Performance-based incentives (PBIs) for energy storage systems are typically calculated based on how effectively the systems provide benefits to the grid during specific times. Here’s a general overview of how they are calculated:
Components of Performance-Based Incentives
- Active Dispatch Events: Utilities trigger these events usually during peak demand periods (e.g., summer afternoons or winter evenings) when they need energy to be discharged from batteries into the grid. The duration of these events can vary but is commonly around 3 hours.
- Incentive Rates: These vary by season and location. For instance, in Connecticut, incentives range from $200/kW in summer to $25/kW in winter for the first five years of operation.
- System Performance: Incentives are awarded based on the average kW-AC that the battery contributes during each dispatch event. The system must be enrolled in an active dispatch program, which prioritizes over passive dispatch when called upon.
- Duration and Frequency: While incentives are typically designed to encourage frequent participation (e.g., multiple full discharges per year), the specific duration over which incentives apply can affect calculations. Some programs may reduce incentives after a certain number of hours or events.
- Avoided Costs: Incentives might also be calculated based on the avoided costs of peaking power generation, reflecting the value of battery energy storage in reducing peak demand and related costs.
Calculation Example
For example, if a customer’s battery system participates in active dispatch events and contributes an average of 5 kW-AC during summer events (each event lasting 3 hours), and the incentive rate is $200/kW for the season, the incentive for each event could be calculated as:
Incentive per Event = Contribution per Event × Incentive Rate
In this case, if the system participates in multiple events throughout the summer, the total incentive would sum up across these events.
Example of an Annual Performance Incentive
For a yearly performance, if a battery system contributes effectively throughout multiple summer and winter events, the total annual incentive can be a combination of these seasonal contributions:
- Total Summer Incentive: (Number of Summer Events) × (Average kW-AC per Event × $200/kW)
- Total Winter Incentive: (Number of Winter Events) × (Average kW-AC per Event × $25/kW)
The total performance incentive for the year would then be the sum of the summer and winter incentives.
Incentives are crucial for encouraging the adoption of energy storage, as they help offset the costs and provide ongoing financial benefits for participating in grid stabilization efforts.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-are-performance-based-incentives-calculated-for-energy-storage/
