For many commercial and industrial electricity users in Malaysia, monthly electricity costs are influenced not only by total energy consumption in kilowatt-hours, but also by the site’s highest recorded electrical demand during the billing period.
A short demand spike may occur when high-load equipment such as chillers, compressors, production machinery, pumps or electric vehicle chargers operates simultaneously. This can increase the site’s maximum demand charges for the entire billing month.
Effective maximum demand management is therefore an important cost-control consideration for Malaysian businesses. Solar PV may reduce grid demand during daylight hours, while a properly designed Battery Energy Storage System (BESS) can discharge during high-demand periods to support peak shaving.
However, the effectiveness of a BESS depends on appropriate system sizing, available stored energy, charging strategy and timely dispatch before the chargeable maximum demand is recorded.
What Is Maximum Demand (MD) on Your TNB Bill?
How TNB Measures Maximum Demand
Maximum Demand (MD) is the highest level of electricity demand recorded during a billing month.
TNB defines monthly MD as twice the largest number of kilowatt-hours supplied during any consecutive 30-minute period. In practical terms, this converts the electricity used during the highest half-hour interval into a demand value measured in kilowatts.
It is important to distinguish between:
- Kilowatts (kW): the rate at which electricity is being used;
- Kilowatt-hours (kWh): the total amount of electricity consumed over time; and
- Maximum Demand: the highest measured demand during the billing period.
A business may therefore use electricity efficiently overall but still incur high MD charges if several high-load systems operate at the same time and create a short demand spike.
MD Under the RP4 Tariff: Capacity Charge + Network Charge
Under the Regulatory Period 4 (RP4) tariff schedule, effective from 1 July 2025 to 31 December 2027, TNB bills are unbundled into energy, capacity, network and retail components. The former Imbalance Cost Pass-Through mechanism was replaced by the monthly Automatic Fuel Adjustment (AFA).
For non-domestic medium-voltage customers, the official tariff schedule states:
- Medium Voltage General: Capacity Charge of RM29.43/kW plus Network Charge of RM59.84/kW, giving a combined demand-related rate of RM89.27/kW per month.
- Medium Voltage Time-of-Use (ToU): Capacity Charge of RM30.19/kW plus Network Charge of RM66.87/kW, giving a combined peak-period demand-related rate of RM97.06/kW per month.
These figures are not universal. The applicable rate depends on voltage level, tariff category, General or ToU election, metering and current TNB terms. Low-voltage non-domestic capacity and network charges are generally expressed per kWh rather than through the same per-kW MD structure.
Worked Example: What a 500 kW Peak Can Cost
For illustration, a Medium Voltage General customer with a recorded maximum demand of 500 kW would incur estimated monthly Capacity and Network Charges of:
| 500 kW × RM89.27/kW = RM44,635 per month |
For a Medium Voltage Time-of-Use (ToU) customer with a 500 kW maximum demand recorded during the applicable peak period, the estimated monthly charges would be:
| 500 kW × RM97.06/kW = RM48,530 per month |
These calculations cover only the Capacity and Network Charges. Energy, Automatic Fuel Adjustment (AFA), retail and power-factor charges are calculated separately.
Why Your MD Charge Keeps Going Up
A new monthly maximum can be created when several major loads operate at the same time. Common triggers include:
- chillers and HVAC systems starting at shift commencement;
- compressors, pumps, production lines, welding equipment or injection-moulding heaters overlapping;
- EV chargers operating while production and cooling loads are already high; and
- equipment restart after an outage or operational interruption.
Momentary motor inrush may have limited effect on a 30-minute average by itself. The greater risk arises when multiple start-ups, warm-up cycles or sustained loads overlap.
| Businesses often refer to maximum demand charges as an “MD penalty”. However, maximum demand is a valid tariff component rather than a penalty. In this article, the phrase “reduce maximum demand penalty” refers to reducing avoidable or excessive demand-related charges through effective load management. |
How to Reduce Your Maximum Demand Charge
Operational Fixes
A facility can first assess load staggering, revised production schedules, sequential motor or chiller start-up, automated load control and moving suitable processes away from chargeable peak periods. These measures may be constrained by production, quality, staffing or safety requirements.
Capacitor banks can improve power factor and help avoid a Power Factor Surcharge, but they should not be presented as a direct substitute for maximum-demand control. MD management and reactive-power management address different electrical issues.
Solar PV: Shaving Daytime Demand
Solar PV can reduce grid demand when solar generation coincides with the facility’s load. However, solar output depends on irradiation, weather, system availability and time of day. A site may still record its maximum demand during cloudy conditions, after solar output falls, in the evening or when a major load starts unexpectedly. Solar alone therefore does not reliably impose a maximum-demand ceiling.
