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Return on Investment with Battery Energy Storage

Battery energy storage typically represents a significant upfront cost, even if your organisation is able to access one of the various funding options available to offset that initial expense. How a battery energy storage system (BESS) provides a return on its investment is difficult to quantify, and varies depending on what you purchased it to achieve, and what, if any, technology it is replacing or supporting.

It is important to clarify that the business case for battery energy storage has never been stronger, and only a small part of that case is the financial returns offered by a battery. The rapid growth of renewable energy in the UK means that the grid is facing increased pressure integrating this distributed generation and balancing grid supply with total demand. Battery energy storage is becoming an increasingly critical technology as a key solution to some of these issues.

Firstly, purchasing and installing a BESS provides your site with emergency power in the case that increased pressure and constraints on grid networks results in a power disruption event. Protecting yourself from this kind of disruption is difficult to quantify in terms of outright return on investment, as without the investment in reliable emergency power your site may have faced significant outages, as well as other costs included wasted materials for manufacturers, lost productivity and opportunity costs.

A historically reliable grid means that there has been relatively little research done on the total cost of power outages for UK businesses. However, the US in recent years has found its security of supply more vulnerable than ours in some places, resulting in a 2018 study by S&C that found a single outage can quickly run into millions of dollars for a large manufacturing business. Collectively, outages cost the US economy $150 billion annually. This coming winter and well into 2022, the UK will continue to face an ongoing energy crisis that raises the very real possibility of significant grid disruption also being experienced here.

The pressures of balancing the grid also opens up new potential sources of revenue for those with on-site battery energy storage. Unlike most Uninterruptible Power Supply (UPS) systems that provide emergency power in the case of disruption, a BESS can also be used for many other applications, such as maximising renewable energy generation, supporting EV charging, engaging with various grid balancing services, and more. These balancing services are used by National Grid and Distribution Network Operators (DNOs) alike to dynamically balance supply and demand in real time. Battery energy storage makes up an increasingly important aspect of this, being used to store excess power when required or called upon to release power back into the grid during periods of high demand.

Demand Side Response (DSR) is the process by which surplus energy is released back to the grid, while Firm Frequency Response is used to quickly reduce demand or increase available power when there is a large deviation in system frequency that would otherwise result in disruption for end users. In both cases, battery end users are paid to allow their batteries to act as a standby for grid balancing.

Battery energy storage was originally able to offer a compelling return on investment from these grid revenue services alone. However, changes to these schemes, the payments on offer and the rapid growth of battery storage means that outside of major, grid-scale developments, grid revenue is unlikely to provide a return on investment alone. Instead, these revenues can provide a beneficial secondary benefit when a battery is installed to resolve another energy management priority.

The most common, and in the growing majority of cases most pressing, of these is the need to provide power resilience, protecting your site from the risk of power disruption. A battery used in this way can then offer a range of secondary benefits, not just unlocking new revenue streams but also improving sustainability and reducing energy costs. Collectively, we refer to this as Resilience+.