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Sizing a commercial solar system for peak demand means running two separate calculations: one for how much energy you want to offset, and one for how much of your peak kW demand charge you want to cut.
This guide walks through both formulas, a worked example for a 500 kW facility, and what to check before committing to a system size.
If you have ever stared at a commercial electric bill and wondered why the “demand charge” line item is almost as large as the energy charge, you already understand why sizing a solar system is more complicated than it looks.
Most online calculators ask for one number, your monthly kWh, and spit out a system size.
That number only solves half the problem.
Sizing a commercial solar system for peak demand means figuring out how much capacity you need to shrink the single highest kW your business pulls from the grid in a billing period, not just how much total energy you use over a month.
Get this part wrong and you can end up with a system that offsets plenty of energy but barely touches your demand charge, which is often the bigger line item on the bill.
This guide breaks the process into the two calculations that actually matter, walks through a real worked example, and covers the roof space, equipment, and timing decisions that come after the math.
If you are trying to figure out whether your building is even a good candidate for solar before you get this deep into the numbers, that is worth checking first.
SEE IF YOUR BUSINESS GOOD CANDIDATE FOR SOLAR
Sizing a commercial solar system for peak demand means matching your system’s capacity to the highest kW your business draws from the grid at any single point, not just your total monthly energy use.
It is a separate calculation from sizing for annual kWh offset, and skipping it is the most common reason commercial systems end up undersized or oversized for what the business actually needed.
Most commercial and industrial electric rates charge two different things: an energy charge for total kWh consumed, and a demand charge for the single highest kW spike recorded during the billing period, often measured in 15-minute intervals.
Demand charges often make up 30% to 70% of a commercial electric bill, and roughly 5 million commercial customers in the United States face demand charges above $15 per kW, the threshold where battery storage and solar start paying for themselves quickly.
A system sized only around annual kWh can completely miss that charge.
Before any sizing math happens, find the actual numbers on your bill.
Look for a line labeled “demand,” “peak demand,” or “billed demand,” usually shown in kW alongside a separate energy charge in kWh.
Most utilities also show the dollar rate per kW, which tells you how much each kW of reduction is actually worth.
Pull at least 12 months of bills if you can get them.
Demand peaks shift with seasons, especially for buildings with heating, cooling, or production equipment that cycles on and off.
A single month’s bill will not show you whether your highest demand happens in July afternoons or January mornings.
This is also the point where a site visit pays off.
A commercial solar site assessment looks at your actual interval data alongside your roof, electrical panel, and equipment schedule, which catches details a bill alone cannot show.
Once you have real numbers in hand, the rest of the sizing process in the full design process moves a lot faster.
Your kWh total and your kW peak are two different problems with two different fixes.
Reducing kWh means offsetting energy over the whole month, which solar does continuously whenever the sun is out.
Reducing kW means specifically shrinking the one highest moment of draw, which solar alone can only do if that peak happens to occur while the sun is shining.
Picture two businesses with identical monthly energy bills.
One runs steady equipment all day, so its highest kW moment looks a lot like every other hour.
The other runs a single large compressor that spikes demand for twenty minutes each afternoon.
Both businesses might need the same amount of solar to offset their kWh, but only a system designed around that twenty-minute spike will meaningfully cut the second business’s demand charge.
This is why a sizing conversation that only asks “how much electricity do you use” misses half the picture.
You need both numbers before you can size anything with confidence.
Once you know your current peak demand and its dollar cost, decide how much of it you actually want to cut.
This target drives every calculation that follows.
Solar paired with battery storage typically cuts commercial demand charges by 40% to 60% on average, and by 60% to 90% on facilities with predictable midday peaks, like retail or office buildings where demand tracks closely with daylight hours.
Facilities with peaks that happen outside daylight hours, like evening manufacturing shifts, will see smaller reductions from solar alone and need to lean more heavily on battery storage.
A realistic starting target for most commercial buildings is a 30% to 50% reduction in peak demand.
Anything higher usually requires a battery system sized specifically around your worst demand spikes rather than solar capacity alone.
