How Arizona Businesses Can Reduce Demand Charges: A Battery and Load Management Guide
Commercial demand charges reflect how much power a facility draws during the measurement periods defined by its tariff. Reducing energy use in kilowatt-hours does not necessarily reduce billed demand in kilowatts. Start with the bill and interval data before choosing solar, batteries or load controls.
1. Understand the charge you are trying to reduce
Record your APS, SRP or TEP tariff, demand measurement interval, seasonal rates, peak windows and any minimum or ratchet provisions. Some tariffs include more than one demand component. Verify which peaks set each charge.
2. Find what creates your peaks
Collect twelve months of bills and interval data. Look for HVAC, refrigeration, pumps, compressors, production equipment and EV charging running simultaneously. Compare peak events with operating schedules. A warehouse with short afternoon spikes needs a different solution from cold storage with a sustained refrigeration load.
3. Compare operating changes with equipment
Stagger equipment starts, schedule flexible loads and evaluate controls first. Solar can reduce daytime grid purchases, but its output may not coincide with the demand interval that sets your bill. A battery can discharge during targeted peaks when properly sized and controlled. Compare each option against the same baseline.
4. Size for both power and duration
A battery needs enough kW to reduce the targeted peak and enough usable kWh to sustain that reduction. Illustration only: reducing a 50 kW peak for two hours requires approximately 100 kWh delivered, before accounting for losses, reserve and operating limits. A 100 kWh battery with insufficient discharge power cannot provide a 50 kW reduction.
5. Build an honest financial case
Illustration only: if billed demand falls by 50 kW and the applicable charge is an assumed $15 per kW, that component falls by $750 for that month. The assumed rate is not a utility quote. Annual savings are not automatically $9,000: seasonal rates, other demand components, recharge peaks and missed events can change the result. Subtract charging costs, operating costs, degradation and financing. Do not double-count the same battery capacity for backup and peak shaving.
6. Check capacity and backup separately
Lowering billed demand does not automatically create additional approved utility service capacity. Outage backup requires compatible switchgear, controls and electrical design. Ask the utility and engineer to confirm interconnection, protection, permitting and critical-load requirements before committing capital.
A practical assessment checklist
Facility address, utility and tariff.
Twelve months of bills and interval data.
Peak kW, monthly kWh and operating schedule.
Major loads, planned expansion and electrical drawings if available.
Critical loads, outage tolerance and budget.
Installed cost, modeled savings, service costs and sensitivity to missed peaks.
Quick answers
Will solar eliminate demand charges? Not necessarily. Timing and tariff rules determine its effect.
Can a battery lower every demand peak? Only within its power, energy and control limits. One missed peak can materially reduce savings on tariffs based on a monthly maximum.
Which businesses should investigate? Facilities with material demand charges and controllable or concentrated peaks, including warehouses, cold storage and manufacturing. Their actual data determines suitability.
Request a facility-specific review
Use the Commercial Energy Calculator for preliminary exploration, review commercial battery storage, or request a Peak Ready assessment. Peak Ready provides preliminary independent commercial energy education and project navigation. Final engineering, utility approval and financial decisions require qualified professionals.
Official utility sources
SRP business time-of-use pricing explains energy, demand and service charges. SRP business bill guidance helps identify billed demand. Confirm the applicable tariff using APS rates and schedules.
Published October 9, 2026. Worked examples are educational assumptions, not customer results or savings guarantees.
