Energy storage in manufacturing – how to avoid power exceedances and high penalties

What are contractual power exceedances?

Every industrial plant has a contractual power (contracted capacity) set in the agreement with the grid operator. This is the maximum power the company may draw from the grid.

If the plant exceeds this value in a given measurement period, a contractual power exceedance occurs, which leads to additional charges.

Exceedances most often occur when:

• several production lines start at the same time
• large electric motors are started
• industrial furnaces are running
• compressors or cooling systems are switched on

In many plants the issue is not high continuous consumption, but very high short-term demand peaks.

Penalty for power exceedance – why do companies pay so much?

Grid operators apply exceedance charges because the grid must be ready to handle the highest possible loads.

When a plant exceeds its contractual power, the operator adds an exceedance charge. In practice, companies pay for short spikes in demand that often last only a few minutes.

In large manufacturing plants such penalties can amount to:

• tens of thousands in local currency per month
• hundreds of thousands per year
• and in very large plants, even more

That is why more companies are asking: how can we reduce contracted power without cutting production?

Peak shaving – how energy storage works in industry

One of the most effective ways to limit power exceedances is peak shaving.

Peak shaving means the energy storage supplies the short-term demand peaks.

How does it work in practice?

Under normal conditions the plant draws power from the grid. When demand suddenly rises – for example when a furnace or several compressors start – part of the power is supplied from the energy storage instead of the grid.

As a result:

• the plant does not exceed contractual power
• the operator does not apply penalties
• the electrical installation runs more steadily

So the energy storage acts as a buffer that smooths short-term demand spikes.

Energy storage in a manufacturing plant – a practical example

Imagine a plant that runs:

• industrial furnaces
• air compressors
• production lines with large motors

When a furnace starts, power demand can suddenly jump by several hundred kilowatts. Without energy storage, that entire spike comes from the grid, causing a contractual power exceedance.

With energy storage, the picture changes. The Energy Management System (EMS) automatically detects the rise in demand and activates the storage, which supplies the extra power for several minutes.

From the grid operator’s perspective, the plant does not exceed contractual power. Production continues as usual and the company avoids penalties.

How to reduce contracted power with energy storage

In many cases, installing energy storage also makes it possible to lower the contracted capacity in the agreement with the grid operator. This works because the storage handles short-term demand spikes.

As a result:

• the company can contract lower connection capacity
• distribution charges go down
• the electrical installation runs more steadily

For many industrial plants this means permanently lower energy costs for years to come.

Typical savings for industrial companies

Savings from energy storage in industry can come from several sources:

• no penalties for contractual power exceedance
• ability to reduce contracted capacity
• more stable operation of the electrical installation
• optimized energy use

Depending on the plant’s profile and production pattern, annual savings can range from tens to hundreds of thousands in local currency.

Is energy storage profitable for your company?

Many companies are not aware how much contractual power exceedances cost. Only a detailed analysis of energy data shows how often demand peaks occur and how much the company pays for them.

In such cases, energy storage can significantly cut energy costs and improve the plant’s energy security.

If you want to see whether peak shaving is feasible for your company, start with an energy consumption profile analysis. Often just a few days of measurement data are enough to assess the optimization potential.