Understanding BESS and How It Works
Understanding Battery Energy Storage Systems and How They Work
A Battery Energy Storage System is a versatile and cost-effective energy solution that helps businesses optimize energy usage, reduce costs, and increase energy independence. With the price of lithium-ion batteries falling in 2023, BESS has become a reliable and affordable option for various organizations, including workplaces, nonprofits, and educational institutions. But what exactly is a BESS, and how does it work? Let’s break it down.
What is a BESS?
A Battery Energy Storage System is a collection of batteries that store electrical energy, which can be discharged when needed. Although it functions similarly to a standard consumer battery, a BESS operates on a much larger scale, designed to power facilities or entire buildings. It’s not just a single battery, but rather a “bank” of connected batteries that work together to store and distribute electricity. Here’s what you need to know about the main components of a BESS
Key Components of a BESS
Batteries: Typically, lithium-ion, these batteries are energy-dense, meaning they store a significant amount of power in a small footprint.
Enclosure: The batteries are housed within a durable metal structure (enclosure) that protects the system from environmental elements while allowing for safe access during maintenance.
Inverter/Charger: Batteries store energy in the form of direct current, but most facilities require alternating current. The inverter/charger converts DC to AC for use within the building. It can also take AC power from the grid, convert it to DC, and charge the batteries.
Battery Management System: This system monitors the battery’s state of charge, temperature, and other critical metrics to ensure safe and efficient operation.
Energy Management System: The EMS software controls when to charge and discharge the batteries based on energy needs and cost-saving strategies. This makes sure the system operates efficiently and reduces energy expenses.
Step-Up Transformer: In some cases, a transformer may be needed to adjust voltage levels and ensure the system is properly connected to the grid or customer’s energy meter.
How is a BESS Installed?
Typically, the BESS enclosure is installed outdoors with minimal disruption to daily operations. Installation is straightforward, and the system can often be installed as a standalone asset or integrated with other clean energy solutions, like commercial solar or electric vehicle charging stations.
Primary Applications of a BESS
Battery energy storage systems are useful for a variety of business objectives, from cost savings to sustainability and energy independence. Let’s look at the key benefits:
Cost Savings: A BESS can significantly reduce energy costs. By storing low-cost electricity during off-peak hours, you can avoid high utility rates during peak periods. Over time, the savings from reduced electricity bills can improve your bottom line and create opportunities for further investments in renewable energy.
Energy Independence: A BESS reduces reliance on the grid, helping your business achieve greater energy independence. It also acts as a backup power source during outages, minimizing downtime and ensuring that your operations stay on track.
Sustainability: BESS supports your sustainability initiatives by lowering your carbon footprint. By reducing grid dependence, you cut down on emissions associated with electricity production. It also maximizes the use of renewable energy, such as solar power, to help achieve emission reduction goals.
Grid Stabilization: Facilities with a BESS can reduce their demand on the grid during peak hours, contributing to grid stability. By drawing from stored energy during high-demand periods, you help reduce strain on utility companies and improve overall grid reliability.
Optimized Energy and Load Management: Energy management software optimizes energy use by predicting demand trends, balancing supply and demand, and adjusting the system’s charging and discharging cycles. This maximizes energy efficiency and lowers operational costs.
Peak Shaving and Demand Charge Management: A key feature of a BESS is its ability to reduce peak loads by discharging stored energy during times of high electricity demand. This peak shaving reduces demand charges, which are calculated based on the highest electricity usage during peak periods. By minimizing peak demand, businesses can save significantly on electricity bills.
Energy Arbitrage: A BESS can also facilitate energy arbitrage–buying electricity when prices are low and either using it or selling it back to the grid when prices are high. This strategy takes advantage of daily price fluctuations to reduce energy costs and potentially generate revenue.
Grid Services & Demand Response: BESS systems can provide critical grid services such as frequency regulation, voltage support, and grid stabilization. Additionally, businesses can participate in demand response programs, where they receive incentives for reducing their electricity usage during peak times or for selling stored energy back to the grid.
Backup Power & Resilience: When paired with a microgrid, a BESS provides backup power in case of grid failures. This ensures critical operations continue without interruption, offering resilience during emergencies and reducing downtime.
Integrated Solar-Plus-Storage Solutions: Combining solar panels with a BESS allows you to store excess solar energy generated during the day for use at night or during cloudy periods. This maximizes the use of clean, renewable energy, lowering electricity costs and supporting your sustainability goals. Plus, solar-plus-storage systems are more cost-effective than standalone solar installations due to favorable net metering policies in regions like California.
Ownership Structures and Financing Options
There are several financing models for installing a BESS. Here’s a look at the options available:
Direct Ownership
With direct ownership, your business purchases and owns the energy storage system. This model provides full control, access to tax credits, and a high return on investment (ROI). However, it requires significant upfront capital and responsibility for maintenance.
Direct Purchase: Purchasing the system outright is a financially advantageous option, offering the highest ROI and benefits like tax incentives and renewable energy credits.
Loans: If upfront costs are a concern, businesses can finance the purchase of a BESS through loans, which spread the costs over time.
Third-Party Ownership (TPO)
With TPO, a third-party provider owns and operates the energy storage system, and your business either leases the system or purchases energy from the provider under a contract. This eliminates the upfront cost but may result in higher long-term expenses.
Leasing or Rental Agreements: Your business rents the system, with the third-party owner responsible for maintenance. This option is ideal for organizations that prefer not to manage the system.
Power Purchase Agreements (PPAs): In this arrangement, your business buys electricity from the third party at a fixed rate, protecting against future price fluctuations. Energy Savings Performance Contracts (ESPC): This model finances the system through the energy savings generated, with payments made over time.
Co-Ownership
In co-ownership, multiple parties share the cost and benefits of the BESS. This is typically used in partnerships or community solar projects, allowing organizations to pool resources and distribute risk while benefiting from clean energy.
Financial Incentives and Tax Benefits
Organizations that install energy storage systems may qualify for several financial incentives, including:
Federal Investment Tax Credit (ITC): Receive a 30% federal tax credit on the cost of the energy storage system.
State, Local, and Utility Incentives: Additional rebates and incentives vary by region.
Accelerated Depreciation (MACRS): Deduct system costs over a shortened time frame, enhancing financial returns.
Tax Credit Monetization: Organizations without sufficient tax liability can sell tax credits to other entities.
Conclusion
Battery Energy Storage Systems (BESS) offer organizations a range of benefits, from energy cost savings to improved sustainability and energy independence. By understanding how BESS works and exploring different ownership and financing options, your business can make informed decisions that align with your financial and environmental goals. For more information or to explore customized energy storage solutions, contact us today to start your journey toward energy efficiency and resilience.