Peak Shaving with a BESS
Peak shaving is an energy-management strategy that limits the amount of electricity drawn from the grid during high-demand periods. In a BESS peak-shaving arrangement:
- The Energy Management System continuously monitors the site’s grid demand.
- A target grid-import level or demand threshold is established.
- When demand approaches that threshold, the BESS begins discharging and supplies part of the site load.
- Grid demand is held below the target, subject to available battery power, stored energy, response time, equipment ratings and operating conditions.
- The battery is recharged during a suitable lower-demand period or from available solar generation.
For example, if a facility’s load rises to 1,200 kW and the BESS supplies 300 kW, grid import may be limited to approximately 900 kW during that period, subject to system losses and operational constraints. This creates a controllable demand ceiling, but only while sufficient battery power and usable energy remain available.
Peak Shaving with BESS Explained
Sizing the Battery: kW Versus kWh
A peak-shaving BESS has two critical sizing dimensions:
- Power rating (kW or MW) determines how much load the battery can offset at a particular moment.
- Usable energy capacity (kWh or MWh) determines how long the battery can sustain that output.
| A simplified starting calculation is: Required usable energy = Required peak reduction × Expected peak duration For example, reducing demand by 300 kW for 45 minutes would require approximately: 300 kW × 0.75 hours = 225 kWh This provides an initial estimate only. Final BESS sizing should also account for state-of-charge limits, system efficiency, battery degradation, design margins, repeated peak events and the facility’s actual load profile. |
MD Peak Shaving Versus ToU Energy Arbitrage
TNB’s current ToU schedule identifies the weekday peak period as 2:00 p.m. to 10:00 p.m. and treats the remaining weekday hours and all Saturday and Sunday hours as off-peak. For applicable medium- and high-voltage ToU customers, maximum demand occurring during the off-peak period is not charged.
A BESS may support peak-demand control, load shifting, solar shifting and ToU arbitrage. These objectives must be coordinated. Discharging too early for energy-rate savings may leave insufficient battery capacity for a later MD event, while reserving too much state of charge for peak shaving may reduce other savings opportunities.
Illustrative Gross Savings from Peak-Demand Reduction
Suppose a Medium Voltage customer can consistently reduce its chargeable maximum demand by 300 kW.
| Medium Voltage General Tariff 300 kW × RM89.27/kW = RM26,781 per month This is equivalent to an indicative gross annual saving of RM321,372. | Medium Voltage ToU Tariff Where the 300 kW reduction occurs during the chargeable peak period: 300 kW × RM97.06/kW = RM29,118 per month This is equivalent to an indicative gross annual saving of RM349,416. |
These figures illustrate potential gross savings only and should not be treated as guaranteed savings or payback projections. A detailed assessment should also account for system costs, charging energy, efficiency losses, auxiliary consumption, battery degradation, maintenance, financing, system availability and the ability to achieve the required demand reduction consistently.
Power Factor and kVARh Charges Are Separate
Power factor measures how efficiently a facility uses electricity. It is the ratio of real power used, measured in kilowatts (kW), to apparent power supplied, measured in kilovolt-amperes (kVA).
TNB applies a power factor surcharge where the recorded power factor falls below:
- 0.85 for electricity supply below 132 kV; or
- 0.90 for electricity supply at 132 kV and above.
For supply below 132 kV, the surcharge is calculated at 1.5% of the relevant energy, demand and AFA charges for every 0.01 below 0.85. For each further 0.01 below 0.75, the applicable rate is 3%.
A BESS designed only for peak shaving should not be assumed to improve power factor. Some systems may provide reactive-power support if specifically designed for that purpose. In certain cases, reducing grid-imported kW without reducing kVAR may even worsen the measured power factor.
Maximum demand, power factor, harmonics and reactive-power requirements should therefore be assessed together.
Why Load-Profile Data and Asset Management Matter
Why a Metered Load-Profile Study Comes First
A proper assessment should review at least 12 months of electricity bills, interval data, recorded maximum demand, tariff information, power factor, operating hours, major equipment, solar generation and future expansion plans. Temporary metering may be required where existing data is insufficient.
The study should identify when demand peaks occur, how long they last, how often they repeat and which equipment causes them. A battery may have sufficient energy capacity but insufficient power to reduce a sharp peak, or sufficient power but insufficient energy to manage a longer event.
Ongoing BESS Optimisation with Avera Energy
Avera Energy approaches BESS peak shaving as part of a wider energy-management strategy. Through VeraNex™ and VeraVault™, Avera Energy can integrate solar, BESS design, real-time controls, asset management and performance optimisation.
Ongoing monitoring may cover system availability, battery condition, state of charge, dispatch performance and changes in the site’s operating profile. This helps ensure that the BESS continues to perform as intended throughout its lifecycle.
