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The commercial battery storage systems employed at these sites use smart technology to optimise when the cheaper stored energy is used, which may be at any time of day or night depending on the site’s electricity tariff structure. Battery storage provides energy cost savings by peak shaving and tariff arbitrage.

The cost-effectiveness of commercial battery storage is determined primarily by the demand charge tariffs that a site is exposed to, and therefore the level of tariff optimisation that could be achieved. The higher the demand charges, the more potential savings are available for a site by installing battery storage to reduce their exposure to those demand charges.

As of April 2018, the National Electricity Market (NEM) market status for commercial and industrial electricity tariff optimisation points to regional Queensland having the most attractive demand charge tariffs for storage investment (estimates 5 to 7 year paybacks on commercial energy storage from tariff optimisation alone), followed by South Australia (10 to 14 year paybacks) then Victoria and New South Wales (12 to 18 year paybacks).

Beyond tariff optimisation, further improvements in the economics of commercial battery storage at the ‘grid edge’ can come from the value stream of demand response uses of the battery. In South Australia for example, demand response uses are expected to pull the payback down to 9 years in the short term. Further improvements in economics of commercial battery storage will also continue to come from a fall in battery technology costs.

Demand response is when the energy stored in the battery is contracted or “sold” into the wider electricity market to help meet a short-term spike in electricity demand in that market. Demand response value streams include economic demand response (contracted by a retailer), network demand response (contracted by a network company) and system security demand response (contracted by AEMO, or bid through a market platform for grid services).

Sites with a low load factor (< 0.2 on a monthly basis) are good candidates for battery storage, as it implies the maximum demand for the site is set by infrequently occurring but relatively high peak events. These short-lived events require less energy (kilowatt hours, or kWh) to achieve a given level of shaving (kilowatts, or kW) than if the peaks remain high for longer time periods.

Schools and daytime use facilities are attractive candidates particularly under Actual Demand (see below), with the high demand charges starting at 4 pm. Typically, the energy demand at these types of sites begins its descent from daily maximum at or around this time, creating a sharp ‘load pinnacle’ for the battery to shave.

Also known as a Time of Use (TOU) tariff, a peak/off-peak tariff charges a site different rates for electricity depending on the time of day and day of the week that the energy is used.  In most cases, volumetric consumption of electricity is priced more cheaply in the evenings than the daytime, to reflect the supply and demand characteristics of when grid electricity is used.

The four demonstration sites are all on a flat tariff with their current electricity retailer. However, for the purposes of demonstration, a conscious decision was taken to adopt a representative peak/off-peak tariff to demonstrate the tariff arbitrage operating strategy. For the purposes of the demonstration and the savings calculations presented on this website, the sites are each assumed to have a peak tariff of 20c/kWh (9 am-7 pm on a working weekday) and off-peak tariff of 10c/kWh all other times.  These tariffs have been assumed as they are representative of typical South Australian peak and off-peak electricity tariffs, and are therefore meaningful to the intended broader audience of this demonstration project.

Actual Demand is a typical tariff applied to small businesses.  In South Australia, the electricity distributor, South Australian Power Networks (SAPN), sets the tariff and reviews it annually.

Customers on an Actual Demand tariff are charged in a way that reflects their individual maximum energy demand on the distribution network, particularly during peak usage times.

The tariff provides for three demand periods – a ‘summer peak’ demand period between 4pm and 9pm on work days between November and the end of March, a ‘shoulder’ demand period between 12 noon and 4pm on work days all year round, and ‘off-peak’ demand period outside of the summer peak and shoulder demand periods.

Customers on an Actual Demand tariff are subject to demand charges based on their maximum actual recorded demand in the peak and shoulder periods since their last meter read, and at the end of each meter reading period, their maximum demands are reset to zero.

Using more grid electricity results in higher demand and therefore higher demand charges. Customers on this tariff also receive an energy charge at a flat rate per kWh.

Actual Demand Energy Storage
Setting peak demand ceilings for energy storage at Actual Demand sites

Agreed Demand is a typical tariff applied to large businesses and industrial customers.  The demand is contracted to a pre-agreed level, generally with headroom above the site’s historic maximum demand. The contracted level is reviewed/reset on an annual basis, generally around 30 June.

Customers on an Agreed Demand tariff are charged in a way that reflects their individual maximum electricity demand on the state’s distribution network, particularly during the peak usage times of 12 noon to 9 pm from November through to the end of March.

The tariff provides for two demand periods – an ‘annual’ demand period between 12 noon and 9 pm on work days between November and the end of March, and ‘anytime’ demand period for times outside of the annual demand period.

Customers on an Agreed Demand tariff are subject to demand charges based on the agreed demand in the annual or anytime demand period. The agreed demand limit is fixed and additional costs are incurred if site demand exceeds this limit over any half hour period. These additional costs include having the Agreed Demand tariff reset at the higher amount, and back-billed to cover the entire contract period.

Using more grid electricity results in higher demand and therefore risks higher demand charges. Customers on this tariff also receive an energy charge at a flat rate per kWh.

Peak demand ceilings energy storage agreed demand
Setting peak demand ceilings for energy storage at Agreed Demand sites

Agreed Demand sites operate on an annually contracted pre-agreed demand level. Once deployed, the battery will perform peak shaving functions and beneficially modify the site load profile seen by the grid and the electricity retailer by lowering the maximum demand requested from the grid.  This is reviewed at the contract anniversary (typically 30 June) and the contracted level can be lowered at that time to achieve the financial benefits.

