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.