Using demand flexibility to reduce supplier imbalance risk

Bitumen tanks

At Open Energi, we are teaming up with energy suppliers and their customers to help make the most of the flexibility in their energy consumption. Using smart demand flexibility to sustainably balance the system, we can mitigate the risk of volatile prices and help reduce rising system charges.

The balancing act

Electricity can’t be stored efficiently or cheaply at scale, so electricity suppliers must balance the energy that they produce themselves or procure from third parties with the energy that their customers use. This means, ahead of time, forecasting how much electricity is going to be generated, forecasting customer demand, and taking any actions to balance them out: buying or selling additional electricity as required.

Any imbalance between generation and demand can result in suppliers facing costly charges from National Grid, who are forced to act in real time to balance the system. Some of the balancing actions that National Grid takes to ensure the lights stay on are expensive and polluting, and lead to gross inefficiencies in the system. During periods when the system is short (insufficient generation / high demand) it might call on a thermal power station to increase its output. Similarly, when the system is long (too much generation / low demand), a thermal power station could be asked to decrease output.

For the flexible energy generators of the UK – namely CCGTs – to be able to respond to these calls, they are run at < 100% of their maximum capacity. The inefficiencies here are twofold. The plants are not run optimally – they use more fuel and produce more carbon per MWh of electricity produced – and, more power stations are required to meet the nation’s electricity requirements. Balancing actions, by their nature, are also taken very close to real time, often outside of the market, which pushes prices up.

An alternative to balancing on the generation-side is to do it on the demand-side: instead of increasing or decreasing the output of a power station, decrease or increase the demand of electricity users. By enabling flexibility behind the meter, for example using battery storage alongside inherent process flexibility, demand-side response can provide an efficient and economical (roughly an order of magnitude cheaper than more traditional methods1) way to balance the system.

Rising system prices

National Grid recovers the cost of balancing from suppliers and generators through Balancing Services use of System (BSUoS) charges, which are passed onto the consumer. A large part of these charges are driven by the imbalance, or system price, which quantifies the cost of balancing energy of the system per half hour period by asking power stations to turn up or down. High prices usually occur when system margins are small; when there is a lack of surplus generation that can be called on. Similarly, low, or even negative prices can occur when there is a surplus of generation. This typically happens during periods of low demand, when solar power is at a maximum – for example on a sunny weekend day.

In the last 6 months or so we have seen the highest and most volatile system prices ever. They peaked at over £1500/MWh in November 2016, compared to an average cost of about £40/MWh over the last year. This peak was caused by a combination of factors. Much of the UK’s aged coal fleet was placed in Supplemental Balancing Reserve (SBR) to be called upon only as a last resort. Then, maintenance to the French nuclear fleet (causing the UK to export rather than import power through the French interconnector) coincided with maintenance to some UK gas peaking plants and low wind speeds, creating a situation where the system got very, very short. When one generator pushes prices up, and these high prices get accepted by National Grid, other generators are likely to follow suit to maximize their profits. For suppliers, this means that an imbalance of a few MW over a few half hours at the wrong time can suddenly become very, very expensive.

Figure 1 shows how system prices have risen since January 2016. With BSUoS similarly rising, suppliers can no longer afford to be complacent with their self-balancing.

 

Suppliers must manage their imbalance to mitigate the risk of volatile system prices
Figure 1: System price over the last 15 months, for periods when the system has been short (insufficient generation) and long (insufficient demand). Prices have increased compared to the mean over the period for both cases

Thus, suppliers are increasingly looking to protect themselves against the risk of coming up short. This is particularly true of renewable generators: you can’t make the wind blow harder at the same time as customer demand peaks (whereas you can burn more gas). Rather than buying in more conventional ‘brown’ (rather than ’green’) generation to make up any gaps at the last minute, or paying the imbalance price on any shortfall, an alternative is to use the inherent flexibility in connected customer loads to alter your demand, and better align with the power being generated by the wind. Instead of flexing the generation, flex the demand.

