By John Hudson, Managing Director, Boston Renewables
Many experts agree that the solution to the future of Britain’s energy supply is not just the development of more generation, but the intelligent use of existing generation capacity to balance the peaks and troughs of supply and demand. A correctly balanced National Grid will work better and help to control electricity price inflation. 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 in the public and private sectors. There are opportunities for all to engage in and benefit from grid balancing. Battery storage is emerging as the key enabler.
Not only does battery storage help the grid manage electricity in a smart way, but it can also deliver a valuable income stream for the organisations that participate in the grid balancing schemes. Facilities managers are at the heart of these new developments.
An on-site energy storage system comprises lithium ion batteries with inverters and switchgear often housed in a metal shipping type container and installed on the organisation’s site. The system typically works by storing cheap night-time electricity or surplus generation from on-site renewables. Users can switch to the stored power on a daily basis to avoid peak time electricity pricing and, therefore, reduce their energy costs. Failsafe Triad management and on-site UPS are additional benefits to battery storage schemes.
Generating income
Energy efficiency has long been the buzz phrase for facilities managers, with many organisations just focusing on energy cost savings. Battery storage, however, provides the additional dimension required to move beyond cost saving and actually generate valuable income from providing balancing services to the National Grid.
By bringing organisations into grid balancing schemes, two things happen. First they are financially incentivised to take less electricity from the grid when demand overall is too high. Second, when there is a surplus of electricity on the grid, for instance during the night, their on-site batteries become stand-by assets that the grid can call on to store the excess electricity so it is not wasted. The organisation is paid by the grid for use of these assets.
The requests and payments for all this are done through the “internet of energy”. Sometimes large organisations contract directly with National Grid, but most will work through aggregators that have direct links to the battery storage developers. There are many and varied contracts and models for battery storage and DSR. The key for the end user is to engage with a developer that offers a bespoke and complete solution.
Who can participate?
If an organisation has half-hourly metering installed and spends more than £50,000 annually on electricity, it is likely to benefit from an integrated storage and DSR scheme. It is particularly suitable for organisations with processes that operate beyond normal office hours.
Organisations with multiple sites also benefit, as unlike the feed-in tariff system, there are no restrictions on the number of storage assets and DSR contracts a company can own or participate in.
Facilities managers usually start the process by making the business case for the initial investment in storage systems and renewables that will become an income stream for their organisation. Energy storage can be enhanced if it is integrated with onsite renewables, like a wind turbine or solar PV array, but it also works as a stand-alone system.
Return on investment
Typically, the financial returns on capital employed are at least 11% and sometimes over 20% using the internal rate of return (IRR) metric for capital investment. Flexible finance options are offered by some storage developers to offset the initial investment in the battery system.
The future
It is likely that more organisations will participate in and benefit from grid balancing schemes as DSR becomes better known and early entrants are seen to reap the benefits of these schemes; electricity storage systems and smart metering will be key enablers.
The risks are not as high as many suppose. Facilities managers will always stay in control of their assets, they can set the parameters within which they will respond to grid balancing requests and their on-site operations will not be compromised.
This is all part of a wider trend to use energy in a smarter way. In June 2016, the National Infrastructure Commission noted that Britain needs to solve its energy challenges not just through more generation but also by increasing flexibility in its electricity system.
