Should You Get a Free Storage Battery?
We all know that “there’s no such thing as a free lunch,” but is that always the case? What if you’re offered free energy storage from a battery system at your business or home? Is this free - or is there a catch?
Let’s start from the beginning.
For a long time there has been a view that energy storage just does not make sense; the argument being that the savings from the energy stored will never pay for the initial investment needed in buying the battery in the first place.
Well, this is now changing and to understand why we need to turn to the Grid.
The Grid was originally developed for power to flow in one direction, from the power stations to our homes and businesses. The emergence of renewable generation mainly from solar and wind has changed all this as power is no longer generated in ‘one place’ and transmitted to another; we now have ‘distributed generation’ where the Grid has to cope with multi-directional power flows - and this presents a few technical problems…
Aside from the ongoing and long term Grid upgrade, there is a twofold and short-term solution:
Firstly, the distribution network operators (DNOs) have started to impose limits on new generation on parts of the Grid where the power flows are leading to problems. These constraints are either at a fixed time or at different times – either static or variable – but the key point is that all power generated and not stored during constrained times is lost - forever.
Secondly, to encourage distributed generation the DNOs and National Grid are providing financial incentives for those who can manage their power flows at specific times of the day.
It is the combination of the constraints and the financial incentives that is now making energy storage a viable investment asset; an investor can own and operate the battery or energy storage system (ESS) and sell its capabilities (power and energy) to the highest bidder on the transmission network.
For an investor to make this work they require two key assets: land and a connection to the Grid - and this is what is behind the “free battery” offer; investors are looking for good sites with a grid connection to capitalise on the incentives.
So, if someone approaches you with this offer, should you accept?
With an ESS installed on your land or within your home there is a good chance that you will make energy savings; the ESS will charge and discharge energy at the optimum times dictated by the market while also providing you with your own energy at a lower net cost to you - as long as you have right Power Purchase Agreement in place.
This Power Purchase Agreement (PPA) is very important as it sets the price that the ESS owner will pay you to import energy from your own Grid connection and / or existing on-site generation and the price that you will pay them for the energy received from their system.
It’s essential that you understand how the PPA and the ESS strategy will affect your annual electricity costs; without this detailed analysis you could get a bad deal that may end up costing you money, and if you do save, it’s useful to know by how much.
The question is: how can you work this all out?
This is where our GridMAP software comes in; we help you to make the right decision through objective analysis of the options and economic reality of energy system projects. And this is key - because a “free” ESS may not be really free as there are often associated costs that need to be considered:
1. Physical Access: The ESS will sit on your land or inside your building and there can be access restrictions around this area which may require legal help and possible legal costs.
2. Energy Supplier: Some “free” ESS offers may require you to change supplier as the investors benefit by tying you into an energy tariff that they control and you need to make sure that this is right for you.
3. Grid Connection: An ESS will take up capacity from your Grid connection and as this will reduce or possibly end your ability to add new generation capacity in the future, you need to understand the implications for your energy strategy.
4. PPA: Understanding the relationship of the costs within this agreement is key; you will need to get legal advice on the PPA to ensure that deal is right for you.
So, what about that free lunch? On the face of it a free ESS may benefit some, but for many the decision is complicated; it could be that it’s better to invest in an ESS yourself. To help you make the best decision you need to know all the facts and GridMAP provides the analysis and information that will help you make the right choice.
Fraser Durham is Commercial Director at Argand Solutions Ltd.
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