Flexing electricity consumption

Here at Open Energi, we are using our experience with Dynamic Frequency Response to flex the energy usage of large industrial & commercial consumers to balance the books of their renewable supplier. By intelligently talking to equipment which has energy stored in its processes we can shift electricity consumption without affecting the operation of a customer’s site. For example, the stored energy in a bitumen tank means we can delay heating it for an hour with very little impact on its temperature. Given notice by a supplier that they are short in the next hour and so require a reduction in demand, or, they think system prices will be high, we can delay turning on the tank’s heater until after the price spike.

Figure 2 shows a typical bitumen tank. The blue line shows the tank under ‘normal’ operation and the orange line shows the tank under Open Energi control. Following a request from the supplier (given approximately 30 minutes before hand) to reduce demand at 11am, we can delay switching the tank on, without affecting its operational parameters (the temperature always remains within set limits). We then allow the tank to switch on and heat up after the price spike, shifting its power consumption.

Demand flexibility can help suppliers to manage their imbalance risk
Figure 2: Flexing the power consumption of a single bitumen tank, such that it’s temperature always remains within predefined limits

Do this across a portfolio of tanks, and you make a sizeable reduction in the supplier’s demand during periods when they would otherwise be short: see Figure 3. The energy is recovered later, and, given the energy storage in any one asset, this definition of ‘later’ can be flexible.

Open Energi is working with businesses and their suppliers to manage imbalance risk using demand flexibility
Figure 3: Resulting shift in electricity consumption when flex energy across a portfolio of bitumen tanks

Suppliers save money by avoiding costly imbalance prices and mitigate the risk of price volatility, while managing renewable intermittency and reducing the need for brown generation. By partnering with innovative suppliers who create a market for such flexibility in an open and accessible manner, businesses can use technology to deliver smart demand side flexibility, in real time, with no impact on their operations, while saving money on their electricity bills. This kind of smart, digitized demand side flexibility is crucial to building the decentralized, decarbonized energy system of the future.

1Open Energi analysis

Robyn Lucas is a Data Scientist at Open Energi. She works on demand side flexibility in the UK electricity network; modelling, forecasting and optimizing the usage and performance of a variety electrical loads and enabling customers to intelligently control their electricity consumption. Prior to Open Energi she worked for a technology consultancy, helping clients make the best use of their data. Robyn graduated from Imperial College London in 2015 with a PhD in Physics, during which she worked on one of the experiments at the CERN LHC.

 

Making a success of batteries

Tech image

The surge in interest in battery storage projects has highlighted a fundamental change in the energy market, as commercially viable systems become progressively more available. We explore critical success factors, from choosing the right battery to managing state of charge.

The deployment of physical energy storage assets can broadly be separated into two project categories. The first kind of project consists of grid-scale assets in “front of the meter”, which are usually implemented by industry partners on large grid connections. The second type is “behind the meter” batteries which provide an added layer of flexibility to energy consumption patterns of sites already connected to the electricity network – and offer tremendous potential to unlock previously inaccessible revenue streams for industrial and commercial customers.

Both project types require different approaches to select the best battery type and optimise operational strategy and performance over time.

Selecting the optimal battery operating strategy

Battery flexibility has the ability to unlock several non-mutually exclusive revenue streams. For example, a battery can be used to reduce site demand (for “behind the meter” projects), or export to Grid (for “front of the meter” opportunities) during peak price periods, reducing costs associated with wholesale, Duos, Triads and Capacity Market levy charges. Outside periods of peak tariffs, batteries can participate in the frequency response market and earn a revenue from National Grid for helping to dynamically balance electricity supply and demand.

The characteristics of Battery Energy Storage Systems (BESS) differ widely between manufacturers, with important factors to consider including capital and operating costs, power rating, energy storage capacity, energy density, cell chemistry, operating temperature, round-trip efficiency, self-discharge, degradation profile and tolerance to various depth of discharge. All these parameters have an influence on the economic viability of the project, so it is important to select the appropriate technical solution for a given project.

