FIVE MYTHS OF COMMERCIAL & INDUSTRIAL ENERGY STORAGE
FIVE MYTHS OF COMMERCIAL & INDUSTRIAL ENERGY STORAGE
“Storage is where solar was ten years ago.” If you walk the show floor at any energy conference, you will hear this phrase ad nauseam. While the comparison may be getting old, there’s no denying that storage is still in its infancy. And like with any early market, newness can lead to uncertainty. And uncertainty breeds myths.
It is not worth investing in Energy Storage Systems (ESS) until system prices drop
Solar PV costs have dropped dramatically. Familiar with this trend and fearful of overpaying while system prices are still falling, potential energy storage buyers are delaying investment until system prices come down.
Buildings with high demand charges (>$15/kW) and predictable peaky load profiles can often expect to see sub-five year payback periods for an energy storage investment. These customers are leaving money on the table if they do not invest in storage today. California has been a leader in creating a storage-specific incentive program. The California Self-Generating Incentive Program (SGIP) has helped bring down system costs and increase ESS deployments. For this myth, we analyzed how SGIP and the Federal Investment Tax Credit (ITC) will impact the cost of energy storage over the next five years.
Both SGIP and the ITC have decreasing values over the next five years. At $0.40/Wh, the SGIP incentive is already down from $0.50/Wh in 2016 and will be non-existent by 2022. The ITC will begin its steady decline beginning in 2020.
Conclusion: For SGIP and SGIP-ITC eligible projects, the time to act is now. Even as system prices come down, with incentives overall system costs are cheaper today than they will be in 2022. Savvy investors will take advantage of these incentive programs while they last.
For Myths Two and Three, we’ve teamed up with Geli’s Director of Analytics, Zach Ernst, to debunk Demand Charge Management and ITC Compliance myths.
The following assumptions were made:
- The customer is currently on PG&E’s E19 Tariff, a representative time-of-use (TOU) tariff
- A two-hour capacity energy storage system is installed (60kW/120kWh battery)
- Max battery power output is equal to ~20% of facility’s maximum demand
- Battery round trip efficiency of 81% (charge/discharge efficiency of 90% each way)
For a full explanation of assumptions and calculations, please see the Appendix section at the end of the article.
Demand charge management (DCM) reduces peak demand costs but increases energy costs
Due to efficiency losses, an energy storage system will actually increase a building’s energy costs.
Like any other piece of modern equipment that plugs into a wall, operating a battery does require energy. However, the energy “lost” by the battery is very small relative to the cost of powering the whole facility and pales in comparison to the savings generated through demand charge management. In addition, when on a Time-of-Use (TOU) tariff, demand charge management (DCM) will perform energy arbitrage during the on/off peak spread to save customers even more money.
To debunk this myth, we’ve looked at two possible scenarios.
- Worst-Case: DCM occurs during off-peak time and the battery recharges during on-peak time. This would occur, for example, if there is a morning and evening demand spike. The storage system discharges during off-peak time in the morning and must recharge during peak time mid-day to prepare for the evening demand spike.
- Best-Case: DCM occurs on-peak and the battery charges off-peak.
In the worst-case scenario, the battery is forced to charge during an on-peak energy price period.
Battery cycle losses: $0.09/kWh in summer and $0.04/kWh in winter. The total cost of charging during an on-peak energy price period (peak energy, not peak demand) is $1,014 annually. This loss is small change compared to the estimated $16,000 in annual savings delivered through an energy storage solution. Demand savings were calculated using Geli’s analysis and design tool, Geli ESyst.
In the best-case scenario, the system is able to perform energy arbitrage and DCM at the same time.
Energy arbitrage: $0.04/kWh in summer and $0.01/kWh in winter. The total value of DCM arbitrage is $390 annually.
Conclusion: Whether the worst case or the best, the impacts of energy shifting while performing DCM is insignificant compared to the total energy consumed by the facility.