To size solar capacity for annual energy offset, divide your target annual kWh offset by the expected annual production per kW in your location: System Size (kW) = Target Annual kWh ÷ Annual Production per kW.
This number tells you how large a system you need to cover a chosen percentage of your total electricity use over a year, which is a different number from your demand reduction target.
Annual production per kW depends heavily on where your building sits.
Massachusetts gets about 4.4 to 4.5 peak sun hours a day, while New Hampshire averages closer to 4.3 to 4.4, and both states see annual production in the range of 1,060 to 1,230 kWh per kW installed once wiring losses, inverter efficiency, and panel angle are accounted for.
A building in Virginia, further south, will produce somewhat more per kW than one in northern New England.
Any solar you generate beyond what your building uses in real time typically flows back to the grid under net metering, which is why energy-offset sizing and demand-reduction sizing can point to different system sizes.
A business chasing a high kWh offset percentage may end up with more capacity than its demand charge alone would ever justify.
Solar capacity for demand reduction is calculated differently depending on whether you are using solar alone or pairing it with battery storage, since a battery can discharge during the exact minutes your demand spikes while solar can only help if the sun happens to be out at that moment.
For solar without storage, a practical starting rule is roughly 1 kW of solar capacity for every 1 kW of demand reduction you are targeting, assuming your peak demand falls within the solar production window of roughly 10 a.m. to 4 p.m.
Outside that window, solar alone contributes little to your billed peak no matter how large the array is.
Pairing solar with battery storage changes the ratio.
A commonly used sizing rule is 1 kW of solar plus 0.5 kW and 2 kWh of battery capacity for every 1 kW of demand reduction targeted, which lets the battery discharge during the exact spike that would otherwise set your billed peak, regardless of what time of day it happens.
This combination is usually the only realistic path to demand reductions above 50%, and it is the main reason battery storage has become part of so many commercial solar proposals.
Here is how the two calculations play out for a mid-size distribution facility in New Hampshire, similar to what we see on a lot of warehouse and distribution roofs across the region.
Energy offset calculation: 750,000 kWh ÷ 1,100 kWh per kW (a reasonable New Hampshire production figure) ≈ 682 kW DC of solar capacity.
Demand reduction calculation (solar plus battery): A 200 kW reduction target at the 1:0.5:2 ratio calls for roughly 200 kW of solar, 100 kW of battery power, and 400 kWh of battery capacity.
In this case, the energy-offset number is actually larger than the demand-only target, which is common for buildings with substantial daytime equipment loads.
The practical system size usually lands at whichever number is larger, with the battery sized separately around the demand charge math rather than the energy math.
That is also why system size and a facility’s actual return on investment can look so different between a warehouse and a retail storefront with identical peak demand.
A roughly 682 kW DC system needs about 68,000 to 70,000 square feet of usable roof area, since flat commercial roofs typically require close to 100 square feet per kW once panel tilt, row spacing to avoid self-shading, and setbacks for fire access are factored in.
That works out to roughly 1,100 to 1,150 panels if using 600-watt modules, since commercial panels now regularly ship in the 500 to 600 watt range.
Before assuming a building can fit a given system size, check the actual usable roof area against rooftop equipment, skylights, and structural load limits.
The exact panel count and layout depend on your building’s real dimensions, which is covered in more detail in our breakdown of panel dimensions and wattage.
Panel wattage and inverter sizing both affect how closely a system actually tracks its target demand reduction once it is installed.
Higher-wattage panels fit more capacity into less roof area, which matters most on buildings with limited usable space, and higher-efficiency commercial panels can make the difference between a system that hits its demand target and one that falls short because it ran out of room.
Inverters also need to be sized against the array, not just the target kW reduction.
A common approach is a DC to AC ratio between 1.1 and 1.25, meaning the panels are rated for somewhat more capacity than the inverter can output at once, which captures more production during non-peak sun hours without oversizing the inverter itself.
The exact ratio depends on your location’s sun hours and your demand profile, which is part of how the system is engineered during design.