Once the different parameters are known, the determination of the most economical operating strategy becomes an optimisation problem in response to an aggregated electricity price signal and a potential frequency response revenue, under several constraints such as the battery technical characteristics and the site operational constraints (existing demand/generation on site if any, and import and export capacity).

The operating strategy might change over time, for example because one component of the price signal has changed, or if there is a new opportunity for flexibility that is more financially viable than current revenue streams. In that case the optimisation process will be performed again and the operating strategy modified accordingly.

Battery State of Charge profile
State of charge profile of a BESS doing peak price avoidance from 4PM to 7PM and participating in the frequency response market the rest of the time. The energy stored in the system is maximised before 4PM in order to optimise arbitrage revenues.

Choosing the right battery

The next crucial decision is choosing a battery that is optimal for a given project and operating strategy. The goal here is to select the battery that will be commercially viable under the constraints of a given project. For a “front of the meter” BESS the main factors driving the battery characteristics are the Authorised Supply Capacity (ASC) for importing and exporting, the capital and operational costs and the electricity tariffs for import and export.

There are additional parameters for a “behind the meter” battery. As most of these projects are implemented in sites with no or a small export capacity, the battery would respond to a low frequency event by discharging power into the site, reducing its overall energy consumption. It is therefore crucial to forecast the demand on site to choose the optimal battery size and tender an accurate power availability in the frequency response market.

The same approach can be used for generating sites (like wind or solar farms) where there must be sufficient potential for export in addition to the generating activity on site. The potential energy savings are also dependent on the demand and the site constraints, which might in return drive the optimal power/energy ratio of the BESS.

Managing battery state of charge and maintaining performance

Once installed, the challenge is to manage batteries while ensuring high performance following the operating strategy selected. A requirement of entering the frequency response market is to be able to provide the power tendered for 30 minutes at a time, which highlights the need for a performant state of charge management.

There is an inherent efficiency in BESS, with average efficiency ranging from 75% to 90 % for conventional systems. When used in the frequency response market, successive cycles of charge and discharge will progressively cause a net discharge of the battery, and ultimately cause the battery to be fully discharged if no corrective actions are taken. Similarly, if several large high frequency events happen in close succession, a frequency-responsive BESS might reach a high state of charge at which it will not be able to respond to high frequency events anymore.

Battery charge management graph
State of charge of a 1MW/2MW.h frequency responsive battery. An appropriate state of charge management helps keep the energy stored in the battery at an optimal level over time.

A control strategy should ensure that the battery state of charge always stays within appropriate boundaries in order to meet its contracted obligations at any given point in time. It should also ensure that the total throughput of the battery (which is the cumulative sum of discharge processes over time) is minimised while in operation. A reduced throughput decreases the wear and tear of the battery, enhancing the BESS lifetime.

At Open Energi we are working with several customers to successfully operate batteries in the frequency response market, optimising their operating profile to maximise revenues, applying designed state of charge management techniques, while limiting the degradation of the battery lifetime to the lowest value possible.

 

 

Energy Storage: unlocking consumer value

Storage London Skyline of Gherkin

David Hill, Director, Open Energi, discusses how a sharing economy approach to battery deployment can unlock value for consumers.

Energy markets are in the midst of a revolution and the arrival of commercially viable energy storage systems is accelerating this change.

When looking at how the market will adapt to this change, there are two broad options for the deployment of energy storage. The first is the introduction of massive grid-scale batteries in front of the meter, backed by utilities and other large industry partners. Such an approach would support the traditional, centralised model of energy supply where value is returned to industry incumbents.

The second option is a behind the meter approach where energy storage helps to fuel the growth of a decentralised system.  One which sees batteries distributed in every business and home and transfers value to consumers, putting them in control of how, when and from where they consume their energy.

Yesterday, at the BNEF’s Future of Energy Summit, I discussed why this is not only the most exciting vision, but also the smartest.

