Battery Energy Storage: A Glossary of Grid Applications

Kathleen Gill
September 21, 2021

It’s no secret that today’s electric grid is changing in big ways.

Instead of centralized generation simply delivering electricity to end consumers, distributed energy resources (DERs) like rooftop solar and electric vehicles now create unpredictable loads and two-way power flows.

While large-scale renewable energy leads us down the critical path to decarbonization, it also creates significant imbalances between supply and demand, among other challenges. At the same time, consumers are often left in the dark with rising utility bills and frequent grid outages.

That’s where energy storage comes in to help. Because a battery can both “consume” and dispatch energy, it can be useful in a wide range of grid applications for the producer, consumer, and prosumer. Its quick responsiveness and flexibility help grid operators increase efficiency and reliability, while also reducing costs and encouraging renewable energy integration. For consumers, battery energy storage (BES) can enable much-desired energy independence and control over costs. 

From storing energy produced from a rooftop solar system to ensuring a stable, cost-effective grid for millions of customers, this “Swiss army knife” can be leveraged to provide a wide range of benefits. This article provides a glossary of the various front-of-the-meter and behind-the-meter grid applications of BES.

Behind-the-Meter Applications

The value of BES for electricity customers can be categorized into two groups: electricity savings and backup power.

Electricity Savings  

BES can be strategically used to shift electricity demand from one specific period to another, known as load shifting. When executed correctly under the appropriate circumstances, load shifting can significantly reduce electricity costs. 

Peak Shaving / Demand Charge Management

BES can be used to reduce a customer’s peak demand. This can be particularly advantageous for commercial customers in lowering demand charge costs. A demand charge is part of a commercial monthly utility bill that is based on the customer’s peak demand in kilowatts (kW) during that billing period. Especially for consumers of variable or peaky loads, the demand charge can account for up to 70% of a commercial customer’s monthly bill. If the battery can be discharged during a customer’s peak energy demand, then the peak can be “shaved” or flattened, thus reducing the demand charge and providing significant savings.

Time-of-Use Rate Management (Energy Arbitrage)

A utility time-of-use (TOU) rate plan is a type of time-varying rate structure, meaning that electricity prices vary depending on the season, day of the week, and/or time of day. BES owners with TOU plans save money through what is known as energy arbitrage: by charging the battery during “off-peak” periods when rates are lowest, and discharging the battery during “peak periods'' when rates are highest. This strategy can be particularly effective when combined with onsite solar systems, as the battery can be charged with free solar energy during the day. It can then be discharged later in the evening or during other times when prices are high. 

Back-Up Power

Reliable back-up power is one of the most common reasons that homeowners purchase BES. As extreme weather events like hurricanes and wildfires become more frequent, customers are increasingly subjected to grid outages and unreliable power, so some are taking matters into their own hands and installing systems that can power their homes and businesses when the grid is down.

Home & Commercial Back-Up Power

BES can power critical devices during power outages, providing essential medical support to vulnerable populations, keeping families and employees safe and comfortable, and avoiding unnecessary operational costs and risks. Current lithium-ion battery technologies can cost-effectively power critical devices for up to about four hours.

Microgrid / Off-Grid Support

BES can also provide support for off-grid energy systems. A system that pairs batteries with off-grid generation sources like solar, wind, or diesel generators can be considered a microgrid, which can operate autonomously from the grid as a reliable power source. This application is still relatively rare, although it is growing as more look for ways to ensure energy security. 

Front-of-the-Meter Applications 

On the bulk and distribution side, BES provides a range of ancillary and grid balancing services that enable utilities to minimize costs while also creating more stability for a renewable-integrated grid.

Ancillary Services 

Grid operators employ a multitude of strategies to ensure supply and demand are balanced and that the grid is operating stably and reliably. The flexibility and agility of BES means that it can provide effective support for many of these services. 

Frequency Regulation

Frequency regulation is a vital part of grid services, as the frequency of the grid’s alternating current (AC) needs to be held at a steady rate in order to effectively coordinate generation assets and maintain grid stability. Traditionally, frequency regulation has been largely managed by ramping generation assets up and down. BES is an effective tool for frequency regulation due to its ability to respond accurately to frequency fluctuations by injecting and absorbing power in mere milliseconds. This service is especially valuable in grids where large amounts of variable renewable resources can cause deviations in frequency.

Black Start

Black start describes the capability of restoring power to an offline or idling power plant without the help of grid-sourced power. This is a vital service, as power outages can render the grid unable to support essential generation assets. Traditionally, diesel generators have been used to provide black start services. However, onsite BES can provide black start support while avoiding the fuel costs associated with a diesel generator. Batteries that are installed specifically for black start can also provide other grid services when not called upon for black start. 

Load & Generation Shifting

Energy Arbitrage

Similar to behind-the-meter customers, electricity providers can reduce costs via energy arbitrage by purchasing energy when prices are low and dispatching the stored energy when prices are high.

Renewable Integration & Curtailment Reduction

Renewable energy resources like solar and wind are variable and intermittent - for example, the sun only shines during the day. What’s more, high solar and wind production do not always align with periods of high energy demand. BES enables grid operators to shift renewable energy supply to other times when demand is high but production is low.

Firm Capacity / Peak Shaving

BES can help grid operators reliably meet demand by dispatching energy during demand spikes. Traditionally, peak demand has been addressed by natural gas “peaker” plants. However, BES can dispatch energy quickly and cost-effectively to provide capacity for peak demand.

Virtual Power Plant

As the number of DERs grows, utilities have been increasingly seeking out ways to use them to provide value to the grid. A virtual power plant (VPP) is a group of distributed sources that can be remotely aggregated to provide flexible capacity and other grid support. VPPs are virtual because they are not physically centralized, but instead aggregated and controlled by software.

Transmission and Distribution Investment Deferral

Transmission and distribution (T&D) infrastructure must be built to meet future peak grid demand needs. These upgrades are costly and can take years to be approved and constructed - all to meet a peak demand that may only occur for several hours each year. When placed in substations, BES can defer the need for new T&D investments by shaving peak demand with stored energy. 

The Swiss Army Knife for Grid Decarbonization

As we gradually decarbonize the electricity grid, we are seeing a rapidly evolving, intricate web of smart devices and distributed generation. Battery energy storage, with a wide range of applications, will continue to be a critical component due to its unique flexibility and dynamic response capabilities that allow utilities and empower consumers to control their energy future.

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