Energy Storage is Economically Attractive for Commercial Sector
While energy storage is generally cost-prohibitive for the residential sector, it can be economically attractive for the commercial sector because it is subject to a different billing structure.
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A study published by the National Renewable Energy Laboratory (NREL) in partnership with Clean Energy Group (CEG) found that about 25 percent of all commercial customers in the United States could cost-effectively reduce their electric-utility bills through onsite battery storage.
Commercial properties are charged for energy demand, in addition to energy consumption, plus fixed monthly fees. Public buildings, nonprofit organizations, community centers and even multifamily housing are subject to the commercial pricing structure too.
This report is significant for three reasons. First, a demand-charge study of this magnitude has not been made public before now. Second, the findings demonstrate onsite battery-storage technology is cost-effective for many commercial customers now, not sometime in the future. Third, the report highlights viable market opportunities for expanding behind-the-meter energy storage — meaning a battery paired with solar power — into new regions of the country.
Although solar PV and energy efficiency measures can reduce overall utility bills, they do not reduce demand charges. Demand charges are calculated based on peak demand events — times in which demand peaks within the billing period. These demand charges can comprise from 30 to 70 percent of a customer’s utility bill, according to the white paper.
However, behind-the-meter battery storage can store energy produced during times of low demand and deploy it during times of higher demand, thereby shaving peak demand charges and giving customers the opportunity to respond to pricing signals.
For example, with a commercial demand charge threshold of $15 per kilowatt and peak demand reduction from 125 kilowatts to 60 kilowatts, battery storage could reduce the demand charge by close to $1,000 for the billing period. This amounts to an annual savings of $11,700.
The report also challenges assumptions that battery storage is only economically viable in states with high utility prices. It found that even states with lower electricity prices had some of the highest demand charges. These include Colorado, Nebraska, Arizona and Georgia. These states therefore could greatly benefit from energy storage. Projected decreases in the cost of battery storage technology will only increase this market potential.