Investment Tax Credit compliant energy storage can negatively impact solar PV economics
Charging a battery on solar energy will adversely limit the amount of energy that can be sold/exported back to the grid during lucrative peak periods.
In order for an energy storage system to be considered a renewable energy resource and achieve ITC compliance, the battery must charge on a minimum of 75% on-site solar PV production. For the PG&E TOU tariff considered in this case, the summer peak period begins at noon. The first graph below, displays a solar-plus-storage demand charge management solution will affect building load during a typical summer week.
As displayed in the histogram below, for a typical system there is enough morning sunlight to recharge the battery before the peak period begins at noon. Thus, the system owner is still able to sell excess solar back to the grid during the financially-advantageous peak period.
DCM with a 60 kW/120kWh energy storage system over the course of one week in September.
Histogram of time at which the battery reaches full charge when recharging on morning solar production.
Conclusion: 90% the time, the system is able to reach full charge before the noon peak period. A majority of 2-hour systems are not adversely affected by ITC constraints.
Batteries are dangerous and pose serious threats to building owners
There is a commonly held belief that energy storage systems are unsafe and should not be installed indoors until further research is conducted.
This past winter, critical stakeholders worked together to address the key safety questions surrounding battery storage. In February, NYSERDA and Consolidated Edison released a commissioned report conducted by DNV-GL, entitled “Considerations for ESS Fire Safety.” In the same month, leading battery and safety excerpts met in Santa Fe, New Mexico for the second annual Energy Storage Systems Safety Forum at Sandia National Laboratories. While both the report and forum acknowledge the new risks associated with energy storage, they highlight measures already in place and underway that will ensure building safety.
Fires & Toxicity. Fire risks associated with battery storage can often be managed with existing building fire safety codes and protocols. ConEdison, NYSERDA, and DNV GL worked closely with the FDNY to conduct ventilation and extinguishing tests for each type of battery chemistry. The toxic fumes created by a battery fire are comparable to fumes from plastic fires, and therefore safety measures are accounted for in many existing building codes.
Training. The National Fire Protection Association (NFPA) is spearheading the efforts to create the necessary codes and training programs for first responders attending to energy storage system fires.
Conclusion: The latest report indicates that batteries are safe. Like with any new customer-sited technology, researchers and fire protection agencies are creating stringent standards and procedures to ensure customer safety.
There’s only one player in the game
With the recent acquisition of Solar City, Tesla has been front and center in the solar-plus-storage conversation. While Elon Musk has announced an inspiring strategic vision for a world running on renewable energy, Tesla is not the only player in the game. As reported by Greentech Media, battery manufacturers around the world continue to announce plans for new gigafactories. From Johnson Controls to Daimler subsidiary Accumotive, energy storage providers are doubling down on their investments. The expansion of conferences devoted specifically to energy storage is a testament to this rising group of industry player. From EES North America, co-located at InterSolar International, to Energy Storage North America held annually in San Diego, the number of exhibitors is expanding each year.
Conclusion: When searching for an energy storage solution – you’ve got options. Explore the market before signing a check.
Register for Geli’s design and analysis tool, Geli ESyst, to see which of the 100+ available system combinations will maximize the value of your next solar + storage project.
MYTH #1 ASSUMPTIONS
- “Cost of energy” refers to both capital and soft costs
- Economics are for lithium-ion battery technology
- Capital cost outlook taken from Lazard’s Levelized Cost of Storage – Version 2.0
- Soft cost estimates based on Geli’s experience in the field
MYTH #2 CALCULATIONS
Worst Case Scenario
*Savings estimated calculated with Geli’s design and analysis software, Geli ESyst. Assumption: The system completes 130 full cycles annually to perform DCM and there are an equal number of cycles in each season. The number 130 chosen to comply with SGIP rules in California.
Best Case Scenario
Assumption: The system completes 130 full cycles annually to perform DCM and there are an equal number of cycles in each season. The number 130 chosen to comply with SGIP rules in California.
Hilary Platt, Marketing & Strategy @ Geli & Spring 2017 Clean Energy Leadership Institute Fellow