Energy arbitrage and peak shaving are two significant benefits that companies can derive from storage Power Purchase Agreements (PPAs). Here’s how these benefits are realized:
Energy Arbitrage
Definition: Energy arbitrage involves buying electricity when prices are low and selling it when prices are high. This strategy can create additional revenue streams for companies.
Benefits through Storage PPAs: Storage PPAs enable businesses to store energy during off-peak hours when prices are low and release it back to the grid during peak hours when prices are high. This not only maximizes profit but also helps stabilize the grid by managing demand fluctuations. The guaranteed price structure in storage PPAs provides a predictable revenue source, making energy arbitrage a more reliable business strategy.
Peak Shaving
Definition: Peak shaving refers to reducing electricity demand during peak periods to lower energy costs and avoid high demand charges.
Benefits through Storage PPAs: Storage PPAs allow companies to utilize stored energy during peak demand times, thereby reducing their reliance on the grid when prices are highest. This approach helps in minimizing demand charges and lowering overall energy costs. By using stored energy instead of grid power during peaks, businesses can ensure a stable energy supply while optimizing their energy expenditure.
Key Advantages
- Cost Savings: Both energy arbitrage and peak shaving contribute to significant cost savings by optimizing energy usage and revenue opportunities.
- Grid Stability: These strategies help ensure grid stability by managing supply and demand fluctuations.
- Predictable Pricing: Storage PPAs provide a structured financial framework that helps companies manage energy costs and predictability in uncertain markets.
Overall, storage PPAs offer a robust framework for utilizing energy storage effectively, enhancing economic viability and operational efficiency for both storage providers and offtakers.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-energy-arbitrage-and-peak-shaving-benefit-from-storage-ppas/
