Key Long-Term Cost Savings of Energy Storage in Microgrids
1. Reducing Energy Expenses Through On-site Generation and Storage
Microgrids typically incorporate solar panels combined with battery storage. Solar power provides low-cost, zero-emission electricity that is effectively “locked in” at a fixed cost for 20+ years, protecting users from rising grid electricity prices. Batteries enable storing surplus solar energy for use when grid prices peak, maximizing savings by consuming cheaper stored energy instead of costly grid power.
2. Peak Demand Charge Reduction (Peak Shaving)
Energy storage allows facilities to offset short-duration spikes in electricity use, which are often billed at high demand rates. By discharging batteries during these spikes, businesses lower their peak grid demand and reduce demand charges, which can sometimes constitute up to half of their electricity bill.
3. Load Shifting/Time-of-Use Arbitrage
Batteries enable “load shifting,” charging during off-peak (low-cost) hours and discharging during on-peak (high-cost) periods. This arbitrage leads to substantial savings on energy costs by taking advantage of time-varying electricity rates.
4. Avoiding or Deferring Utility Infrastructure Upgrades
On-site microgrid capacity can reduce the need for costly utility service upgrades that are often required for new or expanding facilities, especially those adding electric vehicle charging. Avoiding these capital expenses and associated project delays can save millions and years of waiting.
5. Enhanced Reliability and Reduced Outage Costs
Energy storage in microgrids provides backup power during outages, maintaining critical operations and preventing costly downtime or damage to sensitive processes and inventory. Hybrid microgrids combining solar and batteries have demonstrated up to 35% lower net present cost than diesel-only backup systems, driven by both operational savings and fewer outage-related losses.
6. Participation in Demand Response and Grid Services
Energy storage in microgrids enables participation in demand response programs whereby businesses are paid for reducing grid consumption during peak times. Emerging virtual power plant (VPP) applications allow microgrids to provide additional grid services, creating new revenue streams that improve the financial returns of the microgrid investment.
7. Regulatory Incentives and Sustainability Goals
Energy storage supports compliance with regulatory requirements and corporate sustainability targets by optimizing energy use and cutting carbon emissions. Additionally, tax credits and incentives can improve the economic case and long-term savings.
Summary Table of Long-Term Savings from Energy Storage in Microgrids
| Cost Saving Category | Description |
|---|---|
| Energy Cost Reduction | Solar + stored energy reduces grid electricity purchases and locks in low costs |
| Peak Demand Charge Reduction | Batteries offset demand spikes, lowering high demand fees |
| Load Shifting | Charging storage at off-peak rates, discharging at peak rates for cheaper energy use |
| Utility Upgrade Deferral | Avoid costly utility infrastructure upgrades for expanded load |
| Outage Cost Avoidance | Reliable backup power avoids losses from downtime and damage |
| Demand Response & Grid Services | Revenue opportunities from participating in grid programs and virtual power plants |
| Regulatory and Tax Incentives | Access to incentives and compliance with environmental goals improves economic returns |
In practice, businesses adopting microgrids with integrated energy storage have reported savings of 30% or more on energy expenses starting from day one. Successful projects have avoided millions in utility bills and significantly reduced outage hours.
Overall, energy storage in microgrids transforms from a cost center into a strategic asset that delivers substantial long-term financial benefits through operational savings, enhanced resilience, and new revenue opportunities.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-long-term-cost-savings-associated-with-using-energy-storage-in-microgrids/