For sites on Actual Demand, demand charges are calculated from the actual use in that month and then reset to zero at the commencement of the next month.  For these sites, battery savings are immediately achieved on a month by month basis.

The City of Adelaide Works Depot and Adelaide High School are on Actual Demand and, for demonstration purposes, assumed to be on a peak/off-peak tariff.

For these sites, the battery performs an operating strategy in pursuit of tariff optimisation; peak shaving and tariff arbitragePeak shaving contributes the majority of the benefits.

The battery controller works to a manually set a grid electricity demand ‘ceiling’. For Actual Demand sites there are separate ceilings for each month, reflecting the site’s historic load profile.  Peak shaving during the Summer band (4-9pm) is prioritised because the benefits are highest at $15.83/kVA/month.  If the real-time load at the site exceeds the manually set ‘ceiling’, the battery will discharge to defend the ceiling and use stored electricity to meet the needs of the site that sit between the set ‘ceiling’ of grid electricity and the actual needs of the site.

Outside Summer (November to March), the battery reverts to Shoulder shaving worth $7.91/kVA/month.

If the battery was not required for peak shaving that day, it is instructed to fully discharge by the close of the peak at 9 pm and then fully recharge overnight at the off-peak rate (10c/kWh), prior to 7 am, the commencement of peak rate (20c/kWh).  If the battery did perform a peak shave, then the value from tariff arbitrage is automatically realised.

Adelaide High Battery Benefit Calculation (estimated)

Use CaseActive Measurement Window
(Months)(Days)
Tariff Rate
(/kVA)
Battery Power
(kVA)
Useable Energy
(kWh)
Elecricity Cost Savings
(p.a.)(%)
Peak Shaving (Summer)5$15.8388$6,96544%
Peak Shaving (Shoulder)7$7.0188$4,87330%
Tariff Arbitrage250$0.10166$4,14026%
Total15,978100%

The Art Gallery and State Library are on Agreed Demand and, for demonstration purposes, assumed to be on a peak/off-peak tariff.

For these sites, the battery performs an operating strategy in pursuit of tariff optimisation; peak shaving and tariff arbitragePeak shaving contributes the majority of the benefits, and the two strategies are non-conflicting.

The battery controller works to a manually set demand ‘ceiling’.  For Agreed Demand sites there is one ceiling for the 12 month period, reflecting the site’s historic load profile.  If the real-time load exceeds the ceiling, the battery will discharge to defend the ceiling and use stored electricity to meet the electricity needs of the site while actual required load is above the ‘ceiling’.

If the battery was not required for peak shaving that day, it is instructed to fully discharge before the peak rate (20c/kWh) finishes at 9 pm and then fully recharge overnight at the off-peak rate (10c/kWh).  If the battery did perform a peak shave, then the value from tariff arbitrage is automatically realised.

Art Gallery Battery Benefit Calculation (estimated)

Use CaseActive Measurement Window
(Months)(Days)
Tariff Rate
(kVA)
Battery Power
(kVA)
Useable Energy
(kWh)
Elecricity Cost Savings
(p.a.)(%)
Peak Shaving12$10.4522.5$2,82266%
Tariff Arbitrage250$0.1058$1,44034%
Savings from battery action$4,262100%
Contract headroom notional savings*$19,280
Total savings$23,542
* The Art Gallery has contracted 563kVA of demand from SA Power Networks, whereas the operational demand is approximately 358kVA. 75% of the contract headroom (563-358=205kVA) can therefore reasonably be eliminated. These notional savings are claimed to illustrate the firming effect of the battery to contain demand to operational levels, eliminating the need for full headroom.


Glossary

The entity responsible for operating Australia’s largest gas and electricity markets and power systems, including the National Electricity Market (NEM), the interconnected power system in Australia’s eastern and south-eastern seaboard, and the Wholesale Electricity Market (WEM) and power system in Western Australia.

The function whereby the energy stored in the battery is contracted or “sold” into the wider electricity market to help meet a short-term spike in electricity demand in that market.

The company that owns and manages the power poles and wires which deliver power to homes and businesses across the state (often excluding the larger high voltage transmission lines). Your electricity distributor depends on where you live and you cannot choose your distribution company.

A unit of power. One kilowatt is a thousand watts.

A unit of energy that is equal to the energy provided by a thousand watts in one hour.

A measure of the ratio of energy consumption at times of peak demand compared to average consumption.

The wholesale market for the supply of electricity in all states of Australia except Western Australia and the Northern Territory.

Peak shaving is a form of demand-side response where an energy user can reduce energy demand from the electricity grid during peak periods, in this case by using energy stored in the on-site battery storage system in lieu of energy from the electricity grid.

The company you pay for the electricity you use.

With regard to electricity, the amount charged for providing energy under your contract. It includes both fixed charges, typically for supply to site, and variable charges, typically for volumetric usage.

Charging a battery from the electricity grid during off-peak times when grid electricity is cheaper, and then discharging/using that energy during peak times, when the cost of electricity from the grid is higher. Tariff arbitrage requires the customer’s tariff to include different rates for electricity used at different times of the day.

Managing a site’s electricity requirements and how those requirements are delivered to the site (via front of meter electricity supplied by the grid/NEM, and behind the meter generation such as solar and energy storage), to deliver the lowest practicable cost of electricity for the site.