A sharing economy approach

By co-locating batteries on business sites, you are taking the same sharing economy principles revolutionised by Airbnb and Uber, and applying them to industrial equipment and infrastructure to unlock new income streams from existing assets.

It means there’s no need to buy up acres of land or invest in expensive new grid connections. Batteries are installed on industrial and commercial customer sites and tap into the grid via existing connections.

This also means they can interact with other business assets and processes, opening up new revenue streams and energy saving opportunities for end users. In this way, batteries can help businesses to maximise the value of their total flexibility by:

  • Cutting costs during peak price periods
  • Earning revenue from frequency response
  • Unlocking value from assets with zero flexibility
  • Trading capacity in wholesale electricity markets

Unlocking total flexibility

Take a supermarket for example. Without a battery, it could use flexibility inherent in some of its equipment and processes, such as refrigeration, air conditioning and cold storage, to participate in real-time frequency response. For example, automatically turning air con units down for a short period of time (90% of switches are for less than 5 minutes) when demand exceeds supply, or turning them up when there’s an unexpected surplus on the system.  Because there is stored energy in these processes, i.e. the thermal inertia associated with heating or cooling, it could do this without impacting the quality of its products or the comfort of its customers.

This still leaves a significant portion of its energy consumption “untouchable.” Turning lighting, tills or baking ovens off to avoid peak pricing periods wouldn’t go down well with customers. Batteries change the game completely; enabling a supermarket to charge its battery when costs are low, and power as much of its consumption as possible from the battery during peak periods, including non-flexible consumption such as lighting, tills and baking ovens. As peak price periods only account for about 10% of a day, the rest of the time the battery can earn revenues from frequency response.

Combining energy storage and demand side response in this way is the key to unlocking the total value of flexibility to consumers – and the potential of this flexibility to transform how our electricity system operates. It’s a combination which means we’re already seeing business models on industrial and commercial sites with an ROI of 3-5 years. Not bad compared to 15-20 years for a grid-scale generation project.

Smart technology platforms

Similar to the other sharing economy models that have been catalysts for change in their respective industries, underpinning this flexibility in the energy industry is technology. Decrypting patterns of flexible demand and making intelligent decisions on a second-by-second basis about how an asset should behave and from where it should consume its energy requires cutting-edge technology.

Open Energi is using the same mathematical techniques that have let machines defeat chess and Go masters to build a technology platform that can aggregate massive amounts of flexible demand – from industrial equipment, co-generation and battery storage systems – and take us closer to the reality of a smarter grid; one that is cleaner, cheaper, more secure and more efficient.

 

 

The Business Case for Flexibility

The Business Case for Flexibility

The move to a low carbon economy coupled with rapid advances in technology and innovation are transforming electricity supply and demand. Grid agility and flexibility are essential as we move away from models of centrally dispatched generation and incorporate more intermittent renewable energy generation onto the system.

This flexibility can be provided in a variety of forms, from demand side response (DSR) and energy storage to new build gas generation. However, there is a clear merit order emerging in terms of both carbon and consumer cost of these offerings, and to enable this merit order to play out requires a technology-agnostic approach to the energy system, free of subsidies and long-term contracts that prevent these solutions from competing on an equal footing.

The National Infrastructure Commission’s Smart Power report signifies the concrete shift in thinking needed to unleash flexibility and shore up energy security for the UK. The conditions are right for innovation, and innovation is about being able to run systems effectively at tighter margins with no impact on reliability or risk through storage and invisible, automated and no-build DSR.

Demand response technology is, at its core, an intelligent approach to energy that enables aggregators to harness flexibility in our demand for energy to build a smart, affordable and secure new energy economy. True DSR technology invisibly increases, decreases or shifts users’ electricity consumption, enabling businesses and consumers to save on total energy costs and reduce their carbon footprints, while at the same time enabling National Grid to keep capacity margins in check. Although in its infancy, the UK’s demand side response market is a reality, delivering flexibility today.

