Peak Shaving with a Battery

Peak shaving means using a home battery to power your house during expensive peak hours, then recharging it from the grid (or solar) during cheap off-peak hours. You don't reduce how much electricity you use — you shift where it comes from during the most expensive part of the day.

It's the same idea as timeshifting an appliance, except the battery shifts your whole house without you having to schedule individual loads.

How it works

A typical setup:

1. Off-peak (overnight): Battery charges from the grid at the low rate.
2. Peak (afternoon/evening): Battery discharges to power your house. Grid draw drops to near zero.
3. Off-peak resumes: Battery sits idle or starts recharging for the next cycle.

The wider the gap between your peak and off-peak rates, the more each cycle is worth.

When peak shaving makes sense

Peak shaving only pays off when two things are true:

1. You're on a Time of Use rate plan (see Understanding TOU).
2. The spread between peak and off-peak rates is large enough to cover the battery's per-cycle cost.

Rough numbers

A 10 kWh usable home battery, fully cycled once per day:

Peak rate	Off-peak rate	Spread	Daily savings	Annual savings
$0.48/kWh	$0.32/kWh	$0.16	$1.60	$584
$0.55/kWh	$0.28/kWh	$0.27	$2.70	$986
$0.30/kWh	$0.22/kWh	$0.08	$0.80	$292
$0.18/kWh	$0.12/kWh	$0.06	$0.60	$219

A 10 kWh battery installed costs $8,000–$15,000 depending on chemistry, inverter, and install. Even at the high end of the spread above (~$986/year), payback is 8–15 years — and that's before accounting for round-trip efficiency losses (typically 10–15%) and gradual capacity degradation.

Why a battery alone usually isn't worth it

For peak shaving as the only purpose, the math rarely works:

• Round-trip losses eat 10–15% of stored energy. A kWh charged off-peak only delivers ~0.85–0.90 kWh at the outlet.
• Cycle life is finite. Most LiFePO4 home batteries are rated for 6,000–10,000 cycles. One cycle per day = 16–27 years to wear out, but warranty terms and capacity fade often shorten the useful window.
• Install costs dominate. The battery itself is half the bill. Inverter, wiring, permits, and labor make up the rest.
• TOU spreads can shrink. Utilities adjust rate schedules. A 50¢ peak today could be 35¢ in five years.

Unless you're on a very aggressive TOU plan (NEM 3.0 in California, some Hawaii rates), buying a battery purely to peak shave will not pay back within its useful life.

When it does make sense: stacking with backup

Peak shaving makes sense as a secondary benefit when you're already buying a battery for another reason:

• Backup power. You want the house to stay up during grid outages (storms, wildfires, planned shutoffs). The battery is justified by reliability, not bill savings — peak shaving is bonus revenue on top.
• Solar self-consumption. You have solar and your utility no longer pays retail for exports (NEM 2.0 → NEM 3.0 in California). Storing your own production and using it at peak avoids the export-rate haircut.
• Demand charges. Some commercial and a small number of residential rate plans bill a monthly fee based on your highest 15-minute draw. A battery can flatten that peak and cut the demand charge directly.

In all three cases, the battery has a primary job. Peak shaving runs in the background and shortens the payback period — but it isn't the reason you bought the battery.

What to check before buying

If you're considering a battery and want to know how much peak shaving would actually save you:

1. Pull your last 12 months of utility bills. Note your peak and off-peak rates and how much they've changed year over year.
2. Estimate your average evening (4 PM – 9 PM) consumption in kWh. That sets the minimum usable battery size — buying more than you discharge daily wastes capacity.
3. Multiply daily peak consumption × rate spread × 365. That's your upper bound on annual savings, before efficiency losses.
4. Compare to the installed cost of a battery sized for that draw. If payback is longer than the warranty period, peak shaving alone won't justify the purchase.

The bottom line

A battery is the right tool for backup power, solar self-consumption, and demand-charge management. Peak shaving is a useful side effect that improves the economics — sometimes substantially — but it almost never justifies the purchase on its own. If you already have, or are already buying, a battery for backup, configuring it to discharge during peak hours is free money. If you don't, your dollar goes further on timeshifting individual high-wattage appliances — same idea, no hardware required.