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Alastair Morris, Chief Commercial Officer, Powerstar, UK, considers how behind-the-meter storage can generate new revenue for commerical end users and support the National Grid, exploring why energy storage is so vital for the growth of the renewable energy industry.

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n a world where net zero commitments and the other elements of the energy trilemma appear to be increasingly competing agendas, the efficient storage and use of renewables is a critical issue. Exactly how end user companies and organisations can capitalise on opportunities – by supplying energy generated and stored on-site back to the grid – is a vital aspect of both agendas. Efficient energy storage combined with contracts to manage a relationship with the grid can offer new revenue streams to such companies.

Battery energy storage system (BESS) technology is a cornerstone of the changing energy landscape, in part because of its proven flexibility which allows for optimum effectiveness in a range of scenarios and for the efficient use of other technologies. For commercial end users, battery energy storage also offers the possibility of offsetting rising energy costs by generating additional revenue from their assets through engaging with grid balancing services. The ongoing and rapid increase in the amount of inflexible, renewable power generation in the UK has made the grid increasingly unstable, often struggling with either too much or too little electricity generation, fundamentally dependent upon weather conditions. For the UK, in unfavourable weather, the country is still largely reliant on gas generation to make up the shortfall, therefore contributing to the

ongoing energy crisis. Within this context, the National Grid are increasingly reliant on balancing services to manage supply and demand more effectively and, in the long-term, this flexibility will be critical in maintaining a robust grid supplied predominantly, or entirely, by renewables.

In essence, BESS technology works by storing electricity so that it can be used when required or when most beneficial, depending on the company’s operational demands and strategic priorities. If combined with control software, this operation can be automated, using artificial intelligence (AI) to learn what generation and what usage should be prioritised. Grid scale battery energy storage is well documented and is factored into large scale operations and the wider utilities and power generation markets. However, there is a significant role for the concept in behind-the-meter (BtM) scenarios, where its commercial application can provide an integrated energy management and microgrid solution, one which allows for greater control and flexibility of energy usage. For these commercial end users, there are a range of benefits, including: power resilience through uninterruptible power supply (UPS), cost savings through shifting times when a company uses grid-supplied electricity, and the capability to buffer large loads, such as electric vehicles (EV) charging from the grid, so that they can be more easily and more cheaply connected. However, in terms of the potential of BtM solutions and how they impact on grid supply for the benefit of in front-of-the-meter (FtM) suppliers, the key question to address, to really engage commercial end users with the benefits of investment in BESS, and therefore help to support grid stability, is: how can investment in BESS equate to revenue generation?

Figure 1. Demand side response (DSR) infographic.

Figure 2. Harnessing on-site renewables to generate new revenue streams.

Figure 3. Critical process manufacturing.

The two contracting options

While grid scale operators will be thoroughly familiar with the mechanism of selling energy stored in a BESS back to the grid, for smaller scale operations – those that are being defined as commercial end users – this contracting will require the services of a third-party aggregator. Here, there are two contracting options for these smaller scale companies – demand side response (DSR) and firm frequency response (FFR). For FtM, of course, the objectives of each of these options differ – DSR being the process whereby surplus energy is released back to the grid, while FFR is used to rapidly reduce demand or to increase available power in scenarios where a large deviation in system frequency would otherwise result in disruption across the network.

DSR gives the grid the ability to intelligently manage supply and demand, and this is increasingly important as intermittent generation from renewables grows as an overall percentage of power generation. These DSR grid contracts, ‘balancing services’, are facilitated both through end users varying their overall energy demand and, increasingly, via BESS technology. Battery storage allows end users to fulfil DSR contract obligations by turning up, turning down, or offsetting their own demand in real time, to help the grid smooth out peaks and troughs in overall demand. The storage capability of a BESS also means that companies can secure a better price for their surplus power by selling it when it is most in demand. As a critical part of how National Grid balances the grid in real time, FFR contracts can be the most valuable balancing service for end users to provide DSR but can also be the most challenging to engage with. FFR providers must meet

contractually binding response times, requiring companies to be able to respond fully to movements in system frequency within 30 secs. or fewer. FFR uses pre-approved assets to rapidly reduce demand or to increase generation in scenarios where a sudden imbalance, such as a power station unexpectedly shutting down, to keep the frequency of the grid within prescribed limits and prevent the power outages that large deviations in system frequency can cause.

