Uncovering the Value in Storage Behind the Meter

Energy storage is being recognized for its considerable value in demand charge mitigation and renewable energy development.
Published: Tue 01 Apr 2014

Many industry observers such as GTM Research are beginning to see the economic potential and value in “behind the meter” energy storage.

Storage can alleviate demand charges

The key to this value is in alleviating demand charges-the portion of a customer's electric bill calculated not on how many kilowatt-hours they use but a snapshot of their highest amount taken from the grid at any particular time.

Basically, demand charges are there so that utilities can cover their fixed power delivery costs, as represented by each customer's peak power needs. However, they can also be increased to make up for revenue lost to shifts in energy prices and reduced energy demand, regardless of whether its falling natural gas prices, a slow-growth economy, increased customer efficiency -- or the spread of on-site solar and other customer-owned generation.

One thing is certain-many major US electricity markets are seeing demand charges escalate as energy continue to dip. These trends can be seen in New York and the Northeastern US, in Hawaii, in Colorado and in other markets, according to Stefan Kratz, sales director for Stem.

The value of energy storage

Buildings with “peaky” loads (hard-to-predict spikes in consumption) have a particularly difficult time managing demand. This is where an energy storage system can kick in automatically to smooth out those peaks. This makes energy storage a highly valuable resource.

In California, that proposition, coupled with state incentives, has allowed Stem to sign up customers for a collective 6MW of installed storage systems. It’s also the key payback being targeted by storage systems in New York City, where storage projects could also play a role, alongside on-site generation and demand response, to relieve congested distribution systems without forcing expensive upgrades.

There’s another important aspect of demand charge mitigation as a service: its relatively short duration requirements. Preventing power spikes in fifteen-minute intervals is something that a lithium-ion battery can do without having to deplete itself and thus shorten its lifespan.

Energy Storage-the next step in renewable energy development

Demand charge trends are playing a major role in another growth area for energy storage: backing up customer-owned solar photovoltaics.

Commercial customers that have installed photovoltaics to reduce their energy bills are discovering that solar power storage provides greater paybacks-either to avoid demand spikes or shifting it to times of the day when grid power is more costly.

The pairing up of solar and storage can help grid operators and utilities transform an intermittent, unpredictable source of customer-generated power into power that is more reliable and stable. It helps to provide emergency backup power, time-of-use price arbitrage. Customers can also use it to play into ancillary services markets as revenue streams.

Currently, markets in Japan and Germany are leading the way with solar-storage combinations. These are being driven by incentives and solar feed-in tariff policies that make it a more reliable investment. Incentives can help reduce risk to utilities or developers investing in energy storage systems.

The US storage industry is also making some major moves in the markets-these include Solar Grid Storage projects on the East Coast, as well as Solar City’s big move into storage as a low- to no-cost add-on to its third-party solar offering for commercial and residential customers.

In addition, California’s Self Generation Incentive Program, which offers incentives for a wide array of customer-sited energy technology, has seen a huge increase in advanced energy storage (AES) technologies applying for credits.

An energy storage system, when connected to a long-term power purchase agreement on a renewable energy power plan, will shift the risk off a utility. The integration of these will also guarantee a revenue stream to the developer. As renewable energy continues to develop, the value of energy storage will be enhanced.

There will come a time when renewable energy systems will not be installed without an energy storage solution.