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Energy: supply and demand

Onsite energy storage has the potential to reduce organisations’ operating costs and generate income from the National Grid. John Hudson, managing director of Boston Renewables, explains

It’s widely accepted that the solution to Britain’s energy challenge is not just more generation, but to make the Grid itself work better. The key is to balance the peaks and troughs of electricity supply and demand. Through its Power Responsive initiative, the National Grid is actively promoting grid balancing, otherwise known as demand side response (DSR), to organisations of all sizes across the public and private sectors.

It’s all about onsite energy storage. Facilities managers have an opportunity to put themselves at the heart of these developments and reap benefits like lower bills, reduced carbon footprint and new income streams for their organisations.

An onsite energy storage system consists of lithium ion batteries with inverters and switchgear. It typically works by storing cheap night-time electricity from the Grid or surplus generation from the organisation’s own renewable energy sources. The organisation can switch to the stored power on a daily basis to avoid peak time electricity pricing, reducing its operational costs.

Now some organisations are taking things a step further by generating valuable income from the National Grid through its grid balancing schemes. These organisations either work directly with the Grid or through an intermediary, an aggregator, which might involve a complete solution with a battery storage developer.

The organisation’s onsite storage becomes a standby asset that the Grid can call on when it has produced excess electricity (at night, for example). Alternatively the same onsite batteries can be used to run local operations instead of taking more electricity from the Grid at times of high demand. The requests and payments for all this are made through the ‘internet of energy’. Most organisations with half-hourly metering and an annual electricity bill of £50,000 or more can join in.

There’s a good reason to get involved sooner rather than later. The ratio of commodity to non-commodity pricing of electricity is currently undergoing a reversal, from 60:40 to 40:60. Non-commodity costs are non-negotiable, so it’s inevitable that total electricity costs will rise. By installing a battery storage system, linked to a grid balancing scheme, sooner rather than later, facilities managers can better control their energy budgets. It’s worth noting that there are no limits to the number of organisations that can participate in storage and grid balancing, nor are there restrictions on the number of installations a single organisation can have.

Furthermore, onsite storage systems will be vital if the country is to make the most of offshore wind turbines coming on-stream. Organisations will be paid to store the electricity they generate at night or on
windy days.

Facilities managers looking to replace ageing diesel UPS units could find the answer in battery storage systems. They are highly reliable, scalable and modular, and can be used for both grid balancing and onsite emergency generation. Some managers use UPS just to protect their IT operations, but others need them as standby generators for all site processes. Battery systems are up to the task and should have spare capacity to participate in grid balancing schemes, helping to generate income.

We worked with one site that discovered it would need to spend about £350,000 to replace its ageing UPS system. By sizing a storage system to accommodate base load and off-peak supply, the need for a separate standalone UPS was avoided. At this particular site the grid integrated storage system had a capital value of £1.6 million (100 per cent fundable through an energy service company scheme) and an ROI of 16.5 per cent.

By rolling in the UPS capability the ROI jumped to 19.5 per cent, meaning the system will pay itself back in five years. The batteries themselves have a 15-year warranty, and as they will only have suffered a five per cent degradation in that period they will remain efficient and serviceable beyond the warranty period.


Battery storage is too expensive
Batteries usually carry a 15-year warranty and the payback on investment is well within that time period. Typically, the financial returns on capital range from 11 per cent to 20 per cent or more using the internal rate of return (IRR) metric. Storage developers will offer flexible finance options.

Onsite batteries will interrupt our operations
Switching to an onsite system from the Grid (and back) is instantaneous. Facilities managers report that they don’t even see the lights flicker.

Responding to the Grid will interrupt our operations
A contract will include preset parameters for responding (or not) to Grid requests to use an organisation’s standby assets. A request will never be made if the onsite batteries are running low.

About Sarah OBeirne

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