Stacked value: Combine distributed energy resources and goals to dramatically raise ROI
When it comes to achieving the best possible ROI from battery storage investments, a lot of potential value is being left on the table. This is mostly because many energy storage purchasers use only a fraction of their storage capacity. Worse, many target only one use with their storage systems, even though batteries can provide multiple uses and value streams.
The Rocky Mountain Institute’s report titled The Economics of Battery Energy Storage notes that an energy storage system dispatched solely for demand charge reduction is utilized for only 5–50% of its useful life, whereas dispatching batteries for a primary application and then re-dispatching them to provide multiple, stacked services make the economics of storage much greater.
In fact, a holistic approach that combines battery storage with other distributed energy resources (DERs) such as controllable loads can increase value streams dramatically and can, in fact, cut battery project payback times in half.
1 + 1 = a LOT more than 2
Enbala recently quantified the economics of storage alone versus storage plus load for a large energy service provider (ESP) seeking to control battery storage on C&I accounts so it could engage in a power purchase agreement (PPA) with a west coast utility. The primary goal was to provide capacity to the regional ISO (CAISO) using behind-the-meter storage. If the network could maintain its commitment level to the ISO, additional services and revenue streams could be stacked on, with the ESP retaining the rights to this additional value.
The two types of DERs evaluated were battery storage and loads under control by the Symphony by EnbalaTM distributed energy resource management system (DERMS). The primary value stream examined was the PPA between the ESP and a California utility that was contracting with CAISO to provide 5 MW of capacity with a four-hour duration during the four highest hours in the day-ahead market. By purchasing this capacity, the utility gained the value of the capacity resource, and the ESP was paid an assumed PPA price of $20/kW/month.
Meanwhile, the ESP retained rights to the energy and ancillary services that could be provided by the storage systems and loads at C&I customer sites. In this project, demand-charge management surfaced as a win-win opportunity for the ESP and its C&I customers.
The payoff in the trade-off
These value streams show the inherent trade-off in using a battery storage system for multiple goals, such as demand response capacity plus demand charge reduction. But, the trade-off doesn’t necessarily lower the capacity to be gained from the battery investment. In fact, it raises it.
If a 1 MW battery is installed for demand response (DR), the logical assumption is that a full MW of capacity could be used, i.e., when the asset is called by the utility or ISO, 100% of the inverter capacity could be drawn for the duration of the DR event. However, if part of the battery capacity is also being used for demand management, the stored energy must be optimized between the DR and demand-management goals. That’s where the extra value comes in.
Looking at a large office building example, consider the potential value a battery alone could deliver. With a 360 kW/1,440 kWh storage system, an office could average an 83 kW reduction in monthly peak demand (equal to 23% of the inverter capacity). By leveraging a DERMS, the system could stack value streams to provide an additional 331 kW (or 92% of the inverter capacity) in a DR event.
Going one step further and adding load control to the battery asset, the total value created by each storage system is an even higher percentage of the inverter capacity. In fact, combining storage with load increases the storage systems’ effective inverter capacity by 11% for demand reduction, plus an additional 3% for DR capacity.
All of these value streams are impressive individually and even more compelling when they can be stacked together. For more details and facts about this interesting study of distributed energy value stacking, visit http://info.enbala.com/stackedvalueud.