September 2018 Edition: Energy Storage: What is it and why is it important for my business?
Energy storage is many things to many different people. For commercial and industrial companies, energy storage is a versatile tool that offers more control over energy costs. Specifically, battery energy storage systems (BESS) have the ability to target specific demand-based charges and reduce these charges without impacting business operations.
What is Energy Storage?
In many ways, large-scale BESS share many of the same characteristics of batteries in your cell phone or consumer electronics. The major differences are in the scale of the systems and the added control systems that are required to run the battery efficiently and reduce safety issues.
Like the batteries in your smart phones or electric vehicles, the most widely used BESS are lithium-ion based. Lithium- ion batteries are versatile, high in energy density and come in various designs optimized for its intended use. Lithium- ion batteries make up most of the batteries currently deployed to date.
In the U.S., the use of batteries has grown dramatically. According to the U.S. Energy Information Administration (EIA), over 80% of the energy storage in the U.S. was made up of batteries at the end of 2017, and 40% of that capacity is located in the PJM interconnection territory. You can find more in-depth information on battery storage in EIA’s U.S. Battery Storage Market Trends.
For example, imagine these batteries are similar to smartphones. On your smartphone, you can have multiple applications (apps) – the same is true about batteries. Each battery contains applications that fall into two distinct categories: power (kW) applications, which help you reduce demand costs $/kW, and energy (kWh) applications, which help you reduce energy supply costs $/kWh. Energy applications require a battery to be scaled for longer run times the longer the run times – the more expensive and cost prohibitive the battery becomes. In some markets outside of PJM, energy batteries in the six to eight-hour range have strong paybacks, however, there are limited opportunities for energy applications in PJM. With that said, there are several power applications that require limited, full discharge events over the course of the year and can result in significant savings in PJM.
Getting Value from Battery Energy Storage Systems
Combined with a peak prediction tool, such as AEP Energy’s PowerPerksSM, a properly designed and sited BESS can be deployed to reduce the following demand-based charges in PJM and produce significant savings, reducing your bill by five to ten percent, depending on the size of the system.
The local utility takes the organization’s average demand level during the five highest demand hours, called Coincident Peak (CP), for the entire PJM system during the summer months. Capacity charges make up about 16 percent of energy supply cost charges, so reducing these costs can have a significant impact on your energy bill.
BESS for Resiliency
Many customers think of batteries as a tool for riding through power outages. While energy batteries can act as back-up power, this particular application is costly and may not be the best resource for your organization’s particular need.
Applications that require more than eight to ten hours of run time, typically would be better suited for a back-up generator, rather than a BESS. However, if the battery is being used for demand reductions for PLC and NSPL reduction over one to two hours, the battery could be on standby for critical loads during remaining hours of the day. The smaller the critical load, the longer the battery will be able to maintain it.
Siting and Selecting a Vendor
Current BESS systems are modular and can be sized to fit any application. A typical 2MW/2MWh system, or a system that can output 2 MW for one hour, is fairly large and can fit inside an average 40 ft. shipping container. These systems will be tied directly into the low side of a customer’s transformer, or behind the customer’s meter and will be installed in parallel operation to eliminate risk of interruption with day-to-day operations. The systems can be operated either on-site or through remote monitoring using a low cost cellular connection.
BESS can be owned directly or by a third party. Each has their advantages, however, unlike solar, the operation of a battery is critical to extracting the value streams discussed in this edition. Third parties are available who specialize in BESS applications. Whether you own the system directly, or it is owned by a third party, partnering with an experienced vendor will be important to maximizing the value of the project.
Interested in Learning More?
AEP OnSite Partners, along with AEP Energy, is uniquely suited to own, operate and dispatch BESS, to maximize the benefit to our customers. If you are interested in learning more about how a BESS can benefit your organization, reach out to Peter Protopappas, Business Development Lead for AEP OnSite Partners, at firstname.lastname@example.org or contact your AEP Energy sales representative to find out if an opportunity is right for your organization.
Market Overview – AEP Energy Trading
Power PJM – Ohio
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