Energy Storage: A Better Solution for Reducing Demand Response Charges

Source: Schneider Electric, by Barthold Veenendaal

There’s been a lot of talk of late about energy storage technology and the role it promises to play in our energy future. As previously pointed out, here at Schneider Electric we agree that lithium-ion (Li-ion) battery technology presents some exciting possibilities but it’ll take lots of infrastructure and intelligence surrounding the batteries in order to make it truly useful.

In this post, I want to demonstrate that point by walking through one of the biggest and best use cases we see for energy storage technology in a commercial or industrial setting: reducing demand charges.

A demand charge is a fee an electric utility charges commercial and industrial customers who consume large amounts of electricity, even if only for a short time. In a notice to its commercial customers in New York, National Grid explains the rationale behind it this way:

Some [commercial customers] need large amounts of electricity once in a while – others, almost constantly. Complicating this is the fact that electricity cannot be stored. It must be generated and supplied to each customer as it is called for – instantly, day or night, in extremely variable quantities. Meeting these customers’ needs requires keeping a vast array of expensive equipment – transformers, wires, substations and even generating stations – on constant standby. The amount and size of this equipment must be large enough to meet peak consumption periods, i.e., when the need for electricity is highest.

The rationale is simple enough: those who are driving the need for all that energy infrastructure should share the burden of paying for it. But the demand charges can be extreme, as they are typically based on short intervals of demand, the highest 15 minutes in the case of National Grid in New York (others may be even less). So if you have a spike in demand that lasts only 20 minutes, you’ll be paying a demand charge as if you were using that much energy all month long. For some customers, that may mean demand charges can double or even triple their energy bill.

As National Grid noted, “the fact that electricity cannot be stored” is – or was – a complicating factor. That’s the factor that is now changing due to emerging energy storage technology.

Imagine a company has large Li-ion batteries on site, with enough capacity to run its typical load for some period of time, perhaps 30 minutes or an hour. It charges these batteries during times when demand on the electric grid is low, so as not to incur any demand charges. Or, even better, perhaps the company uses renewable energy sources to charge the batteries, such as solar.

Now combine that with some intelligent energy management software, such as Schneider Electric’s StruxureWare. It constantly monitors the company’s energy use and can identify when it is approaching a peak demand period. As the peak nears, it has the intelligence required to shut off electric utility power and instead use the stored power from the battery array.

Such a solution would enable the company to even out its utility energy consumption and avoid excessive demand charges.

To date, the chief way companies try to avoid excessive demand charges is by curbing their energy use during periods of peak demand. While such a strategy can be effective, it is not without sacrifice. Customers may reduce demand by raising the temperature in their office buildings, thereby making it a little less comfortable, for example. Energy storage technology offers the same benefit but with no sacrifice.

That’s exactly the type of application that Schneider Electric looks forward to providing in years to come as we combine the intelligence of our StruxureWare software with EcoBlade, our scalable energy storage system.