Optimization of solar photovoltaic and battery energy storage system for peak demand reduction under Malaysia’s new tariff structure

Abstract

Malaysia has introduced a new electricity tariff structure that increases the charge for maximum demand. Other than using solar photovoltaic (PV) systems to reduce energy costs, a battery energy storage system (BESS) is required to perform peak shaving and optimize the building’s energy usage. Previous studies mainly focused on utilizing solar PV or BESS to supply energy during night-time periods, with limited investigation into peak demand management. This study develops a mixed-integer linear programming (MILP) model in General Algebraic Modelling System (GAMS) to formulate an integrated energy management framework that coordinates solar generation, BESS operation, and grid interaction. The model aims to minimize the total energy system cost while ensuring reliable energy supply for the building. Results show that the optimum configuration of solar PV and BESS can reduce grid energy consumption and peak demand by up to 15%, while excessive peak shaving beyond the optimum point is not economically feasible due to high battery investment.