LNG Peak Shaving Explained

What Is LNG Peak Shaving?

LNG peak shaving is the practice of storing liquefied natural gas during periods of low demand — typically summer months — and vaporizing that stored LNG to supplement pipeline supply during periods of peak demand, such as cold winter days when heating demand spikes. The practice is called 'peak shaving' because the stored LNG supply shaves the peak demand load that would otherwise need to be served by expensive incremental pipeline capacity.

Gas distribution utilities have practiced LNG peak shaving for decades as a cost-effective alternative to building additional pipeline transmission capacity sized only for peak demand events. Industrial users apply the same principle: maintaining on-site LNG storage that supplements pipeline supply during periods when pipeline capacity is constrained or expensive.

How Peak Shaving Works

The Liquefaction Phase

During warm-weather months, natural gas demand for space heating is minimal and pipeline capacity is underutilized. Gas utilities and industrial peak shaving operators take advantage of this surplus capacity and low spot prices to purchase gas, liquefy it at on-site liquefaction plants, and store the resulting LNG in cryogenic tanks. This process — 'making LNG' — continues through summer and fall until storage tanks are full.

The Vaporization Phase

When winter arrives and heating demand pushes pipeline utilization to its limits, peak shaving operators begin vaporizing their stored LNG and injecting it into the distribution system (for utilities) or using it at their facilities (for industrial users). The vaporized LNG supplements the pipeline supply, meeting demand that the pipeline alone could not serve economically.

Economic Benefits of LNG Peak Shaving

The economics of peak shaving are straightforward for gas utilities:

• Pipeline capacity cost avoidance: Building or reserving pipeline capacity for peak demand is expensive. LNG peak shaving storage is often cheaper per unit of peak-day delivery capability than incremental pipeline capacity.
• Gas price arbitrage: Purchasing gas at summer off-peak prices and using it at winter peak periods captures the seasonal price differential.
• Supply reliability: LNG storage provides a supply buffer independent of real-time pipeline conditions.

Industrial Applications of Peak Shaving

Industrial users apply peak shaving to manage pipeline supply constraints and cost variability:

• Plants on interruptible pipeline tariffs maintain LNG storage to continue operations when pipeline service is curtailed
• Facilities in constrained pipeline areas maintain LNG backup to avoid production losses during peak-demand periods
• Large industrial users capture summer-winter price differentials through seasonal storage

United Energy's Energy Fulfillment™ platform supports both utility and industrial peak shaving applications through integrated LNG supply and storage management.

Equipment Requirements

A complete LNG peak shaving system includes: an on-site liquefaction plant (for utility applications) or reliable LNG supply source (for industrial applications), cryogenic storage tanks, regasification/vaporization equipment, and integration with the facility gas distribution system. Industrial users purchasing LNG from external suppliers only need storage and regasification equipment.

Key Takeaways

• LNG peak shaving stores low-cost summer gas for use during high-demand winter periods
• Gas utilities use peak shaving to avoid expensive pipeline capacity additions
• Industrial users on interruptible tariffs use LNG storage to maintain operations during curtailments
• The practice captures both capacity cost savings and seasonal price arbitrage benefits
• Industrial peak shaving requires on-site storage and regasification equipment plus reliable LNG supply