How Peak Demand Reduction Protects California Facilities From Rising Utility Costs.

In California’s commercial energy landscape, peak demand not total energy consumption is now the primary driver of operational cost. With demand charges rising across SCE, PG&E, and SDG&E, many businesses are paying more for their highest 15 minutes of usage than for the electricity they consume all month. This article explains why demand mitigation is now essential for cost control, which strategies are most effective, and how facilities can reduce exposure to California’s accelerating utility inflation.

Peak Demand:

The Largest and Fastest-Growing Component of Commercial Bills. For many commercial and industrial (C&I) customers, demand charges account for 50–70% of the monthly electric bill. Utilities assess these charges based on the facility’s highest instantaneous power draw often measured in 15-minute intervals. As California utilities shift toward more aggressive Time-of-Use (TOU) structures and higher grid-stress surcharges, peak demand charges have become a major source of volatility.

Across the state, typical commercial demand charges now range from $18–$42 per kW depending on the tariff. A single unmitigated equipment startup, HVAC surge, or production spike can increase a facility’s bill for the entire month.

Why Demand Reduction Delivers Outsized ROI:

Reducing total kWh consumption provides value, but avoiding peak demand events often delivers far greater savings. Each avoided kilowatt of peak demand reduces monthly expenses directly and permanently. Because demand charges compound over 12 months especially under tariffs with ratchet clauses the financial benefit of even small reductions is magnified. Demand events typically correlate with operational patterns (HVAC, motors, compressors, charging equipment), meaning businesses can strategically manage loads without compromising productivity.

California’s utility inflation also disproportionately affects demand charges. Many tariffs have increased peak demand pricing faster than energy rates, making demand management the most powerful cost-reduction lever available today.

Primary Strategies for Peak Demand Reduction in Commercial Facilities

Operational Load Shifting
Adjusting run schedules for large loads such as compressed air systems, HVAC chillers, and industrial motors can significantly reduce the facility’s coincident peak. Automated scheduling systems improve consistency and minimize human error.

Battery Energy Storage
Battery storage has become the most reliable peak-shaving tool. A properly sized system discharges during load spikes, flattening the facility’s demand curve and reducing monthly peaks. This is one of the only technologies that provides immediate, measurable, and repeatable demand savings without requiring operational changes.

Solar + Storage Integration
Solar production reduces daytime load, while the battery covers late-afternoon TOU peaks. The combination is particularly effective in California, where on-peak pricing between 4–9 p.m. remains high and solar output is declining.

Staggered Equipment Startup
Facilities that ramp multiple motors or production lines simultaneously often create unnecessary demand spikes. Staggering startups across a 5–15 minute window can materially lower peak demand.

Advanced Load Controls
Automated load-management systems can temporarily reduce non-critical loads when a peak event is detected. These controls integrate with building management systems and provide precise real-time responses.

Business Case Example:
A manufacturing facility in the Inland Empire reduced its monthly peak by 310 kW using a combined solar + storage strategy. The result:
• $143,000 in annual demand-charge savings
• Improved load factor and reduced TOU exposure
• Access to SGIP incentives that covered more than 50% of the storage system cost
This facility now has predictable monthly costs and significantly lower sensitivity to grid volatility.

Why Peak Demand Mitigation Is Now a Strategic Priority:

California businesses cannot control utility rate hikes, but they can control peak demand. As grid constraints increase and TOU pricing becomes more punitive, demand mitigation provides immediate financial relief and long-term resilience.
For many commercial facilities, reducing peak demand is now the single most impactful energy strategy available, often outperforming solar alone in year-one ROI.

Burge Energy designs advanced peak-demand mitigation strategies using solar, storage, and load-management controls tailored to California’s commercial and industrial tariff landscape. If your facility is facing rising utility costs, request a custom demand-reduction analysis from our team today.