# Sizing a Battery for Peak Shaving

> Power rating and energy capacity are two separate specifications. A battery correct on one and wrong on the other fails to shave the peak while costing the full price.

Section: Peak Demand Management  
Author: Nil Masferrer Jiménez  
Published: 2026-08-24  
Reviewed: 2026-09-24  
Reading time: 5 min

Batteries are the most flexible peak reduction measure available. They do not care what the load is, only how large it is and how long it lasts, which is why they can address peaks that no amount of scheduling will touch.

They are also the most capital-intensive, and the sizing exercise is where the economics are decided. Two numbers have to be right, and they are independent.

## Power and energy are separate specifications

**Power rating (kW)** is how much the battery can deliver at any instant. It sets how deep a peak you can shave.

**Energy capacity (kWh)** is how much it holds. It sets how long you can sustain that depth.

A 500 kW / 500 kWh battery can shave 500 kW for one hour, or 250 kW for two. A 500 kW / 2,000 kWh battery can shave 500 kW for four. They cost very different amounts, and choosing between them requires knowing the shape of the peak, not just its height.

The failure mode is specific and expensive: **a battery with the right power rating and insufficient energy capacity runs out before the interval that sets the charge has finished.** The peak is then recorded anyway, the demand charge is unchanged, and the capital has been spent.

## Read the shape, not the height

The input is the load duration curve: every interval in the year, ranked from largest to smallest. Two questions come off it.

**How quickly does the curve fall away from the maximum?** If the highest interval is far above the tenth-highest, a small amount of energy capacity captures most of the value. If the top hundred intervals are all within a narrow band, shaving the peak means sustaining the reduction for a long time, and the energy requirement rises sharply.

**How long does the load stay above the intended target on the worst day?** That duration, not the average, sets the energy capacity. Sizing to a typical day and hoping the worst one is similar is how a battery underperforms in exactly the month that matters.

## The calculation

**Sizing a battery against a monthly demand target**

Worst day in the historical data, not the average day.

- Site peak, unmanaged: 1,850 kW
- Demand target: 1,500 kW
- (Required discharge power): 350 kW
- Longest continuous period above the target, worst day: 3.2 hours
- (Energy delivered during that period): 1,120 kWh
- Round-trip efficiency: 88%
- (Energy that must be drawn to store it): 1,273 kWh
- Usable depth of discharge: 90%
- (Nameplate capacity at beginning of life): 1,414 kWh
- Capacity retention assumed at end of design life: 80%
- (Nameplate required so the duty is still met at end of life): 1,768 kWh
- **Specification: 350 kW / 1,770 kWh**

*The energy figure grew by 58% between the raw duty and the final specification, entirely through efficiency, depth of discharge and degradation. Omitting those three is the most common sizing error there is. Figures illustrative.*

Three multipliers, none of them optional, and every one of them compounds. A specification that quotes 1,120 kWh because that is the energy above the target is describing a battery that will fail to do the job on the day it is bought, let alone in year ten.

## Choosing the target

Deeper shaving costs disproportionately more, because the load duration curve steepens as you go down it. Each additional kilowatt of reduction requires more hours of coverage, and hours are energy, and energy is the expensive axis.

The economically correct target is not the deepest achievable one. It is the point where the marginal cost of another kilowatt of reduction exceeds its annual value. Testing three or four candidate targets against the same data, and pricing each, is a half-day exercise that routinely changes the specification and the cost.

## Which duty you are sizing for

The three common duties produce very different batteries, and a site facing more than one has to decide which governs.

| Duty | Power driven by | Energy driven by | Frequency |
| --- | --- | --- | --- |
| Monthly non-coincident demand | Depth below the monthly peak | Duration above target on the worst day | Continuous readiness, every month |
| Coincident peak or capacity obligation | Reduction needed during called hours | Length of the event window | A handful of events per season |
| Time-of-use energy arbitrage | Load during the expensive period | Whole on-peak window | Daily |

*Three duties, three specifications*

A battery sized for a handful of long summer events is a different machine from one sized for daily readiness against a monthly maximum. Sites in coincident regimes frequently find the second duty far cheaper to serve, because it is a known number of hours in a known season: [coincident and non-coincident demand](https://thedemandcharge.com/articles/coincident-vs-non-coincident-demand).

## Before the specification is issued

A battery is the last rung of the ladder rather than the first, and the cheaper rungs beneath it — sequencing, scheduling, control setpoints — are worked through in [how to reduce peak demand charges](https://thedemandcharge.com/articles/how-to-reduce-peak-demand-charges). Sizing against a peak one of those would have removed buys a larger machine than the site needs, at the most expensive point on the list.

**Battery sizing due diligence**

1. Exhaust the cheaper rungs first. Sizing a battery against a peak that staggered startup would have removed makes the battery larger and the payback longer: [staggered startup](https://thedemandcharge.com/articles/staggered-startup-sequencing).
2. Size against the worst day in at least twelve months of interval data, not the average day.
3. Apply round-trip efficiency, usable depth of discharge and end-of-life retention, in that order.
4. Confirm the recharge window. A battery that recharges into a new peak has moved the problem, and the recharge itself is a load that has to fit somewhere.
5. Model every demand determinant the tariff bills, separately, against the shaved series: [facility, on-peak and billing demand](https://thedemandcharge.com/articles/facility-vs-on-peak-demand).
6. Decide what happens when the battery is unavailable. Under a ratchet, a single uncovered excursion sets a floor and undoes a year of correct operation: [ratchet clauses](https://thedemandcharge.com/articles/ratchet-clause-explained).
7. Take the sizing into a full appraisal rather than a payback figure: [total cost of ownership for a behind-the-meter battery](https://thedemandcharge.com/articles/battery-tco-model).

The point about unavailability deserves more weight than it usually receives. A battery that covers 95 percent of events at a site with a ratchet is not delivering 95 percent of the value; the remaining 5 percent sets a floor that persists for months. That argues for conservative targets, for a maintenance regime that keeps availability high, and for a fallback plan on the days it is out of service.


## Sources

- [National Laboratory of the Rockies (formerly NREL)](https://www.nlr.gov/storage/)
- [DOE Better Buildings Solution Center](https://betterbuildingssolutioncenter.energy.gov/)
- [Berkeley Lab — Energy Markets and Policy](https://emp.lbl.gov/)
- [DOE Federal Energy Management Program](https://www.energy.gov/femp/federal-energy-management-program)

## Frequently asked questions

### What is the difference between power rating and energy capacity?

Power rating, in kilowatts, is how much the battery can deliver at any instant — it sets how deep a peak you can shave. Energy capacity, in kilowatt-hours, is how much it holds — it sets how long you can hold that reduction. You need both to be right.

### How do I choose the shave target?

From the load duration curve. Rank every interval by size and look at how quickly the curve falls away. The target should sit where the curve flattens, because shaving beyond that point requires a large increase in energy capacity for a small further reduction.

### Does a battery need to shave every day?

Under a monthly non-coincident demand charge, it has to work on the worst day of every month, and you do not know in advance which day that will be. So in practice it operates whenever the load approaches the target — which is more often than the peak occurs.

### What about degradation?

Capacity fades with cycles and with age, so a battery sized exactly to today's requirement will fall short later in its life. Sizing is normally done against end-of-life capacity, not beginning-of-life.

### Can one battery serve peak shaving and demand response at once?

Sometimes, and the interaction needs checking. Discharging for a called event can leave the battery unable to cover a peak the same afternoon. Stacked value is real but it is not additive by default.

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