The Unique Advantage PV + Battery Storage Gives Commercial Buildings

It is widely recognized that the power grid requires energy storage to smooth delivery of electricity from an increasing amount of solar and wind energy, as well as for intermittent demands. The cost of implementing energy storage, however, has generally been considered too expensive for widespread deployment. Due to continuing price reductions and efficiency improvements in battery systems, it’s rapidly becoming technically practical and economically attractive to use large battery systems for selective energy storage applications.

One particularly attractive application is peak demand reduction for commercial electricity customers. Peak demand refers to the highest amount of electricity being consumed at any one point in time, across the entire network system. Commercially speaking, peak energy demands occur during the work or school days, when computers, lighting, as well as heating, ventilation, and air conditioning (HVAC) systems are on full power.

To help mitigate not only the pressure on the grid, but also the strain on the pocketbook (customers pay more at higher energy times), peak demand reduction simply involves decreasing electricity consumption during peak hours. This is where energy storage comes in, and how PV and battery systems can help make a difference. There are not only key advantages, but also certain requirements that are unique to commercial-scale battery storage systems to reduce peak demand.

Market segments
Battery energy storage market segments are similar to the photovoltaic (PV) generation market, with residential, commercial, utility, and off-grid market segments. In the PV industry, the largest market segment, globally, is in commercial-scale systems. These systems provide economies-of-scale, while displacing higher value retail electricity. In many geographic regions of the world, commercial-scale PV is becoming cost effective with conventional generation.

Like the PV industry, the application and value of battery-based energy storage varies significantly across all market segments. For commercial customers, storage provides the opportunity to reduce peak demand charges—something that only the commercial market segment experiences. Utility regulatory changes aren’t required for these systems to be cost-effective, but incentives can certainly provide motivation. A recently enacted Self-Generation Incentive Program (SGIP) from the State of California, for example, rebates up to 40% of the installed cost of battery storage systems. This incentive should accelerate market demand for commercial storage in the next few years.

Reducing peak demand charges
Commercial electric customers, unlike residential customers, typically pay for demand charges (in kilowatts), in addition to energy charges (in kilowatt-hours). The peak demand charge is normally calculated as the highest peak demand during the monthly billings cycle, based on a 15-minute sample interval. Although the average commercial retail rate in the United States is $0.10/kWh, the marginal cost of energy during these peak periods can be $1.00/kWh or more, making this an attractive opportunity for cost savings.

For many commercial customers, the peak demand part of their utility bill can equate to 30% to 40% of the total electric bill. For some customers, it can be much higher. Electric vehicle (EV) fast charger installations, for instance, can have peak demand (kW) charges reaching 80% to 90% of a monthly electric bill. Commercial customers with a high to average peak demand will have a higher percentage of their utility costs tied to demand charges, and will benefit more from peak demand shaving that’s enabled by energy storage.  

But, first things first. The primary step in reducing energy costs for commercial customers begins with addressing general energy efficiency issues, which can include everything from replacing lighting with LED and fluorescent lighting to upgrading HVAC systems. Additionally, if customers have heavy intermittent loads (such as large industrial motors), they will need to optimize usage when possible. In some cases, utilities will contract with large industrial and commercial customers to curtail load during peak times. There are a number of attractive energy management systems to help commercial customers with these issues, but local energy storage can also play a role.

Adding onsite PV generation to a commercial building reduces utility energy (kWh) charges, but often has little effect on peak demand (kW) charges. Summer peak demands often occur during the late afternoon and early evenings, just when PV generation is sharply dropping. Commercial customers with PV generation have lower average energy (kWh) requirements, but often with the same high-peak power (kW) demand. Since they have a high-peak power to average energy demand ratio, they will generally benefit more from a peak reduction energy storage system.


 

Graph 1. Combining PV and battery storage systems offers lower energy (kWh) and lower peak demand (kW) utility charges.

Battery storage requirements
Typically, only medium to large commercial and industrial customers pay peak demand charges. These customers normally have a 480Vac, three-phase AC grid inter-tie, which is a requirement for battery storage systems to eliminate the cost and efficiency loss of an external transformer. The system needs to be certified by a Nationally Recognized Testing Laboratory (NRTL) to conform to UL1741, which is the same grid-tied standard found in PV inverters. UL1741 guarantees a number of critical aspects of power grid safety, and is required by local utilities for distributed energy storage systems. The system should be scalable from tens of kilowatts to megawatts of power to address different customer requirements.

Battery storage systems require a highly efficient, bi-directional battery converter. Conversion efficiency is even more important in this application than with PV inverters because two power conversions are required: rectifying or charging the DC batteries from the AC grid; and inverting or discharging power to the AC grid from the DC batteries. The battery converter efficiency is particularly important at relatively low-power levels. PV inverters typically operate at 50% to 75% of rated power for five or six hours per day; whereas, battery storage systems often operate at about 10% of rated power for 24 hours per day. As a result, the 10% rated power efficiency is the most important efficiency specification.

Though conversion efficiency is critical to battery storage systems, battery chemistries also need close scrutiny. Traditional lead-acid chemistries are seeing increased competition from lithium-ion and from other battery chemistries, which reduce kilowatt-hour costs by increasing the number of battery cycles supported. Significant capital investments for EV lithium-ion batteries can be leveraged for grid storage applications if the storage system can use standard EV battery packs. Lithium-ion batteries also have zero maintenance requirements, and can be easily sited in commercial environments without the burdensome requirements of some other battery chemistries.

Distributed PV systems reduce kilowatt-hour energy charges, while battery storage systems can reduce kilowatt peak demand charges. By combining distributed commercial-scale PV generation and battery storage, commercial-scale energy users can leverage the benefits of both technologies, creating more economic value together, than by using each system individually or not at all.

PV and battery storage combined
There is strong market demand for combined PV and battery systems, and ongoing research to further improve cost and efficiency of power conversion solutions for these hybrid systems. One example of new technology being developed combines the functionality of a PV inverter and battery converter together in a single-stage three-port power converter. This option offers two independent DC ports, transferring power between any of the three ports in any mix, which provides an efficient alternative to AC grid-tied or DC bus-tied hybrid systems.


Paul Bundschuh is the CEO of Ideal Power Converters.

Ideal Power Converters
www.idealpowerconverters.com