Peak Demand Charges Explained for Sydney Businesses (and How Batteries Reduce Them)

A peak demand charge bills your business for the highest rate at which it draws power from the grid, measured in kW or kVA over a short interval, usually 30 minutes, rather than for the total energy used. One busy half-hour in a month, or on some tariffs in a whole year, can set that charge. Batteries reduce it by supplying power during those peaks so the grid sees a lower maximum, and load shifting and power factor correction can reduce it further. The first step is understanding exactly how your own tariff measures demand.

Reading the demand line on your bill

Demand charges are easy to overlook because they sit alongside usage charges that look more familiar. On a business bill, look for:

• A line labelled demand, maximum demand, peak demand or capacity. Wording varies between retailers and networks.
• The unit. Charges are commonly per kW or per kVA, applied per day or per month.
• The measured figure, such as the highest kW or kVA recorded in the billing period.
• The time window. Some tariffs only measure demand during set peak hours on business days; others measure at any time.
• Whether the figure rolls over. Some capacity-style charges use the highest demand over a longer period, so one bad half-hour can affect bills for months.

If the bill is hard to interpret, our Commercial Bill and Tariff Audit, from $350 per site, examines network tariffs, demand charges, contract terms and billing errors.

The half-hour that sets the charge

Demand is usually the average power over each metering interval. If a site uses 50 kWh in a 30-minute interval, its demand for that interval is 100 kW. A short burst does not have to last the whole half-hour to raise the average, which is why start-up events matter so much. Common causes of peaks include:

• everything switching on together at opening time, such as air-conditioning, compressors, ovens and lighting;
• hot afternoons, when cooling systems work hardest;
• production runs or batch processes that overlap;
• refrigeration defrost cycles coinciding with other large loads;
• electric vehicles or forklifts all plugged in at the same time.

Interval data shows exactly when your peaks occur and what else is running. Our market lists Interval-Data Analysis from $490 for 12 months of data, and a Demand-Charge Analysis from $690 per site that identifies which half-hours set your charge and what a battery, load shifting or correction could save.

How a battery shaves the peak

In peak shaving, a controller watches the site's load in real time. When demand rises above a chosen threshold, the battery discharges to cover the difference, so the grid never sees the full peak. For it to work, the battery needs two things: enough power (kW) to cover the gap above the threshold, and enough energy (kWh) to keep covering it for as long as the peak lasts.

Here is an illustration. Suppose a site regularly peaks at 150 kW and you set a threshold of 120 kW. If the load sits above the threshold for 90 minutes and averages 20 kW above it during that time, the battery needs at least 30 kW of output for the highest point and at least 30 kWh of usable energy (20 kW for 1.5 hours), plus a safety margin. The billed demand falls by up to 30 kW, and the saving is that reduction multiplied by your tariff's demand rate.

The risk is running out. If the battery empties before the peak ends, demand for that interval is set anyway, and one missed afternoon can undo most of the month's saving. Good designs use conservative thresholds, keep charge in reserve before known peak periods and combine the battery with solar so it starts the afternoon full. Our market lists a Peak Shaving System from $14,900 (controller and integration, before the battery) and the Commercial Battery (BESS) 20-200 kWh from $24,900 for a 20 kWh system, installed, before incentives. From 1 September 2026, NSW also offers incentives for eligible business batteries.

Load shifting and staggering

Not every peak needs a battery. Often the cheapest reduction comes from changing when equipment runs:

1. Stagger start-ups, bringing air-conditioning zones, compressors and ovens online a few minutes apart.
2. Pre-cool buildings before the demand window opens rather than during it.
3. Move batch processes, washing or pumping outside peak windows.
4. Schedule vehicle charging so chargers share capacity instead of all starting at once.
5. Review defrost timers and other automatic cycles that may overlap with busy periods.

A Demand Management System, listed from $4,900 per site, automates this by monitoring site demand and shedding or staggering selected loads.

Power factor and kVA demand

If your demand is billed in kVA, power factor matters. Motors, compressors and some older equipment draw reactive power, which does no useful work but still loads the network. Apparent power in kVA equals real power in kW divided by the power factor. A site drawing 100 kW at a power factor of 0.8 registers 125 kVA; the same site corrected to 0.95 registers about 105 kVA, roughly 20 kVA less billed demand without changing what the business does.

Correction uses capacitor banks or active equipment sized from measured data, so logging comes first. Adding solar can also lower the measured power factor at the meter, because it reduces the real power drawn from the grid while reactive demand stays the same. Our market lists Power Quality Analysis from $1,990 (7-day logging and report) and Power-Factor Correction from $9,900 per site, installed. All market prices are indicative and confirmed after a site assessment.

Choosing the right combination

Most sites get the best result from a mix of measures, chosen in order of cost and certainty. This summary shows how the options compare.

We usually start with data, then low-cost operational changes, then correction and storage sized to what is left. That order keeps the battery smaller and the business case stronger.

Next steps

Start by finding your demand line and gathering 12 months of bills. Our commercial ROI calculator gives an early indication of solar and battery returns, and our commercial solar page explains how we design for business sites. Browse the related services in our energy market, then request a quote so our team can review your interval data on site.

Frequently asked questions

Do households pay demand charges too?

Some can. A number of network tariffs for residential customers include a demand component, although most households are on flat or time-of-use tariffs without one. Demand charges are far more common on business and larger-site tariffs. Check your bill for a line measured in kW or kVA; if there is none, your costs are driven by the energy you use and when you use it.

Will commercial solar on its own reduce our demand charge?

Only partly and not reliably. Solar lowers demand when the peak coincides with strong sunshine, but a single cloudy half-hour during the demand window can set the charge anyway, and it does nothing for early morning or evening peaks. Solar remains valuable for cutting energy costs. For dependable demand reduction, pair it with a battery, load management or both.

How much interval data is needed before sizing a battery for peak shaving?

Twelve months is ideal, because it captures seasonal patterns such as summer cooling, winter heating, holiday shutdowns and production cycles. A battery sized from a few mild weeks can fall short in the first heatwave. Your retailer or metering provider can usually supply the data in 15 or 30-minute intervals. If less history is available, we size more conservatively and review performance after installation.