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Battery Storage for Renewable Energy —The Demand, Prices and Savings

a photo of six colored batteries representing low and high energy charges in connection to the topic of battery storage for renewable energy

A behind-the-meter power system is designed to provide a building or a facility with a renewable energy source that will reduce its carbon footprint by generating electricity on the rooftops. This invention of battery storage for renewable energy can typically reduce a building’s electrical consumption by about 80 percent, creating a bold impact as it can drastically change the way renewable energy is used and stored in the years to come.

In this behind-the-meter power system, a local renewable source such as solar photovoltaic (PV) panel system will reduce the building’s consumption of electricity purchased from the utility company’s power grid. Interestingly, behind-the-meter battery storage can take the building or facility off the electrical grid for parts of the day and can provide insurance against power failures or outages. Its use will also allow the building to buy electricity at the lowest rates possible, switching to the stored power during peak hours when the rate is at its highest.

In Focus: Battery Storage for Renewable Energy

In truth, solar PV has been around for many years. However, people did not find the idea feasible because of the cost of battery storage. Back then, people with solar PV in their rooftops ended up using the electricity generated at the time it was generated, which was mostly during mid-day when electrical consumption at home was at its lowest. Another option is to export the electricity generated by the solar PV to the electrical grid through a feed-in tariff.

The availability of cheaper battery storage opened a new option for people with solar PV on their rooftops—store the electricity generated and use it in the evening or during peak hours even when the sun is not shining.  The presence of an aggregator makes it possible to sell the electricity generated by the solar PV into the ancillary service markets. There is also the opportunity to sell or trade the electricity to neighbors. This idea, together with an efficient energy management system, could turn electricity consumers into prosumers—that is, active participants in the energy market. The passive electricity consumers will be transformed into having control over energy production and consumption. When properly utilized, the meter battery storage together with the available technologies and trading models will determine the future of the energy market.

Limiting Factor: Steep Prices

The main stumbling block for the widespread adoption of the behind-the-meter battery storage for renewable energy is its cost. While the concept has been around for a number of years, it was only recently that the battery cost was significantly reduced, paving the way for many stakeholders to get involved in commercial-scale production.

Notably, battery storage technology keeps on improving mainly because of the demand from the manufacturers of electric vehicles. Production is expected to ramp up with Tesla’s Gigafactory in Sparks, Nevada. It is planned to be at full production capacity in 2020, with an output of 150 gigawatt-hours (GWh) per year. The Gigafactory aims not only to provide storage batteries for electric vehicles but also to transition the world to sustainable energy production and consumption. Currently, there are signs that the world is slowly stepping into the threshold of that transition. In 2016, the battery storage market accounts for about 100 megawatts (MW), which is projected to grow to 3,800 MW by 2025.

Worldwide, the market for behind-the-meter battery storage is relatively small. There are still very few countries that show serious interest in the new system—such as Germany, Australia, Japan and the United States.

The Market for Battery Storage for Renewable Energy

a photo of the Dallas Skyline and written data about 5 million people saving energy

The U.S. market for behind-the-meter battery storage is emerging to be commercially viable for large-scale production. The National Renewable Energy Laboratory (NREL) of the U.S. Department of Energy, along with the Clean Energy Group (CEG), made their first comprehensive public analysis available to the public. This analysis details the potential size of the market for commercial behind-the-meter battery storage for renewable energy in the country.

Based on the analysis of more than 10,000 utility tariffs made by the National Renewable Energy Laboratory in 48 states, more than five million out of the 18 million commercial customers across the continental U.S. could potentially reduce their utility bills with the adoption of the battery storage technologies.

The findings of the study are included in the white paper prepared by the NREL and CEG titled, “Identifying Potential Markets for Behind-the-Meter Battery Energy Storage: A Survey of U.S. Demand Charges”.

The researchers in the study took into consideration the commercial customers who are eligible for utility rate tariffs which included $15 or more demand charges per kilowatt, the industry’s benchmark in identifying economic opportunities for the behind-the-meter storage.

A Market That’s Ripe for the Picking

The study estimated that about five million electricity consumers were at or above the threshold. They constitute about a quarter of the commercial electricity consumers in the U.S., presenting a commercially substantial market opportunity for the behind-the-meter battery storage. Markedly, the use of stored energy will control the peak demand for electricity, thus resulting in lower electricity bills because of the reduced demand charges. The economic viability of the use of battery storage for renewable energy will benefit not only the first-mover states, such as New York and California, but also other states across the whole country.

Electricity consumers in states like Alabama, Georgia, Michigan, Kentucky and Ohio are often subjected to utility tariffs due to high-demand charges. These states make behind-the-meter battery storage a viable economic investment. The continuous decline in the cost of battery storage for renewable energy due to the increased demand and ramped-up production make the market potential for battery storage more promising than ever.

The elephant in the room has been the utility demand charges, which cover most of the medium-to-large commercial customers in all of the states. It is a big piece of the puzzle that no one wants to question or discuss in detail with authorities. Instead, consumers just voice their concern over the spiraling energy bills they receive each month to their family or friends.

Savings In the Horizon for Consumers

Electric utility consumers pay for different electric services. There is a basic customer charge, a set fee typically paid on a monthly basis. Large electricity users are charged for demand—which is measured in kilowatts (kW)—based on the demand meters that measure electricity flow based on the highest 15-minute flow average within a billing period. For a customer that uses a lot of electrical power for a brief period of time and uses less electrical power the rest of the time, their demand charge is based on the time that he uses the most electrical power.

Such a type of demand-based charge could be avoided if, at the time when the customer needs to use a lot of electrical power, he switches to the stored electricity in the behind-the-meter battery storage instead of sourcing it from the utility company power grid. Simply avoiding peaks in electricity consumption eliminates the payment of electricity demand charges, resulting in a lot of savings in a person’s monthly electric bill.

The Future with Renewable Energy

The demand charges impact a wide array of customers, including public buildings, multifamily housing units, community facilities and nonprofit businesses. The spike in electricity use resulted in these entities paying demand charges that take up 30 to 70 percent of their utility bills. By installing the behind-the-meter battery storage for renewable energy, these entities will be able to channel their savings to other productive investments. Also, it is worth mentioning that there are other charges that different power utilities place in their billings in addition to all that’s been mentioned. These charges usually depend on government regulations as well as whether the company generates its own power within the state.

In general, the use of battery storage for renewable energy is increasing because of economics. This bold action stems from the fact that it is becoming cheaper to generate your own power, rather than to depend solely on electric utilities. If this trend continues, we can be well on our way to using renewable sources of power at much larger scales in the next few years.

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