Sizing a system around current peak demand alone can leave a business short within a few years if it adds equipment, expands square footage, or shifts to electric vehicle fleets.
Many commercial systems are deliberately sized with 10% to 20% of extra capacity built in, anticipating load growth that has not happened yet.
This decision depends heavily on your business’s growth plans and how much extra roof space or panel capacity you are willing to pay for upfront versus adding later.
We walk through the tradeoffs in more detail when building in room for future load growth, since oversizing too aggressively can hurt your near-term return on investment just as much as undersizing hurts your long-term one.
Every commercial solar system connecting to the grid has to meet interconnection standards before a utility will approve it, and these requirements can affect how much capacity you are allowed to install in the first place.
In the United States, IEEE 1547 sets the national technical standard for connecting distributed generation like solar to the grid, covering voltage regulation, ride-through behavior during grid disturbances, and anti-islanding protection that shuts the system down safely during an outage.
Inverters used in commercial systems need to carry active UL 1741 certification, which verifies they meet the IEEE 1547 requirements.
Utilities review your proposed system size against local circuit capacity during the interconnection application, so a system sized purely around your demand charge math can still face delays or capacity limits depending on what the local grid can absorb.
This is usually one of the first things checked during a site assessment, well before equipment gets ordered.
Timing matters as much as sizing right now.
The federal tax credit for commercial solar under Section 48E is worth up to 30% of project cost, but projects that began construction by July 4, 2026 can lock in the full 30% credit with until the end of 2030 to be placed in service, while projects that did not meet that deadline still qualify for the 30% credit as long as they are placed in service by December 31, 2027.
This deadline affects more than paperwork.
A business deciding on a system size now needs to know which track its project falls under, since the available credit changes the real cost per kW and can shift whether a larger or more conservative system size makes better financial sense.
Our page on the business solar tax credit breaks down what documentation qualifies a project for each deadline.
Getting the sizing math right on paper is only half the job.
We start every commercial project with a site visit that pulls real interval data off your meter, walks your roof, and checks your electrical panel capacity, because the formulas above are only as good as the numbers that go into them.
From there, we run both the energy-offset and demand-reduction calculations side by side, the same way we did in the worked example above, so you can see exactly where the larger number comes from before signing off on a design.
If battery storage makes sense for your demand profile, we size it around your actual peak spikes rather than a generic ratio.
We also help businesses navigate project financing options, since the right system size on paper does not always match the right system size for your budget and timeline.
Our commercial and industrial solar solutions cover everything from the initial sizing conversation through installation and interconnection approval.
If your business is ready to see these numbers run against your actual utility bills, Sunergy Solutions can walk you through what a right-sized system looks like for your specific building and demand profile.
Sizing for energy use targets how much of your total monthly kWh you want solar to offset, while sizing for peak demand targets how much you want to cut the single highest kW spike on your bill. The two calculations often point to different system sizes, and most commercial projects need to run both before settling on a final capacity.
For solar alone, a starting rule is about 1 kW of solar for every 1 kW of demand reduction, as long as your peak demand happens during daylight hours. If your peak happens outside typical solar production hours, solar alone will not move your demand charge much regardless of system size.
Yes, in most cases. Battery storage can discharge during the exact minutes your demand spikes, no matter what time that happens, while solar can only help if the sun is out at that moment. A common sizing rule pairs 1 kW of solar with 0.5 kW and 2 kWh of battery for every 1 kW of demand reduction targeted.
Flat commercial roofs typically need about 100 square feet per kW of installed capacity, once panel tilt, row spacing, and fire setbacks are included. A 500 kW system generally needs somewhere around 50,000 square feet of usable roof area.
Projects that began construction by July 4, 2026 can lock in the full 30% Section 48E credit with until the end of 2030 to be placed in service. Projects that missed that deadline can still claim the 30% credit if they are placed in service by December 31, 2027.
Many commercial systems are sized with 10% to 20% of extra capacity built in to account for future equipment additions or facility growth. Whether that makes sense depends on your roof space, budget, and how confident you are in your growth plans.
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