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BATTERIES POSSIBLY INCLUDED

Nicholas Newman looks at the type of battery storage options that firms are deploying and what technology could mean for cost control.

p58_battery-skyline-CREDIT-Getty
© Getty

5 March 2018 Nicholas Newman


Energy efficiencies and lower bills have encouraged many businesses to embrace reforms, but the potential to earn revenues and guarantee secure supplies has prompted a small but growing band to install turbines and solar panels to generate electricity. 


Examples include Caerphilly Oakdale Business Park, which generates 11 gigawatt hours (GWh) of green electricity, and the White Rose shopping centre in Leeds, which generates 680,000 kilowatt hours (kWh) of solar power, enough to supply 39 per cent of the mall’s daytime electricity requirements.

 

As electricity prices are set to rise further, high-energy users are looking closely for additional cost savings. Energy storage could meet their need because it allows enterprises to replace expensive peak-time grid electricity with cheaper stored electricity, and to replenish supplies during off-peak times. It has the potential to free industrial and commercial enterprises from reliance on the most expensive grid-supplied electricity. 


Energy storage could, therefore, prove attractive to energy-intensive users and those with their own generation capacity. John Walsh, senior strategic account manager at E.ON, says the company’s energy-storage customers are high-energy users “who also have issues with brown and blackouts”. 


A similar customer segment is the focus of Spiritenergy, which is “currently working with high-electricity users [with a] base load [of] 500kW plus”, says managing director Erica Charles. 


“They are looking at funded storage solutions whereby an investor installs a battery on their site which they use for peak-charge avoidance (TRIADs) and the investor uses it to earn money from grid-balancing services,” she adds. 


Combining on-site solar with batteries is a popular option as it is a good way to maximise on-site power generation while reducing consumption of grid-supplied energy by up to 80 per cent, according to William R William, CEO at Altresco.



Benefits of battery storage

Industry experts suggest that an investment in battery storage can yield operational, capital and efficiency benefits. Battery storage maximises efficient and cost-effective energy use. It achieves this in combination with existing on-site power generation, providing a store of power for later use, shielding business from energy price rises and smoothing out variations in power output from wind and solar. As Walsh says, battery storage is, in essence, “about potential financial returns and cost avoidance”.


Specifically, battery storage offers businesses the opportunity to avoid the National Grid’s Triad peak-demand charges for supplying power when it is at its most expensive. But for industrial and commercial users in the South West, facing an end to their power purchase agreements because of daytime grid congestion, energy storage offers them the chance of a new power purchase agreement whereby the grid will pay for surplus power at night.


As a portent, some industrial and commercial businesses are viewing energy storage as a basis for providing power to neighbouring businesses by using their own private wires and bypassing the regional distribution networks altogether. 


For instance, Centrica manages a 3MW battery storage system for Gateshead City Council, linked to the council’s combined heat and power (CHP) plant. Councillor John McElroy, Gateshead Council’s cabinet member for environment and transport, says: “This battery installation completes the wider District Energy Scheme, which will provide low-cost heat and power to homes, organisations and businesses in central Gateshead.”



Types of energy storage

Currently, lithium-ion batteries dominate the market for consumer goods ranging from cars to torches to energy storage schemes for industrial and commercial customers. Lithium-ion batteries are also the energy sector’s choice owing to their robustness and responsiveness – necessary properties for providing essential circuit uninterrupted power and purchasing premium-priced power at peak times (see table 1). 


The most prominent public face of lithium-ion batteries is Tesla, but an increasing number of providers are in its wake, including Samsung, Panasonic, and LG. 


Lead acid and zinc batteries are also currently in use. 


However, the forthcoming expected take-off in electric cars could provide an almost endless supply of cheap batteries repurposed for energy storage.

 

Currently, electric car batteries have to be replaced when their performance declined to around 30 per cent or when they are four to five years old. According to Bloomberg New Energy Finance’s advanced transportation report, second-life batteries can cost as little as $49 per kilowatt hour to repurpose compared with the current new stationary battery price of around $300 per kilowatt hour. 


Car manufacturers including Nissan, BMW and Renault see an opportunity to compete with Tesla’s powerwall technology with price-competitive repurposed batteries and a new market opportunity. As Mike Sewell, energy services director at Interserve, notes: “Reusing car batteries to meet building power needs brings great growth opportunities to energy storage due to its low costs.”



The business energy storage market

Despite its potential, commercial-scale battery-energy storage has hardly penetrated the UK market. 


“The market for such technology is at its very early stages,” says Sewell, “so we are learning as we go along.”

 

Batteries are currently dominated by lithium-ion technology and are supplied by a few specialist companies including Tesla, E.on and Evoenergy, which have the required expertise and technology to meet the needs of industrial and commercial clients. So it is hardly surprising that there are only around 30 commercial and industrial battery energy storage installations operating in the country, according to Jason Mawbey, marketing manager at Evoenergy. 



Factors influencing energy storage use

The National Grid and the country’s regional distribution network operators need to earn sufficient income to pay for continual grid upgrades, which guarantees that energy bills will go on rising. Therefore, the chief selling point for commercial scale energy storage is the “continued long-term trend of electricity price inflation and the ability of battery energy storage systems to shift loads and mitigate energy price premiums”, says Charles. 


The alternative to paying £300,000 to £600,000 per MW for peak time power is to operate a back-up diesel generator costing between £50,000 and £200,000 a megawatt. But diesel is dirty, noisy and – in this environmentally sensitive age – damaging to a firm’s public image. Additionally, diesel generators, while good for emergency lighting, do not provide uninterrupted power supplies.


Cost and returns are key to market penetration. Charles says that the current cost of battery storage is a too high unless combined with grid income. 


“I don’t know if any battery-owners are making money,” she says. “The commercial storage market is behind the domestic battery storage market.”



Challenges ahead

Whether businesses are making money is difficult to determine because of the market is at its early stages, says Walsh. This is not unusual, though. As with any technology in its infancy, neither suppliers nor pioneers should expect to make money. Instead, the marketing focus is on potential cost-avoidance issues. 


“Those organisations with the financial, technical and commercial resources to procure battery energy storage systems see it as a long-term way to make savings of energy costs by avoiding the purchase of premium-rate grid-supplied power,” contends Mawbey.


Another challenge, he says, is the feared changes to business rates that could tax energy-storage schemes in the same way solar projects have been, thus penalising their viability. Red tape and paperwork such as regulatory requirements and network operator permissions are expected obstacles. However, the unexpected challenges facing investors include the threat of renationalisation, shortening of National Grid contract terms and the current government policy vacuum. 


Prospects are mixed. UK Power Networks, which own and maintain electricity cables and lines across London, the South East and East of England, recently reported it had received 12GW of connections requests in little over a year, much of it for batteries – but admits that much of this is “highly speculative”. 


Western Power Distribution has 1GW of storage connections agreements on its network with another 1GW offered. According to the 2017 Demand-Side Response Report, more than half of the 180 businesses and public sector respondents are considering investing in battery storage and two-thirds believe that such an investment would pay back within seven years. 


In the longer term the market is likely to increase substantially, in part because of the need for electric car-charging points. National Grid expects that by 2040, around 18GW of all forms of electrical storage will be connected to its system.  


Emma Potter