Research by Open Energi, National Grid and Cardiff University published in October 2015 illustrates that smart demand side response technology can already meet the UK’s crucial grid balancing requirements faster than a conventional power station. Added to this, using new build gas to provide flexibility in a renewables-based system is counter-intuitive. DSR technologies are already working for the UK, providing flexibility to the UK grid at a far cheaper cost per MW than both batteries and gas.
This is precisely why National Grid has established its Power Responsive campaign as a framework for turning debate into action with a practical platform to galvanise businesses, suppliers, policy makers and others to seize the opportunity to shape the growth of demand side response collaboratively, and deliver it at scale by 2020.

It’s a well reported fact that electricity margins are tighter than they have been for a number of years, as illustrated by the NISM National Grid issued in late 2015. Knee jerk reactions to this are to incentivise infrastructure investment in power stations with long-term contracts, but this is inefficient and costly.

The £18 billion Hinkley Point project is a case in point. Looking at future demand curves, once the plant is up and running, there will be periods when its supply exceeds demand for power across the whole of the UK. The UK should capitalise on smart options for delivering flexibility which can be delivered faster and more cheaply than traditional infrastructure projects. Behind the meter solutions are much more empowering to consumers.

The conditions are right for innovation, and innovation is about being able to run systems effectively at tighter margins with no impact on reliability or risk. This is possible through storage and DSR. In this ‘year of innovation’, disruptors must be able to implement their solutions on a free-market basis, without guarantees and subsidies for certain technologies that block competition. To achieve flexibility goals, government must be technology agnostic.

US regional transmission organisation PJM provides a useful case study, with its real-time and near-term energy markets that incentivise the best and cheapest technology at any given time. PJM’s approach has seen a proliferation in innovative flexibility solutions accompanied by falling costs for customers. According to ABB, two thirds of the 62MW of storage deployed in the US in 2014 was located in PJM territory . Market intervention is not necessary for energy system innovation to flourish. In fact, PJM shows that the opposite is true.

National Grid is already on the case with its Enhanced Frequency Response auction, which has seen 63 generators, energy storage companies and DSR aggregators pre-qualify to bid for contracts that will make it easier to manage the system. Demand side response is part of a wider energy market picture that must focus on flexibility and achieving the lowest cost for consumers. If just 5 per cent of peak demand was met with flexible power, the response would be equivalent to the generation of a new nuclear power station, without the huge costs to consumers.

Government needs to recognise that gas sits at the bottom of the flexibility merit order. Storage will undoubtedly play an important role, but Rudd’s pledge to explore long term storage incentives to get battery market moving are anti-competitive, not to mention unnecessarily costly for consumers.

DSR technology is already working today – not only to reduce electricity load at peak times, but also to increase load when demand is low and support National Grid’s second-by-second frequency balancing needs. And this is happening at both national and local scales.

2016 must be the year of flexibility and, to achieve this, we need consolidated markets that are technology agnostic. An energy department that styles itself as pro-innovation must send clear signals to innovators that it doesn’t pick winners.

David Hill, Business Development Director, Open Energi

Mapping Britain’s Heat Storage Potential

Bitumen tanks

Chris Kimmett, Commercial Manager, Open Energi

The energy system is undergoing a huge transformation away from centralised generation to small-scale, distributed power. National Grid’s Future Energy Scenarios (FES) models indicate that by 2020, small-scale, distributed generation will represent a third of total capacity in the UK and, as a result, speed of response to changes in energy supply and demand will be more important than ever.

And it is not only the increase in distributed generation that will prove challenging for the UK grid. The coal-fired Ferrybridge, Longannet, Fiddler’s Ferry and Rugeley are all expected to come offline this year, and with gas power stations procured under the Capacity Market now in doubt, the cushion between supply and demand is smaller than ever.

A new source of flexibility is urgently required, and storage to provide this flexibility will be an increasingly essential part of a responsive, secure and sustainable energy future for the UK.