In addition to capability, and how balancing services may fit with a commercial end user’s main business objective, the issue of payment from the National Grid in return for providing FFR is an issue to factor in. These are typically split across two different elements. The availability fee is calculated by the number of hours that a provider makes themselves available, and whether their services are called upon or not, while the nomination fee is an additional payment made available when their asset is utilised. Payments will vary depending upon the framework agreement and the level of agreed capacity, but the instantaneous requirement does make them substantially higher than other forms of DSR. BESS are one of the most capable and appropriate technologies for FFR, and particularly dynamic FFR. Their ability to rapidly draw energy from the grid and to deliver it back, when necessary, makes BESS a powerful asset – both for the end user and for the National Grid. The instantaneous response times available with BESS lends perfectly to the flexibility demanded by grid balancing. For businesses, especially those operating in energy-intensive sectors such as healthcare, high value/high volume manufacturing, and data centres, many continue to struggle in the current energy crisis. DSR services represent a way to offset energy costs by generating new revenue streams, while also helping the National Grid to balance the network and mitigate against supply disruption.

Energy storage in application

All this said, there needs to be a word of caution. Battery energy storage was originally able to offer a compelling return on investment from grid revenue services alone. However, the current landscape is somewhat different. Changes to schemes and to payments available, coupled with the rapid growth of battery storage as a sector in its own right, indicate that – outside of grid scale projects – revenue from the grid is unlikely to provide sufficient return on investment as a sole justification for investment in BESS. For these end user commercial organisations, new revenue from balancing should, arguably, be viewed as a secondary benefit. Fortunately, there are numerous scenarios where this secondary benefit is proven to be a case for investment. For example, Powerstar were contracted by a global leader in aviation, manufacturers of precision, high-value landing gear and suspension. Energy disruptions to their plant were causing halts in operations, meaning the destruction of eight material blocks per year, each worth more than £150 000. The application of uninterruptible power supply (UPS) as an innovative capability of BESS has protected the site from any production disruption, giving a payback period of less than two years. This payback period does not factor in their new capability to provide balancing services to the grid. Similarly, for an NHS hospital project in South Yorkshire, UK, the overriding requirement was for security of power supply through UPS. Powerstar specified a new BESS, which incorporated the rapid switching speed and reliability required, but also offered much lower losses, at less than 1% of capacity, than a traditional UPS system. This solution offers cost savings of approximately £225 000 per year, eliminating approximately 190 t of CO2e and allows for the generation of approximately £100 000 of additional revenue through sale of energy back to the grid.

For the UK to meet its net zero targets and for wider, global, carbon emission reduction ambitions, an increase in uptake of BESS technology must show a positive impact, particularly if such organisations could become a larger slice of the capacity market. Within the UK, the capacity market works as a buffer to protect against supply disruption as the country’s energy mix becomes more varied and more unpredictable. Using a descending clock format, auctions have been widely criticised. Starting at £75/kW and reducing until a minimum price is reached, the 2019 top-up auction reached £00.77/kW, making it almost impossible for smaller scale companies to compete. Effectively, the capacity market has been subsidising fossil fuel generators – who are often the lowest bidders – to remain on standby in case they are needed by the grid.

One case study from Powerstar that perfectly combines both the net zero agenda, and the cost reduction imperative is a project for The Design Museum, UK, a leading museum devoted to contemporary design in any form. With a core mission to promote sustainable development and design, and to lead by example, a review of their energy strategy found average monthly energy costs rising by approximately 30%. A BESS has allowed the Design Museum to reduce overall energy bills through storing energy to use at peak times, while also generating additional revenue from grid contracts. These greater energy efficiency and new revenue streams reduced the museum’s overall energy costs by 21%, and reduced energy consumption on site by more than 8%, allowing the registered charity to reinvest savings back into exhibits and visitor experience.

Given the above, and to summarise the issues raised here: to achieve net zero targets, the shift to renewables must be continued. While this move creates significant problems for supply and demand and for the stability and security of power generation, a nuanced approach which uses more localised virtual power plants – the networks where BtM energy management strategies and investment in BESS contributes to overarching FtM supply – offers a positive pathway to emission reduction, cost reduction, and supply security, the three arms of the energy trilemma. BtM can and should have a significant, albeit micro, role in a macro approach to energy security and sustainability.