Cutting Factory Peak Demand & Capacity Charges with Solar + Battery
For most UK factories, the unit rate is only half the electricity bill. Capacity charges, DUoS red-band rates and excess-capacity penalties quietly add 20–40% — and they are exactly what on-site solar plus a battery is built to cut. Here is how the numbers work in 2026.
Quick answer: A factory's electricity bill is split into the energy unit rate (~28–32p/kWh), distribution charges (DUoS, with expensive weekday "red band" periods), and capacity-based charges (kVA availability + DUoS capacity). Solar shaves the daytime unit cost; a battery shifts that solar into the red-band peaks and trims agreed capacity (kVA), cutting the standing portion of the bill too. Together they typically remove 30–55% of total electricity cost on a high-daytime-load site.
What actually makes up a UK factory electricity bill
Manufacturers on half-hourly (HH) metered supplies pay far more than a single advertised unit rate. The bill breaks into three buckets, and only the first is what most people picture:
| Charge | What it is | Typical share of bill | Solar/battery lever |
|---|---|---|---|
| Energy (commodity) unit rate | p/kWh you consume (~28–32p industrial 2026) | 50–65% | Solar self-consumption |
| DUoS (distribution use of system) | Time-banded delivery charge; weekday red band (~16:00–19:00) is many times the day rate | 10–20% | Battery discharge into red band |
| Capacity / availability (kVA) + DUoS capacity | Standing charge on agreed supply capacity; excess-capacity penalties if you exceed it | 8–18% | Peak shaving to lower agreed kVA |
| CCL, BSUoS, TNUoS pass-through, VAT | Levies and transmission pass-through | remainder | CCL relief; lower volume |
The takeaway for a factory CFO: a project that only targets the unit rate leaves the DUoS red band and the kVA capacity charge untouched. The most valuable commercial solar projects are sized and paired with storage to attack all three.
How solar cuts the daytime unit cost
A factory running day or double shifts consumes most of its power in daylight — exactly when a rooftop array generates. Every self-consumed kWh displaces grid power bought at 28–32p with solar that costs ~5–7p/kWh to produce over its 25-year life. A well-matched system on a single-shift site self-consumes 60–80% of generation; add a second shift and self-consumption climbs further. See our factory solar cost & payback guide for per-kWp pricing and the typical 3–5 year payback.
How a battery cuts DUoS red-band and capacity charges
Solar alone stops generating before the late-afternoon DUoS red band — the most expensive distribution window. A commercial battery solves two problems at once:
- Red-band shifting: store cheap midday solar (or off-peak grid) and discharge it during the weekday red band, avoiding the premium delivery rate on those units.
- Peak shaving / kVA reduction: discharge to cap the site's maximum half-hourly demand. A lower peak means you can renegotiate a lower agreed supply capacity (kVA) with the DNO and stop paying excess-capacity penalties.
- Resilience: ride through short grid dips that would otherwise trip sensitive production lines.
Typical commercial batteries run 50–500 kWh at roughly £400–£700 per usable kWh installed. Read the full sizing and ROI logic in our industrial battery storage for factories guide.
Worked example: 250 kWp solar + 215 kWh battery
| Lever | Mechanism | Indicative annual saving |
|---|---|---|
| Solar self-consumption | ~220,000 kWh displaced at ~30p | £55,000–£66,000 |
| DUoS red-band shifting | battery discharge 16:00–19:00 weekdays | £4,000–£9,000 |
| Capacity (kVA) reduction | peak shaved → lower agreed capacity | £3,000–£8,000 |
| SEG export (surplus) | weekend/holiday generation exported | £1,500–£4,000 |
Figures are illustrative and depend on your load profile, DNO region and tariff — a half-hourly data review firms them up. Capital allowances (100% AIA on the first £1m, then 50% First-Year Allowance) and the business-rates exemption for on-site microgeneration to 2035 improve the post-tax return further. Model your own site with the factory solar ROI calculator.
Where this fits in your decarbonisation plan
Cutting peak demand also supports ESOS Phase 3 compliance and Scope 2 emissions reporting, and lifts your building's EPC ahead of the 2027 MEES minimum. For the full picture see our main solar panels for factories guide and the commercial solar installation cost breakdown.
Frequently asked questions
What are capacity charges on a factory electricity bill?
Capacity (or availability) charges are a standing fee on the agreed supply capacity of your connection, billed per kVA per month, plus a DUoS capacity element. If your peak half-hourly demand exceeds the agreed capacity you also pay excess-capacity penalties. Reducing your peak demand with battery peak-shaving lets you lower the agreed kVA and cut this charge.
What is the DUoS red band and why does it matter?
DUoS (Distribution Use of System) charges are time-banded. The weekday "red band" — typically late afternoon to early evening — costs many times the green/amber daytime rate per kWh delivered. Discharging a battery during the red band, after solar generation has tailed off, avoids buying expensive red-band units from the grid.
Can solar alone reduce capacity charges, or do I need a battery?
Solar reduces your daytime grid draw, which can lower peak demand on sunny days, but it cannot be relied on for the late-afternoon red band or for guaranteed peak shaving. A battery makes the demand reduction firm and dispatchable, which is what allows you to renegotiate a lower agreed capacity with confidence.
How much battery storage does a factory need for peak shaving?
It depends on the size and duration of your peaks, not just your total consumption. Many UK factories shave their peak effectively with a 50–215 kWh battery sized to cover the worst one to two hours of demand. A half-hourly demand-profile review sizes it precisely — oversizing wastes capital, undersizing misses the peak.
Do solar and battery savings on peak charges qualify for tax relief?
The solar and battery assets qualify for the Annual Investment Allowance (100% first-year relief on the first £1m of qualifying plant, then 50% First-Year Allowance on the balance). Solar is a special-rate asset, so it does not get full expensing. The on-site generation also benefits from the business-rates exemption for microgeneration to 2035.
Get your free factory solar assessment
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Related reading: check where business electricity prices are heading, and see MCS-approved commercial solar installers before you commit to a system size.