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Solar Demand Charge Calculator

Enter your peak demand, demand rate, and solar + battery system — compare solar-only vs battery-backed demand reduction, optimal battery sizing, and payback period.

Demand and energy details
kW
$/kW
$/kWh
kWh/mo
Solar + battery system
kW
kW
kWh
Demand charge analysis
$600/mo demand charges — battery saves $360/mo
Current demand charges$600/mo
Current energy charges$800/mo
Current total monthly bill$1,400/mo
Solar-only demand reduction18% (limited — solar can't guarantee peak shaving)
Solar-only monthly savings$436/mo
Solar + battery demand reduction60% (battery guarantees peak shaving)
Demand savings with battery$360/mo
Energy savings from solar$328/mo
Total monthly savings (solar + battery)$688/mo
Annual savings$8,260/yr
Optimal battery power for demand shaving25 kW (shave 50% of peak)
Optimal battery capacity50 kWh (2-hr duration)
Battery cost for demand shaving only$25,000
Battery ROI payback (demand savings only)5.8 yrs
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How to Use This Calculator

Find your peak demand and demand charge rate

Your monthly peak demand is the highest 15-minute average power reading in a billing period — found on your commercial electric bill, usually labeled in kW. The demand charge rate ($/kW) multiplies that peak. A single compressor startup, elevator, or HVAC surge can set the demand peak for the entire month, making demand management critical for commercial customers.

Enter your solar and battery system

Solar alone has limited demand reduction ability — it only helps if your demand peak happens to occur during solar production hours. Battery storage changes the math fundamentally: the battery monitors demand in real-time and discharges when you approach your peak threshold, "shaving" the peak regardless of weather or time of day. This is called demand charge management or peak shaving.

Read the results

The calculator shows current demand charges vs energy charges, solar-only savings (modest for demand), solar + battery savings (substantial), optimal battery sizing for your peak, and battery payback from demand savings alone — without even counting the energy arbitrage value.

The Formula

Monthly Demand Charge = Peak kW × Demand Rate ($/kW) Monthly Energy Charge = Monthly kWh × Energy Rate ($/kWh) Solar Demand Reduction = Solar kW ÷ Peak kW × 30% (limited, probabilistic) Battery Demand Reduction = Battery kW (can shave up to 60% of peak) New Peak = Original Peak − Battery Discharge kW Monthly Demand Savings = (Original Peak − New Peak) × Demand Rate Optimal Battery kW = Peak kW × 50% (shave half the peak) Optimal Battery kWh = Battery kW × 2 hrs (typical peak duration) Battery Payback = Battery Cost ÷ Annual Demand Savings

The key insight: demand charges are billed on your peak 15-minute interval for the month. Batteries use real-time monitoring and discharge to prevent the meter from ever seeing that peak. Solar panels reduce average consumption but cannot reliably prevent the specific 15-minute spike that sets your demand charge — that requires storage.

Example

Corner Store — 50 kW peak, $12/kW demand rate

A corner grocery store has a 50 kW peak demand (refrigeration + HVAC startup) and pays $12/kW for demand charges. They're considering a 30 kW solar array with a 30 kW / 60 kWh battery to reduce their bill.

Peak demand50 kW
Demand rate$12/kW
Monthly kWh8,000 kWh
Energy rate$0.10/kWh
Solar30 kW
Battery30 kW / 60 kWh

Result

Current demand charge$600/mo
Solar-only demand reduction~18% (unreliable)
Battery demand reduction~54% (reliable)
Demand savings with battery~$324/mo
Energy savings from solar~$110/mo
Total monthly savings~$434/mo
Annual savings~$5,200/yr

The battery turns a modest solar ROI into a compelling one. Without demand charge management, solar saves mainly on energy ($110/mo). With the battery controlling the demand peak, total savings jump to $434/month — the demand savings alone justify the battery investment in under 5 years, with the solar providing additional value for 20+ years.

FAQ

Demand charges are set by a single 15-minute interval — the highest power reading in the month. Solar panels produce electricity during daytime hours but cannot predict or control when your demand peak will occur. If your AC compressors all start simultaneously on a hot afternoon, that spike sets your demand for the month. Solar might be producing at the time, or a cloud might reduce output exactly during the spike. Batteries solve this: they monitor grid import continuously and discharge the moment demand approaches the target threshold, guaranteeing the peak is never exceeded.
Demand charge rates typically range from $5-25/kW/month depending on utility and tariff. Commercial customers on general service tariffs typically see $8-15/kW. Industrial customers on special contracts may see $15-25/kW. Some utilities charge separate on-peak and off-peak demand rates. Check your utility's tariff schedule — demand charges are often 30-60% of a commercial customer's total bill. The higher the demand rate, the more valuable demand charge management becomes.
Modern commercial battery systems use energy management systems (EMS) with real-time meter data. The EMS monitors your total facility demand continuously and discharges the battery when demand approaches a target threshold — typically set 5-10% below your current peak. Some systems use predictive algorithms based on weather, time of day, and historical patterns to precharge or predischarge. The battery must be able to respond within the 15-minute demand interval window used by most utilities for billing.
Size battery kW to match the demand reduction target: if you want to shave 50 kW from a 100 kW peak, you need 50 kW of battery discharge power. Size battery kWh for the duration of typical demand peaks: most commercial peaks last 1-3 hours, so 2-hour duration is standard. A 50 kW peak with 2-hour duration needs a 100 kWh battery. Going larger on kWh doesn't help demand shaving (you can't store more than you discharge during the peak) but adds value for energy arbitrage and backup power.
Yes — commercial solar qualifies for the 30% ITC (Investment Tax Credit) through 2032. Battery storage also qualifies for the 30% ITC when charged primarily from solar (IRS requires 75%+ solar charging). Additionally, the MACRS bonus depreciation allows businesses to deduct a large portion of the system cost in year one. Some utilities also offer demand response programs that pay customers to reduce load during grid emergencies, providing additional revenue beyond the bill savings calculated here.

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