production coincides with the site's relevant peak demand. A business with strong daytime peaks may receive greater demand reduction than one whose highest load occurs after sunset. Reviewing interval demand alongside expected solar generation helps determine the likely benefit.
Battery storage can discharge when site demand rises, reducing electricity drawn from the grid during a peak. This technique, commonly called peak shaving, can work well for short and predictable demand events. However, businesses should model battery costs, degradation, charging requirements and tariff savings before investing.
Start by obtaining interval electricity data and identifying exactly when maximum demand occurs. Then compare those periods with equipment schedules to determine which loads create the peaks and introduce low-cost measures such as staggered start-ups or scheduling changes. Businesses can subsequently evaluate automation, efficiency upgrades, solar and batteries based on measured results.
