By some estimates, 30 percent or more of the typical organization’s non-capital expenditures are attributed to energy costs, making this line item a focal point for cost-management efforts. However, amid technological, regulatory, and political changes in the energy sector, it’s nearly impossible to predict a particular organization’s future energy costs, which hampers decision making. [Full disclosure: this post has been generously sponsored by Green Charge.]
One way to minimize risk in the face of such uncertainty is to hedge against some of the variables in the energy cost equation. Many businesses and public sector organizations are realizing that a judicious combination of self-generated solar PV and behind-the-meter energy storage can greatly reduce overall energy costs while increasing ratepayer control over those costs. To understand how, let’s look at a typical commercial energy bill.
The two main cost components on most bills are energy use charges (measured in kWh) and demand charges (measured in kW). Energy-efficiency programs address the former. Examples include lighting and HVAC retrofits, building upgrades, and renewable self-generation plants, such as solar PV.
The second component is demand charges, surcharges for maximum demand within a billing period. Demand charges can be hefty for non-residential customers, sometimes accounting for as much as 50 percent of an organization’s utility bill. Even after implementing every feasible energy-efficiency program, demand spikes will occur—and demand charges will persist. Over-reliance on solar PV can actually exacerbate the problem. A short period of cloud cover disrupting solar generation during a peak usage event can result in a very costly demand spike.
One way to reduce demand charges is to negotiate a more advantageous rate structure. However, this is only a temporary fix, since the utility may change its rate structures at any time. A less risky approach is to prevent peak usage events from showing up on the utility’s meter. This is one of the functions of a behind-the-meter energy storage system. It can sense peak load events and instantaneously discharge power to cover that demand. The utility meter never registers the peak, so it does not factor into the demand charge.
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