Energy storage is commonly understood to mean batteries and pumped hydro systems. While both are valuable, current costs, installation times, and issues around recycling and decommissioning are all prohibitive to wider deployment. But storage exists in a number of forms, including through demand side response (DSR), which takes advantage of latent heat in energy-intensive equipment and devices to create new flexibility for the grid.
If too much energy is supplied at any given time, it doesn’t have to be stored in a battery: instead, Internet of Things (IOT) based forms of demand response can adjust the consumption of energy-intensive devices to make use of power when it is available. In instances when there is not enough power, demand can be deferred rather than drawing from a battery to supplement supply.

This smart DSR approach is ideally suited to heating and cooling assets that have the characteristics of stored energy devices.  By harnessing existing everyday equipment, from fridges to furnaces, and invisibly switching them on or off for a few minutes at a time, energy demand can be adjusted to meet available supply in real-time, creating a distributed storage technology.

Take the asphalt plants which manage the complete asphalt production process for road construction as an example. Liquid bitumen for road surfacing is stored in large, well-insulated tanks, and a heater maintains the temperature of the bitumen between a low set point (typically 150 degrees C) and a high set point (typically 180 degrees C).

These tanks have “thermal inertia”, meaning the amount of energy they use can be adjusted and the temperature of the bitumen won’t be immediately affected: Bitumen tanks can be switched off for an hour and the temperature may only fall by between 0.5-15 degrees C.

Using demand response technology, bitumen tanks can deliver a full response to National Grid within two seconds (quicker than traditional thermal generation) and for up to 30 minutes, provided they are within their set-points. The average duration of Open Energi’s switch requests to bitumen tanks is just 3.3 minutes.

Cooling systems such as supermarket refrigeration also provide a distributed storage network that can help to balance UK-wide electricity supply and demand in real-time.

Open Energi estimates that if Dynamic Demand was deployed in the commercial refrigeration assets of the five largest retailers in the UK, it could meet approximately 6% of the UK’s total 1.8GW requirement for Frequency Response, roughly equivalent to 100 MW. This would generate revenues of up to £10 million a year for the asset owners and reduce UK CO2 emissions by around 227,600 tonnes a year.

Other latent heat storage assets include: heating, ventilation, air conditioning, and hot water boilers in commercial property; electric induction furnaces, ovens and melting pots in foundries and metal processing sites; and heaters and aerators at water processing sites.

Because these devices have already been built, it is possible to aggregate the stored thermal energy they contain and build a virtual power station at a fraction of the cost of building a grid scale battery or new generation capacity. The capital cost of building a new peaking power station can be up to £5 million per MW and battery systems in the region of £0.5 million-£1.8 million per MW. A MW of demand response, on the other hand, costs around £200,000 to aggregate.

DSR, coupled with on-site generation and energy storage technologies means that the energy market is no longer a linear value chain driven by fossil fuel production but is becoming decentralised and bi-directional; creating a new energy economy where energy consumers can both take and provide service back to the grid and generate revenue.

To realise the full potential of DSR technology we now need to further understand where the potential for flexibility, including latent heat, lies across the UK’s entire electricity network: assessing both regions and sectors.

In the same way that traditional energy commodities like oil, gas and coal are mapped by geologists to identify resource rich areas, a flexibility mapping process will enable demand response aggregators to identify the DSR ‘hot spots’. This in turn will give business, industry and policy makers the confidence to invest in DSR technology ahead of building additional spinning reserve, and the certainty they need to plan for a future where flexible Demand Response plays an integral role in delivering a secure and resilient energy system.

By using land data from regional authorities, for instance the GLA for London, the industry can develop a better understanding of where the flexibility potential lies, whether that be in heavy industry, commercial buildings or residential areas.

Open Energi is working to map flexible demand in the UK from the bottom up, asset by asset, sector by sector, to model the capacity in the market and demonstrate how much generation can be displaced.

