The POWER Interview: Financial Benefits of Energy Storage

Speakers at POWER’s recent Distributed Energy Experience were unanimous in their agreement that energy storage is a game-changing technology for the power generation sector. Storage provides for more reliability and resilience, and already is proving its importance to supporting the growth of solar and wind power.

Utilities are incorporating storage into their generation portfolios. It is often featured as part of microgrid configurations, and the business community has discovered the cost-effectiveness of storage in commercial and industrial distributed generation systems.

Abbot Moffat, Director of Business Development / West for Rubicon Professional Services, provided POWER with his insight into energy storage. Rubicon is a team of experienced design and construction experts that works on projects for several industries, including alternative energy, data centers, health care, telecommunications, and power plants.

POWER: What are the financial benefits for a utility to incorporate energy storage into its project portfolio?

Moffat: Energy storage is best described as an “enabling” technology – it enables utilities to easily store energy resources from wind, solar and hydro, as well as conventional sources such as fossil fuels or even nuclear power, as well as providing easy access to demand side or system efficiency resources. In short, it acts as a distribution, generation, and transmission source.

Abbot Moffat

Energy storage smooths out intermittent resources such as wind and solar by storing excess energy when the wind is blowing, and the sun is shining and delivering it when appropriate. Energy storage also reduces the cost of spinning reserve services and frequency regulation and can be used to offset the costs to consumers by storing low-cost energy, delivering it during peak periods at higher electricity rates.

Storage can also deliver baseload resources. When demand changes quickly, which requires either expensive and potentially slow to respond power (peaker plants) or difficult to manage (i.e, costly) downramping, energy storage can inject or extract electricity as needed to match load as needed.

For more information about the financial benefits of energy storage, read “Analysts: Storage a Matter of Dollars and Sense” in the November 2020 issue of POWER.

By relatively inexpensively incorporating flexibility into grid infrastructure, energy storage can foster the integration of more solar, wind, and distributed energy resources, which have recently proven themselves as the energy source of choice from both economic and ecological perspectives. It can also improve the efficiency of the grid—increasing the capacity factor of both existing and alternative power resources—offsetting the need for building new pollution-intensive peak power plants.

POWER: What are the financial benefits of incorporating energy storage into a microgrid?

Moffat: Energy storage systems (ESS), and specifically battery energy storage systems (BESS) are one of the cornerstones of a successful microgrid, and the financial benefits are myriad.

Microgrids rely on local energy production, which is increasingly moving toward Variable Energy Resources (VERs) such as solar, wind and to a lesser extent, hydro. The energy production of these sources, while inexpensive and carbon-free, cannot be controlled—the sun does not shine all of the time, nor does the wind always blow. By incorporating a BESS into the system, a microgrid is able to access those low-cost energy sources, dispatching the power when and where their customer base requires. Effectively, a BESS allows a microgrid the same operational efficiencies and cost savings as a utility, just on a smaller, local scale. Also, unlike traditional fossil fuel sources, BESS can dispatch energy almost instantaneously, reacting to changing load conditions dynamically.

POWER: What are the financial benefits for a commercial and industrial (C&I) enterprise of incorporating energy storage into their on-site power generation?

Moffat: Energy arbitrage and independence from grid fluctuations rise to the top of the benefit equation for C&I-scale energy storage systems, again primarily BESS (although it should be pointed out that many of the benefits offered to microgrids and utilities are just as important to smaller-scale BESS operators).

Energy management is a key issue for companies working to maintain and minimize operational costs. Energy storage systems provide companies control over distributed energy resources, allowing businesses to save on demand charges, provide critical continued power to protect against grid variability, and better incorporate renewable energy sources to foster more sustainable and economically sound business practices.

The majority of C&I-scale facilities are required to pay demand charges based on their peak electricity usage. This cost often represents anywhere from 30%-70% of overall energy expenditures included on a commercial electric bill. Energy arbitrage can provide significant cost savings through discharging energy during the highest periods of usage and cost, reducing load during those peak periods, and resulting in reduced demand charges.

Load shifting is a key part of reducing energy costs through this strategy. BESS software analyzes consumption patterns and storage efficiency to determine the best time to charge and discharge stored energy, shifting the highest load to non-peak hours.

Lastly, BESS can be used to “smooth out” grid variability, effectively becoming the primary source of site power, with the grid essentially relegated to a back-up energy source. This allows the site to not only ignore grid power outages (and the potential costs thereof), limited only by the storage capacity at the site, but also to maintain a set power factor point and remove any grid fluctuations that might affect sensitive equipment.

POWER: What technology advancements are needed to improve the cost-effectiveness of energy storage?

Moffat: Energy storage systems are evolving at an extraordinary rate, and have already reached the point of cost-effectiveness, proving themselves at sites such as the Hornsdale and Ballarat systems in Australia. As we see longer storage times and decreased cost (due to increased economy of scale), driven in part by the electric vehicle market, this value option will only increase.

POWER: How should power markets be looking at energy storage versus other forms of power generation, such as coal, natural gas, and renewables?

Moffat: ESS should not be considered as a one or the other proposition (although stand-alone storage BESS are an increasingly common sight), but as a complement to, and enabler of other energy sources, particularly renewables. VERs reach their full potential as an alternative to high-cost (financial and environmental) fossil fuels when paired with ESS, and investments in them now stand to reap long-term dividends across the board.

Darrell Proctor is associate editor for POWER (@POWERmagazine).

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