By Valerie Eacret for Zondits
Zondits spoke with Doug Staker, Vice President of Global Sales at Demand Energy, to learn about Demand Energy’s cloud-based platform which integrates energy usage information to optimize the use of energy storage in buildings. He is an energy professional who has worked globally for 25 years. Doug has been a pioneer in the world of smart grid technologies with a focus on smart metering and intelligent energy storage.
Z: How can battery storage bring value to a building?
DS: Battery storage can add value to a building by managing energy usage and providing critical power during extended power outages. An energy storage system can leverage time-of-use energy charges by storing low-cost off-peak energy and releasing this energy during peak periods when prices are high. An intelligent energy storage system can impact the rate at which energy is used. This will result in lower demand charges, which can represent 50% of a commercial utility bill. When coupled with solar power, intelligent storage can save energy generated in the morning for consumption during the late afternoon, when peak pricing is the highest and solar production starts to diminish. By keeping emergency systems running in an event like Hurricane Sandy, battery storage can add value to a building by ensuring that essential elements like emergency lights, water pumps, and elevators can still function.
The Effect of Battery Storage on a Building
Z: What revenues or cost savings can a typical customer hope to achieve?
DS: Financial incentives are available for participating in demand response programs and for permanently reducing a building’s load on the grid. Battery storage projects allow customers to purchase energy during off-peak hours, when energy is cheaper, in order to avoid purchasing the more expensive on-peak energy. This creates cost savings through energy shifting. A typical building can save between 10% and 15% of its annual energy costs with energy storage.
Z: What regional commercial markets and customer segments are most promising to Demand Energy?
DS: We see promising markets in places with high peak-demand charges or expensive time-of-use rates. The New York City/New Jersey area is the most mature market, with promising opportunity in California for accounts served by the three big Investor Owned Utilities (Southern California Edison, Pacific Gas & Electric, and San Diego Gas & Electric). In Hawaii, where energy generation is dependent upon coal and fuel oil that must be shipped in by boat, the average cost of energy is $0.35/kWh and $22/kW for demand charges. These high rates coupled with the desire to build more solar will foster the need for storage to manage peak loads and add stability to these smaller island grids that are sensitive to intermittent power.
Z: What battery chemistries does Demand Energy use? Please describe their typical useful lives and project costs for a moderately sized project.
DS: We use lead acid and lithium ion batteries. Lead acid batteries are still generally the most economical choice. Sometimes lithium ion batteries are a better choice if there are space constraints, as they have a smaller footprint than the lead acid batteries. Most of our business is based upon behind-the-meter installations, so fire and building departments require code compliance for installation. Lead acid batteries have been used extensively for uninterrupted power supply systems in commercial buildings for many years and are well understood in terms of code compliance. Fire code regulations for lithium are being released in the 2014 National Fire Code update.
The lead acid batteries that we use give us 1,250 cycles of use before needing replacement. This meets our project goals of 5 years (250 cycles/year). A 100 kW system with 400 kWh of energy sells for about $300,000, which equates to $3000/kW or $750/kWh. Replacing the batteries in year 6 is projected to cost an additional $100,000, which brings the cost to $4000/kW and $1000/kWh for a 10-year system.
Z: What programs and incentives are available to help fund these sorts of projects?
DS: NYSERDA and Con Edison created the Demand Management Program for New York City customers to offer substantial energy incentives for permanent load reduction in New York City. This joint program offers an incentive of $2,100/kW for a battery storage project, which is significantly higher than any other demand reduction incentives that have been offered in the area to date. Other demand response programs also provide financial incentives for decreasing load during predetermined times of high grid congestion. California is also developing incentives to support the California Public Utility Commission’s mandate for utilities to install 1.3 GW of storage by 2020.
Z: In your experience, what are the main reasons your customers install battery storage?
DS: Our customers install these systems for two main reasons: they will see financial gains from the project and they see reducing the load on the grid as part of their responsibility. Some customers are already participating in demand response programs by shutting down building systems during load events. They install battery storage because they want to continue participating in these programs without reducing the functionality of their building.
Z: How much interval data do you need to move a project forward?
DS: At a minimum we need 1 year of 15-minute interval data. Some customers have 5-minute interval data, which is even better. If we only have hourly data, it can hide some of the peaks that are often the main target of the project.
Z: Is there a peak demand charge threshold over which a battery storage project begins to be viable?
DS: As a rule of thumb, if you are being charged $16‒$17 dollars per kW, a battery storage project will start to make sense. We also look at the load’s utilization factor. We use the ratio of the average demand to the peak demand to determine how variable the load is. If that ratio is 0.7 or less, it’s likely a good candidate for a battery storage project.
Z: Do battery storage projects benefit the grid?
DS: Yes. There are three main components of the energy supply chain: generation, transmission, and distribution. Energy storage is able to support all three segments. When it is located in a building or at the load center, it provides the most value. Many generation stations operate only 16 hours of the day. If storage created load at night (between 10 p.m. and 6 a.m.), these generation stations could improve their efficiencies and their utilization factors. This stored energy is then released during peak periods, reducing the need to use less-efficient plants during this time. Another advantage of storing off-peak generation is that you get to move the energy through the transmission and distribution systems when congestion is low and line loss is minimal. Transmission and distribution systems lose energy in the form of heat as a function of the square of the amperage, so the less current that is traveling through the grid at one time, the lower the heat losses are. Up to 10% of the energy generated can be lost in the transportation process, with most of the losses occurring during peak periods.