Energy storage is becoming a hot product in corporate energy procurement, with everything from solar paired with energy storage to stand-alone storage systems on companies’ wish lists. The market is still small, but it’s growing quickly, and as companies consider their procurement plans for the future, we should see more growth in 2019 and beyond.
As much as energy storage may be important for making large amounts of renewable energy work effectively in the grid, the reason companies are investing in energy storage is all about the bottom line. There’s real financial justification for energy storage, and that’s what keeps the business going.
How energy storage makes money
Energy assets like energy storage need to make financial sense before companies deploy them at scale, and it’s not a slam-dunk that energy storage meets the minimum return on investment. Still, there are a few ways energy storage can make financial sense both through cost savings and revenue from the battery’s value to the grid:
Demand charges can be up to half of a commercial building’s energy cost and are based on the peak amount of electricity demand going to the building. So, a big spike in demand for 15 minutes for one hour a month can mean thousands of dollars in added costs. Energy storage can help reduce those peak demand numbers and therefore save customers money.
Virtual power plants are a relatively new concept in energy, and what they’re essentially trying to do is band a group of energy storage assets together to act like a much larger power plant. When they work together, they can offset the need for expensive peaker plant power by using up cheaper electrons generated in off-peak hours. Utilities are starting to pay companies like Tesla (NASDAQ:TSLA), SunPower (NASDAQ:SPWR), and Sunrun (NASDAQ:RUN) for their virtual power plants, adding value to the energy storage they put into buildings.
Backup power is a more intangible benefit, but companies who rely on electricity to keep operations going definitely put a premium on having a quality backup, which energy storage is perfect for.
These aren’t the only ways energy storage can add value to companies or the grid, but they show the biggest selling points. When corporations are looking at their energy needs, energy storage can be a lot more appealing when you consider the cost savings, revenue potential, and value in backup power.
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