Battery storage systems can indeed help reduce both energy charges and demand charges for electricity consumers, particularly commercial and industrial customers.
How Battery Storage Reduces Demand Charges
Demand charges are fees based on the maximum power usage (usually within a 15-minute interval) during a billing cycle, reflecting the peak electricity demand placed on the grid by the customer. Battery storage systems can strongly reduce these peaks by:
- Charging batteries during off-peak or low-price periods.
- Discharging stored energy during peak demand intervals to “shave” the demand spikes.
- Flattening the load profile by supplying power locally during high-demand periods, thus reducing the peak load seen by the utility.
This peak shaving can reduce demand charges by up to 90%, significantly lowering the portion of the electricity bill tied to demand rather than consumption. For example, in electric vehicle (EV) charging scenarios, where peak demand spikes are common, batteries help maintain a steadier and lower peak, containing rising demand charges which are increasing annually in many areas.
How Battery Storage Reduces Energy Charges
Beyond demand charge reduction, battery storage can also help reduce energy charges by performing energy arbitrage:
- Charging the battery when electricity prices are low (off-peak periods).
- Using the stored energy during high-price periods to avoid costly grid electricity.
Although demand charge savings tend to outweigh energy charge savings in economic value, battery storage still assists in optimizing energy costs by time-shifting energy consumption.
Economic Considerations
- Battery cost structures vary with energy (battery cells) and power (inverters). Systems designed for short durations (e.g., 30 minutes) tend to have faster payback periods due to effective peak demand reduction.
- Customers with high demand charges (above $10/kW) find battery storage especially cost-effective for lowering bills.
- Reducing demand charges brings greater cost savings than energy arbitrage in most cases, emphasizing the value of batteries in managing peak demand rather than just offsetting energy usage.
Summary Table
| Benefit | Battery Storage Mechanism | Impact |
|---|---|---|
| Demand Charge Reduction | Peak shaving by discharging during peak intervals | Up to 90% reduction in demand charges |
| Energy Charge Reduction | Charging during low-price periods, discharging during high-price periods (energy arbitrage) | Reduced energy costs; less significant than demand savings |
| Economic Payback | Short duration systems with high power rating reduce payback period | Faster return for demand charge savings |
In conclusion, battery storage systems are highly effective tools for reducing demand charges and also help optimize energy charges by load shifting, making them valuable for commercial and industrial energy management and cost reduction strategies.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/can-battery-storage-systems-help-reduce-both-energy-and-demand-charges/