Increasing flexibility on the grid has historically meant building more generation, but latent heat in energy intensive equipment presents a hugely valuable opportunity. And through mapping, this opportunity can be realised at scale for the UK.

Ever ready: will batteries power up in 2016?

Open Energi Banner ADE

David Hill, Business Development Director, Open Energi

Open Energi tends to extol the virtues of Demand Side Response as a solution to the energy storage challenge.  It provides a no-build, sharing economy approach which is cheap, sustainable, scalable and secure.

By harnessing flexible demand and tapping into the thermal inertia of bitumen tanks or the pumped energy stored in a reservoir for example, we have created a distributed storage network able to provide flexible capacity to the grid in real-time without any impact on our customers.

But flexibility comes in many forms, and as the cost of energy storage systems tumble, it looks like 2016 might be the year when commercial batteries become a viable part of the UK’s electricity infrastructure, with recent analysis suggesting they could deliver 1.6GW of capacity by 2020, up from just 24MW today.

The price of energy storage systems is expected to fall sharply over the next three decades, with Bloomberg New Energy Finance predicting the average cost of residential energy storage systems will fall from $1,600 per KWh in 2015 to below $1,000 per KWh in 2020, and $260 per KWh in 2040.

As costs have fallen we have seen increasing interest from industrial and commercial customers keen to explore the benefits of installing batteries on-site and looking at systems capable of meeting 50%-100% of their peak demand – depending on their connection agreement (although it is worth noting an export licence is not a prerequisite).

In addition to providing security in the event of power outages, battery systems can help companies to reduce their demand during peak price periods, enabling them to seamlessly slash the astronomical costs – and forecasting difficulties – associated with Triads, and minimise their DUoS Red Band charges.

When they aren’t supporting peak price avoidance – which may be only 10% of the time – batteries can help to balance the grid – earning revenue for participating in National Grid’s frequency response markets. For example, discharging power to the system if the frequency drops below 50 Hertz and charging when the frequency rises above 50 Hertz.

National Grid’s new Enhanced Frequency Response market has been developed with battery systems in mind – requiring full response within 1 second – but isn’t expected to be up and running for a year or more.

In the meantime battery systems can generate significant revenues today via National Grid’s Dynamic Firm Frequency Response market, tendering alongside loads from companies like Sainsbury’s, United Utilities and Aggregate Industries, to help balance the grid, 24/7, 365 days a year.  And in the longer term the opportunity exists for companies to trade their batteries’ capacity in wholesale electricity markets.

With these saving and revenue opportunities in mind, we’re now at a point where battery systems can be installed behind-the-meter and deliver a ROI within 3-5 years for industrial and commercial sites. The ROI will be subject to certain factors, such as geographic location, connection size and of course the cost of the battery system itself, but these figures would have been unthinkable only a few years ago.

There are important technical factors to consider, including both the battery sizing in terms of its kW power rating and kWhr energy storage capacity, and also the underlying battery chemistry.  By taking into account the physical location of the battery along with models of different markets that it will operate in, it is possible to narrow down to the most appropriate technical parameters.  Another consideration is the gradual effect of wear and tear on the battery with continuous usage.  By analysing these effects it is possible to reduce some of the uncertainty around battery lifecycles (likely to be in the region of 10 years) and get better predictions of the likely revenue in each year of operation.

But whilst a payback of 5 years seems reasonable from an energy infrastructure perspective (where 15-20 years is more typical) for most companies used to a ROI within 2-3 years on energy projects it is not easy financing battery systems.

Some larger, capital rich companies may have the appetite and money to finance these projects themselves, but the majority of the companies we are talking to are keen to take these assets off balance sheet and finance installations via banks and other investors under third party ownership.

In these circumstances, managing the performance of battery systems – so that they meet their warranty and their lifecycle is maximised – whilst optimising their potential as a flexible resource able to cut energy costs, earn revenue and deliver a vital uninterruptible power supply  during outages will be key to their commercial success and scale of deployment.