There are lots of benefits to peak shaving. It helps businesses operate more efficiently, reduces the need for additional power capacity that is only then used during peak periods, and enhances the overall stability and reliability of the electricity grid.
Peak shaving can help:
- Avoid high energy tariffs
A business on a variable tariff may see its energy costs increase at times of high demand. This is because electricity prices go up to disincentivise use, while during much quieter periods, prices are correspondingly lower. These prices per kilowatt (kW) are often referred to as peak and off-peak tariffs, reflecting those demand levels.
On top of this, there are two pricing mechanisms that apply to businesses. The Distribution Use of System (DUoS) is calculated by the amount of energy a business uses and businesses are incentivised to reduce their energy usage at key times of the day. The second mechanism is Transmission Network Use of System (TNUoS) and this is calculated on net consumption volumes to encourage businesses to become more energy efficient. Peak shaving is a key component in reducing reliance on the grid and therefore additional costs.
- Avoid energy bill surcharges
Peak shaving can also ensure that a company does not breach its maximum import capacity (MIC), also known as a kVA allowance. This is a limit on how much energy you can use and exists to ensure that every business gets a fair share of the total electricity available. If you exceed your MIC, you will face significant surcharges from your energy provider. We have worked with companies that were paying tens of thousands of pounds a year in MIC charges. You can read more about the importance of avoiding MIC charges in our dedicated article here.
- Reduce carbon emissions
By avoiding peak load spikes, a business can contribute to lower carbon emissions by using energy at less carbon-intensive periods and therefore reducing the reliance on fossil-fuel-based power plants. This is an important point for businesses motivated by net zero targets.