Customer-Sited Benefits

Executive Summary

On-site storage provides means for electricity end-users to manage their electricity bill (i.e., for energy use and for demandcharges). End-users can also use storage to reduce costs associated with less reliable and lower quality power. End-user-owned storage could also be used by the end-user to address other (compatible) applications via the spot market and/or under auspices of a contract or power purchase agreement for energy, capacity and ancillary services. Similarly, end-user sited storage could be “aggregated” by a third party or merchant power provider to provide other compatible applications.


Time-of-use Energy Cost Management

End-users can use storage to reduce time-of-use (TOU) energy cost by storing energy during off-peak time periods when the retail electric energy price is low, so the energy can be used during times when much higher on-peak energy prices apply. This application is similar to electric energy time-shift, although electric energy prices are based on the customer’s retail tariff, whereas at any given time the price for electric energy time-shift is the prevailing wholesale price. 

For energy end-users to qualify, they must be subject to the relevant type of retail tariff involving prices for energy that reflect time-specific prices. Typically, energy time-of-use tariffs include prices that are specific to:

  1. Time-of-day,
  2. Day of week, and
  3. The season –typically “summer” (May through October) and “winter” (November to April).

Demand Charge Management

A compelling storage application for electricity end-users is to reduce demand such that peak demand charges are reduced or avoided entirely. This opportunity exists because utility tariffs for commercial electricity end-users – especially those with power requirements that exceed 50 to 100 kW – include separate charges for energy and for power. Power-related “demand charges” are assessed based on the end-user’s maximum power draw (demand) during specified demand periods. 

Like prices for TOU energy, most demand charges are specific to: a) time-of-day, b) day of week and c) season. Typically, there are three to five demand periods, including some variation of:

  1. Super on-peak,
  2. On-peak,
  3. Mid-peak,
  4. Off-peak, and
  5. Super off-peak.

In some cases, there is also an “anytime” demand charge which is assessed without regard to when demand occurs. 

The highest demand charges apply during super peak or peak demand periods, typically between 10:00am to 7:00pm during summer weekdays with a duration of five to six hours (e.g., many utilities’ peak demand period occurs 12:00pm to 5:00pm). Lower demand charges apply during other mid-peak and off-peak times of the year. For example, mid peak demand charges typically apply during:

  1. Morning and evening summer weekday hours,
  2. Summer weekend days, and
  3. During all weekday hours in winter months. 

Demand charges – expressed in units of $/kW-month – are assessed monthly, based on the maximum demand within the respective month. So an on-peak demand charge of $7/kW-month that applies during the warmest six months of the year means total charges over the six months of $7/kW-month * 6 months =$42/kW-year.

Given the forgoing, the demand must be reduced during the entire peak demand period within a given monthto avoid demand charges. For example, to avoid a monthly peak demand charge the end-user’s demand must be reduced during all hours of the peak demand period within a given month.

More specifically, the full monthly demand charge is assessed if load is present during just one 15-minute period on one day during the time when demand charges apply. To reduce power draw on the grid when demand charges are high (and to avoid demand charges), storage is charged when there are no or low demand charges. (Presumably, the price for charging energy is low too.) The stored energy is then discharged to serve load during times when demand charges apply.Notably, the energy discharged offsets the need for the customer to purchase high priced energy from the utility (tariffs with demand charges also include time-of-use energy prices.)

Electric Service Reliability

A common use of energystorage is ensuring electricity service without interruption – as with the very familiar uninterruptible power supply (UPS) used in homes and businesses. In the event of a power outage lasting more than a few seconds, the storage system provides enough power and energy to ride through outages. In some cases the electric service will be restored before all stored energy is used. Otherwise, storage allows time for an orderly shutdown of processes and/or to transfer to on-site generation resources.

Electric Service Power Quality

The electric service power quality (PQ) application is similar to that for the electric service reliability except that, as the benefit’s name implies, the storage is used to protect on-site loads from effects related to poor power quality from the grid. PQ challenges tend to be more pervasive, intermittent and they often occur over short durations. Key examples of poor PQ include:

  1. Voltage variations– short-term spikes or dips, longer term surges or sags and
  2. Electrical “noise” – high frequency transients or oscillations, usually injected into the line by other electricity using equipment and some utility operations.

The energy storage benefit for power quality applications is based on avoided costs related to:

  1. Equipment downtime (listed above for electric service reliability),
  2. Damage to electricity-using equipment, and
  3. Suboptimal equipment operation 

Conclusions and Observations

Energy storage for electricity end use can provide four important benefits. Two electricity “bill management” benefits include reduced TOU energy cost and, if applicable, reduced demand charges. A bill management value proposition is attractive because, in like many other storage benefits the prices are apparent and they are likely to rise. Some large commercial end-users have used large capacity cold storage for decades to manage their electricity bill. And, new energy storage technology will only improve. 

Two other important end-user benefits are reliability and power quality related. Depending on the type of end-user; the reliability/power quality benefit can be significant and can be quite complementary to the bill management benefits.