Download Energy Storage Use Case: Commercial Demand Side Management

August 2016
Technology Advisory
Energy Storage Use Case:
Commercial Demand Side Management
This Technology Advisory is one of a series by NRECA’s Renewable and
Distributed Generation work group, providing Use Case studies of various
aspects of Energy Storage. The series may be found on NRECA’s:
Energy Storage topic page on cooperative.com, and
Renewable and Distributed Generation page on nreca.coop.
Note: As a Use Case, this document provides description and
recommendation of applying Energy Storage to the given market scenario;
this is not a Case Study of a particular deployment of the technology.
Defining the Use Case
Commercial Demand Side Management1
Commercial electric accounts often have a demand charge, as well as an energy charge
and facilities charge. The demand charge is based on the peak power (kW) usage at
some point during each month, and is independent of the total amount of energy that
the member uses. The demand may be based on maximum delivery over a 15-minute
period or a one-hour period. It may apply over the entire month, or only during “onpeak” periods. The demand charge may also apply only to work days and may vary by
season. The amount which co-ops charge varies widely, but a quick online survey of
co-op commercial rates showed demand charges ranging from just over $3.00 per kW
to nearly $15.00 per kW.
An energy storage system (ESS) can supply energy to meet the commercial load and
reduce the peak demand at any given time. The maximum amount of demand that can
be reduced is the power rating (kW or MW) of the ESS. The minimum amount of
energy required from the ESS is the rated power times the length of the peak period.
In practice, however, a longer discharge period may be required. For example, if a
commercial facility peak occurs at some time over roughly three hours (e.g. afternoon
air conditioning), reducing the highest peak for one hour would simply shift the peak to
one of the other two adjacent hours. A storage system in that instance would typically
need three to four hours of capacity to offset (or “shave”) the peak. The shape of the
customer’s load would be the determining factor.
The same circumstances apply to ESS cycling. If the load could be forecasted perfectly,
then the system would only need to operate once per month, or only 12 cycles per
1
May also be referred to as “peak reduction” or “peak shaving”.
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August 2016
year, to offset the demand. In a real application, the system would need to operate
multiple times per month, possibly even more than once per day. Advanced control
techniques, including machine-learning algorithms, are being developed to address this
issue, but since many peaks are weather-related, there will rarely be an accurate
forecast for the peak period. A typical cycle requirement could assume a maximum of
one cycle per day, or 365 cycles per year. For a device with a ten-year life, this would
be 3,650 cycles, but not all of them would fully discharge the battery.2
Specifications of ESS for Commercial Demand Side
Management
Power Rating: The optimum power rating of the ESS for this application would vary
depending on the exact rate structure and the shape of the load. If a customer has a
very “peaky” load (short, sharp peaks), then a system should be sized for the
magnitude of those peaks above average. But, if a customer has a relatively flat load
profile, ESS may not be beneficial at all. If the demand charge is calculated only during
specific on-peak periods, a system sized as large as the full commercial load could be
used, and when the demand charge is based on a full month, then a smaller system
would be justified in order to shave peaks higher than the monthly average demand.
Energy Capacity: Useable energy capacity would typically be three to four hours at
peak power, in order to cover broad peaks. If the ESS technology has a maximum
depth of discharge (DOD) to protect the battery, then the useable capacity is the rated
capacity times the maximum DOD.
Required Footprint: Since the ESS would be sited at a commercial facility where
space is typically important, the footprint should be as small as practical, especially if
the equipment must be located indoors. Relatively small storage systems (100-200
kWh-AC) are offered, as standalone cabinets usually coupled with inverter cabinets.
Larger systems may be housed in some sort of outdoor container similar to a diesel
generator enclosure.
Round Trip Efficiency: Since there will be relatively few cycles in this application,
round trip efficiency is not as critical as in other use cases. Alternating current round
trip efficiency (ACRTE) should be a minimum of 70 percent. Higher efficiencies will
decrease the operating cost of the system.
Cycling: Minimum of 3,500 cycles of full useable capacity over a 10-year life.
2
An electric system model such as the Open Modeling Framework (OMF) could be programmed to
simulate the dispatch of a battery using a specific algorithm into a specific load profile based on real
or simulated data.
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August 2016
Equipment Life: The ESS should have a minimum ten-year service life. This may be
accomplished through replacement of part or all of the ESS at regular intervals.
