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Is Battery Storage a Good Investment for You?

June 10, 2015

The internet’s been abuzz with news about energy storage recently. New technology is rolling out at breakneck speeds. And utilities are taking an increased interest in subsidizing battery purchases, both to stabilize the grid in the face of intermittent renewables, and to help defer infrastructure upgrades. More and more enterprises are beginning to consider investing in storage as well, but is now the right time?


The Story of Storage

Battery storage often gets bundled up with emerging technologies, but depending on how broadly you define commercial storage, it's a fairly mature industry with a well-recognized potential upside: less reliance on the grid, and the ability to smooth out your demand peaks and lower your demand charges.


In recent years, enterprises—especially those in regions with staggering peak demand prices—have begun using battery storage to keep their demand charges down. Lithium ion batteries, which rule the market today, are great for fast ramping, high cycle use, exactly what’s needed to do daily peak load shaving.


These projects are often financed by a combination of state utility incentives and storage companies themselves, allowing enterprises to see almost immediate savings. Especially in California, where the state has mandated utilities to implement a combined 1.3GW of battery storage (nearly 3% of the state's peak load) by 2020, installing batteries often makes simple economic sense.


But even before battery storage became viable at a commercial level, plenty of enterprises were pioneering less flexible storage. Many businesses with data centers have been utilizing storage in the form of uninterruptable power supplies (UPS) for years as backup power, or bridging to a local generator, during grid outages.


For more than a decade, a California-based company called Ice Energy has been “storing” energy in blocks of ice for their commercial customers. That energy is then released as cool air to shift air conditioning loads in a building when demand is highest.


Similarly, refrigerated warehouses have also acted as storage pioneers over the decades, "storing" energy in the form of cold air and allowing it to warm (i.e., releasing that energy) during on-peak hours to avoid paying peak demand charges. For more than a decade, Enel X has been helping enterprises like these monetize non-traditional storage capacity to earn demand response payments.


Battery Storage Is Changing the Energy Market

While the debate rages on over whether or not battery-stored power can be economically viable in commercial and industrial markets, the reality on the ground is that, for some enterprises, batteries already are. The energy storage market in the US saw 40% growth last year, and is predicted to grow 250% in 2015.


Much of this growth will be spurred by lower-cost, high-efficiency solutions like EOS Energy’s grid-scale batteries and Tesla’s recently launched Powerpacks, which have dramatically lowered the cost per kWh of stationary storage (to $250/kWh). We’ve partnered with Tesla to deliver battery technology that can deliver maximum energy savings to users, and have seen substantial savings straight out of the gate.


What It Means for You

Determining whether you should consider investing in storage requires a careful look at your tariff and load profile. As I mentioned earlier, California is ripe with utility incentives for storage installations, which could make for much quicker ROI. But New York and Hawaii are also looking closely at how they can get more storage on their grids.


Even outside these three states, if there's enough demand response revenue on the table, utilizing storage to collect some of that revenue could make clear economic sense.


There are also multiple financing options to add into the equation. Some vendors are offering shared savings with no up-front costs, which mitigates risk but lowers potential reward. In other cases a fixed monthly lease payment could make the most sense to your enterprise, both from an operational-expense and savings standpoint.


And if you're already generating power from solar, storage could dramatically extend the savings you're getting from those resources by further flattening your demand peaks or pulling you off-grid for more hours of the day.


None of these circumstances necessarily make storage the right investment for your enterprise. To gain that level of certainty, you'll need access to your load profile in real-time and a thorough understanding of your tariff and energy market exposure.