Energy storage is becoming increasingly important, both to mitigate intermittency in renewable generation and to reduce peak demand. However, storage remains expensive and so must be managed optimally. This paper considers the optimal management of storage that is subject to inefficiency in charging/discharging and to self-discharge, with the objective of minimizing energy costs. Notably, it shows that the less efficient the storage is, the less capacity is required to achieve the maximum peak-shaving benefit.