Performance-based incentives for energy storage are designed to reward participants based on the effectiveness of their systems in contributing to grid stability. These incentives typically involve payments for services such as demand response and virtual power plant (VPP) participation. Here’s how they generally work:
Key Components of Performance-Based Incentives
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Eligibility and Enrollment
- Customers must enroll their energy storage systems in programs that allow utilities to dispatch energy from the batteries during peak demand periods.
- Enrollment often requires the system to be connected to the grid and capable of responding to utility dispatch signals.
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Active Dispatch Events
- Utilities manage these events by calling upon enrolled energy storage systems to supply electricity back to the grid during specific times, usually when demand is high.
- These events are typically scheduled during peak hours (e.g., summer afternoons or winter evenings) and may last for a set duration, often around three hours.
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Performance Measurement and Compensation
- The incentives are usually calculated based on the average power (in kW) contributed by the battery during each active dispatch event.
- Payments can vary depending on factors like the season, with higher incentives often offered during peak summer months compared to winter.
- For example, some programs offer up to $200 per kW for summer events but only $25 per kW for winter events.
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Duration and Payout Structure
- Participating customers can receive these incentives for up to 10 years, provided their systems perform satisfactorily during dispatch events.
- Some programs combine these performance incentives with upfront rebates to incentivize both the initial installation and ongoing use of energy storage systems.
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Role of Manufacturers
- In some cases, manufacturers might retain a portion of the incentive, so it’s essential for customers to understand how incentives are structured with their battery provider.
Benefits
- Grid Stability: Performance-based incentives help utilities manage peak demand without needing to generate additional electricity, reducing strain on the grid.
- Economic Benefits: Customers benefit financially both from reduced electricity costs and from receiving compensation for their contribution to grid stability.
- Sustainability: By promoting the use of stored renewable energy during peak times, these incentives support a cleaner energy mix and can contribute to greenhouse gas reductions.
Overall, performance-based incentives for energy storage encourage the adoption of systems that support grid resilience while providing economic benefits to participants.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-performance-based-incentives-for-energy-storage-work-2/