Malaysian Regulatory, Licensing and Safety Requirements
The Energy Commission’s 2026 Guidelines on BESS Safety apply to lithium-ion BESS under the Electricity Supply Act 1990 and Electricity Regulations 1994. They cover system design, competent persons, registered contractors, protection systems, testing, commissioning, maintenance and local-authority requirements.
Outdoor installation is generally recommended. Where indoor installation is necessary, suitable fire-protection measures and Fire and Rescue Department requirements should be addressed. Grid-connected BESS must also include anti-islanding protection unless the system is specifically designed and safely isolated for islanded operation.
| The Energy Commission’s BESS licensing infographic, published on 1 July 2026, states that BESS installations with a capacity of 5 kW and above are subject to licensing requirements. The applicable licence category and application process will depend on whether the system supplies electricity to another party or is used solely for private purposes. Before implementation, each project should be assessed against the latest requirements of the Energy Commission, TNB, the relevant local authority and the Fire and Rescue Department of Malaysia. |
Frequently Asked Questions (FAQs)
What is a good maximum demand figure?
There is no single “good” maximum demand figure that applies to every facility. The appropriate level depends on the business’s production output, operating hours, equipment capacity, historical load profile, tariff category and operational requirements.
A useful benchmark is the lowest maximum demand that the facility can consistently maintain without disrupting production, affecting equipment performance or creating safety or reliability risks. Businesses should review at least 12 months of electricity bills and interval data to identify when demand peaks occur, how long they last and whether those peaks are necessary or avoidable.
For example, a high MD may be reasonable for a facility operating several large production lines at full capacity. However, it may indicate an avoidable cost where the peak is caused by multiple chillers, compressors, pumps or other major loads starting at the same time.
Does solar alone reduce MD?
Solar PV can reduce maximum demand when solar generation coincides with the period in which the facility records its highest grid demand. During sunny daytime hours, electricity generated by the solar system can supply part of the facility’s load and reduce the amount of power imported from the TNB grid.
However, solar alone cannot guarantee a reduction in MD. Solar generation varies according to weather, irradiation, system availability and time of day. A facility may still record its highest demand during cloudy conditions, in the late afternoon, at night or when a major load starts unexpectedly.
A BESS or automated load-control system can provide greater control because it can respond when demand approaches a specified threshold, subject to the battery’s available power, stored energy and control settings.
How much can BESS reduce my MD charge?
The potential reduction depends on the facility’s load profile, the size of the demand peaks, how long they last and how frequently they occur. It also depends on the BESS power rating, usable energy capacity, state of charge, response time, operating strategy and system efficiency.
For example, a BESS rated at 300 kW may be able to reduce grid demand by up to approximately 300 kW at a particular moment, provided it has sufficient stored energy to sustain that output for the full peak period. If the peak lasts longer than the battery’s usable energy capacity allows, the demand reduction may not be maintained.
The resulting cost saving must be calculated using the customer’s applicable Capacity Charge and Network Charge. There is no fixed percentage reduction that applies to every facility, and projected savings should be supported by electricity bills, interval-metering data and site-specific technical modelling.
What is the kVARh or power factor penalty?
The expressions “kVARh penalty” and “power factor penalty” are commonly used to describe TNB’s Power Factor Surcharge.
Power factor measures how efficiently a facility uses the electricity supplied to it. A low power factor generally means that more current and electrical-system capacity are required to deliver the same amount of useful power. This may occur at facilities with significant inductive loads, such as motors, transformers, compressors and pumps.
The surcharge is calculated based on the customer’s average monthly power factor and TNB’s applicable percentage-based formula. It is not a universal flat charge calculated at a fixed RM-per-kVARh rate.
Power-factor correction commonly involves measures such as appropriately designed capacitor banks, equipment optimisation or reactive-power control. A standard BESS used solely for active-power peak shaving should not automatically be assumed to correct poor power factor.
How is MD different from ToU peak charges?
MD is based on the highest chargeable demand measured in kW. ToU energy charges apply different sen/kWh rates according to when electricity is consumed.
A properly configured BESS can support both MD peak shaving and ToU energy optimisation, but its dispatch priorities must be coordinated so that sufficient battery capacity remains available for the most commercially important demand events.
| Speak to Avera Energy Cut Your Maximum Demand Charge with Avera Energy Avera Energy can review your bills, interval data, load profile, tariff, electrical infrastructure and operating requirements to assess whether operational changes, solar PV, BESS peak shaving or an integrated solution is suitable. The strongest results come from combining appropriate battery sizing with intelligent controls and continuous asset management. Contact Avera Energy to arrange a maximum-demand and load-profile assessment for your commercial or industrial facility. |
