How Intelligent Energy Storage Software Optimizes Commercial & Industrial Operations
Despite several years of low fossil fuel prices, the growth of renewable energy sources, such as wind and solar, seems unstoppable. This clean energy expansion is driven by improved performance, lower costs, and advantages of distributed generation like greater resiliency, energy independence, and reduced carbon footprint. This fundamental shift in electricity production is having profound effects on the utility industry, which is learning to adapt to the shifting landscape. At the same time, lower costs for renewables and energy storage translate to significant benefits for commercial and industrial (C&I) users.
According to a recent study from Lawrence Berkeley National Laboratory, US solar PV installation prices fell by 5% last year, to a median cost of about $4.49 per watt. While this is not as low as in other markets (most notably Germany, where typical pricing for residential systems in 2015 was around $1.70 per watt), prices continue to drop. At the same time, panel efficiency is increasing. With state and federal incentives, system payback periods are getting shorter, making solar PV a very attractive choice for C&I energy users.
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What’s more, similar trends hold for energy storage as technologies improve and global production increases. According to one industry source, lithium-ion battery prices have dropped by 70% over the last 18 months. The McKinsey Global Institute forecasts a further 33% drop in Li-ion prices over the next 10 years. Driven by demand from electric vehicle manufacturers, companies like Tesla and GM are taking aim at the magical $100 per kWh price point.
For the C&I segment, the disruption faced by the traditional energy model presents a threat, but also an enormous opportunity. It’s a threat because in the short term, as established market participants face challenges, policymakers are struggling to update market rules to maximize the value of new technologies—resulting in some bumps in the road as the system adjusts to the disruption brought about by almost marginal cost-free technologies. Such “hiccups” can result in higher demand charges or unnecessarily high energy prices. Grids may also become less stable due to the intermittency of an ever-increasing amount of renewables.
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Fortunately, these threats are counterbalanced by the promise of substantial and permanent energy cost reductions through what is essentially a one-time infrastructure investment. Until now, the potential of renewables (especially PV) was limited to a relatively small reduction in energy cost by shaving a bit off the daily peak. This has changed. Rapidly falling battery costs mean that it is now economical to leverage intelligent storage-based, plug-and-play solutions to cover a much higher share of energy needs by sourcing cheaper, clean, but intermittent, solar PV and wind energy.
In fact, thanks to falling costs, implementing easily deployable storage can provide a number of benefits, even without adding renewable generation. C&I customers can profit from multiple use cases, sometimes referred to as “value stacking,” which utilities and other market participants often can’t do because regulations are sometimes slow to adapt to new technological possibilities.
One major use case is demand charge reduction. Younicos has been helping a German industrial client identify potential benefits from a proposed storage deployment. It was determined that the company would have to pay roughly $82,000 a year for each megawatt of installed generation capacity, regardless of how often they use it. A joint analysis also found that due to peaks in the industrial process, many megawatts of installed capacity are used only occasionally. Modern batteries can deliver this short-term excess power just as well as the grid—especially since these peak demands generally do not come unexpectedly. With a lifetime of at least ten years—thanks to an intelligent energy management system that treats battery cells properly—the avoided demand charge could also cover the capital cost.
Furthermore, during periods when they know they’ll have little or no need for their batteries to provide excess power, C&I customers can use all or some of the capacity to provide valuable grid services, such as primary frequency regulation. In most jurisdictions, primary frequency regulation is supplied in intervals of a week or less—with a trend towards durations of a few hours. This increasing flexibility enables C&I users to maximize the value of their storage asset by deploying as much of it as possible in revenue-generating use cases.
Interestingly, software tools originally designed for other purposes can be adapted for C&I applications. One example is a microgrid energy management system that optimizes battery charging by taking into account factors as diverse as the weather forecast, likely load patterns and the best state of charge for the batteries. This level of control allows customers to minimize energy costs, generate additional revenue, and ensure an uninterrupted production process.
In reference to production processes, there is one more, increasingly important advantage of storage for C&I customers: enabling “Industry 4.0” demand-driven production cycles. Again, without storage, such flexibility would be much more difficult to achieve, and would result in even higher demand charges for rarely used capacity.
As technology continues to evolve, prices steadily decline, and new business cases are established, users may be unsure as to when the best time will be to invest in storage. With today’s favorable pricing trends, however, one could argue that now is the perfect time. The economics pencil out, making a compelling business case for C&I users to invest in intelligent and customizable plug-and-play storage for their operations.