Controls: The ESS must be able to able to follow the load closely, in order to
accurately shave the peak loads. This will require either an additional energy meter or
some sort of tie-in to the existing metering system. The system would typically NOT
have to rapidly switch between discharge and recharge.
Copyright © 2016 by the National Rural Electric Cooperative Association.
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August 2016
Energy Storage Technologies for Demand Side Management
Since this application requires medium duration energy capacities (of 2-3 hours,
perhaps more), it would be appropriate for flow batteries, some lithium ion battery
technologies, advanced lead-carbon, aqueous-ion, and various sodium technologies.
What is the Value?
The value of ESS for commercial demand side management is the savings in demand
charges obtainable from the installation and operation of the ESS. This is determined
by comparing the life-cycle cost and the life-cycle benefits. There are three costs to
operating this type of ESS:
1) the capital cost of the equipment, which can be amortized over the life of the
equipment;
2) the maintenance cost of operating this type of system (quarterly or semiannual maintenance visits, replacement/refurbishment of components, etc.);
and
3) the cost of recharging the battery after a discharge.
Although the primary benefit is reduction in power (kW demand) charges, there is a
secondary benefit in that the system will reduce the energy consumption of the facility
during discharges, which is offset by the need to recharge the battery after use. The
amount of energy that the battery will require to recharge is the discharge energy
divided by the efficiency (alternating current round trip efficiency: ACRTE) of the
battery. Since is the ACRTE is always less than 100 percent, the energy used to
recharge the battery is always greater than the energy delivered. However, if the
facility is also on a time-of-use energy rate, the cost to recharge the battery could be
less than the value of the energy supplied during discharge.
The benefits of the ESS for this application are the savings in peak demand charges and
the net cost of energy considering the discharge and recharge of the system.
Inputs to the value determination include:
Equipment Installed Cost: This is the fully installed cost of the equipment which
meets the specifications described above. It should include interconnection to the main
building power panel (usually at 480V, three-phase) and any required monitoring and
communications equipment.
Equipment operating and maintenance cost: This includes both regular
maintenance tasks and labor, as well as a schedule of anticipated replacement and
refurbishment costs.
Financial Variables: If the equipment is to be financed, the interest rate, term of
loan, tax incentives, and other relevant financial information related to the acquisition
of the equipment and the savings obtained.
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August 2016
Electricity Prices: These are the prices for both discharging and charging the system,
along with any information on time-of-use and/or seasonal variations.
Demand Charges: Rates per kW of demand, along with information on how they are
calculated (facility peak, peaking during utility ‘on-peak’ periods,
weekday/weekend/holiday exclusions, and seasonal variations).
Performing the Analysis
Cost/Benefit and Net Present Value Calculation
A maximum benefit could be calculated by assuming that the demand could be reduced
by the full power rating of the ESS, ignoring the cost to recharge the battery. If the
benefits from this calculation are less than the cost of the system, further analysis
would not be needed to support the application.
A more typical analysis would be to estimate the reduction over a whole year at an
appropriate interval (15 minutes to one hour), using historical data as a baseline. This
would need to include the actual dispatch algorithm, which would be used to determine
the frequency, duration, and depth of discharge of the operating cycles and the cost of
operating the system, primarily recharging. This would also require full details of the
rate structure, including energy charges, demand charges, time of use variations, and
seasonal variations. A complete evaluation would be based on the present value of the
operating costs over a ten-year period compared with the present value of the ten-year
savings in demand reduction. The cost/benefit analysis necessarily assumes that the
rate structure will remain constant throughout the analysis period.
Alternative Technologies
Commercial demand side management can also be done using simple load reduction or
using alternative generation technologies, such as natural gas generation units, microturbines, or on-site fuel cells. The costs for these options could be calculated to
compare to the energy storage alternative.
Summary
Energy storage could be an economic method to reduce demand charges for a
commercial customer, depending upon the specific details of the commercial facility
load profile and rate structure. A number of companies – STEM3, for example – are
looking at ways of monetizing this savings through leasing programs, shared savings
programs, etc. A progressive utility could potentially offer this to commercial accounts
as a service.
3
STEM is a commercial enterprise providing on-site storage systems. Link: Stem | Intelligent energy storage and
predictive energy software
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August 2016
Contact for Questions
Andrew Cotter, Program and Product Line Manager - Renewable and Distributed
Generation Technology, NRECA Business and Technologies Strategies:
[email protected].
Copyright © 2016 by the National Rural Electric Cooperative Association.
All Rights Reserved.