Scaling back peak demand

A new study looks into the potential for energy storage to meet peak demand and while more modelling is needed, it just might be viable.

The Alternative Technology Association recently conducted research into the value proposition of stand-alone power systems as an alternative to network augmentation in remote areas of the electricity grid.

In discussing the findings with ATA members, Climate Spectator readers and the broader energy industry, the main questions that people asked us were:

-- How can I utilise energy storage to meet peak demand?

-- When will it be viable to get rid of my electricity supplier and totally disconnect from the grid?

For homes with typical levels of energy consumption (i.e. in the order of 10 – 30 kWh per day), the ATA SAPS research demonstrated that for the purposes of complete disconnection, the capital and levellised cost of a SAPS is, in the short to medium term, likely to remain prohibitive for the majority of consumers wanting to completely isolate themselves from the grid.

ATA has now modelled the value proposition to a customer of using grid-connected battery storage, charged from the grid during off-peak times for use during peak events.

The ATA has considered a scenario where a fixed, constant load during the peak period was supplied by batteries charged during the off-peak period.

The constant load selected was 2.0kW and the duration was 6 hours. 260 peak periods were also selected for the initial scenario, which reflect all weekday afternoon peak periods for one calendar year (and when peak retail rates are likely to apply). An analysis period of 15 years was used, to reflect the life expectancy of well maintained batteries that are not excessively discharged.

Table 1 below outlines the other fixed parameters selected for the initial scenario:

Parameter

Value

Units

Battery bank – Capacity

15.58

kWh

Battery bank – Cost

$250

$/kWh

Battery bank – Asset life

15

years

Inverter – Capacity

3.0

kW

Inverter – Cost

$900

$/kW

Inverter – Asset life

15

years

Balance of System Cost[1]

$1,000

$/system

Battery Depth of Discharge

50%

lead acid

Whole of system efficiency[2]

77%

 

Discount Rate

5%

 

System Voltage

12

volts

ATA chose lead acid batteries for the modelling exercise. In theory, with lithium-ion phosphate batteries being around twice as expensive as lead acid, but with the ability to be cycled twice as deeply (i.e. 100 per cent), the resultant cost of energy provided by both battery types would be broadly similar, for the purposes of the modelling.

Table 2 below lists the capital costs for the battery system based on the above parameters:

System Component

Capital Cost

Capital Cost of Battery Bank

$7,792

Capital Cost of Inverter

$2,700

Balance of System Cost

$1,000

Total Capital Cost

$11,492

ATA then set about researching current time-of-use tariffs that are available, in order to understand the costs of charging batteries during off peak times, and the value of the benefit of using them during peak times.

A quick analysis of price comparator websites suggested that NSW has the highest peak electricity tariffs in Australia – with some peak rates rising as high as 58.85 cents per kWh (after GST) over a six-hour period from 2pm to 8pm. This tariff value is not surprising given the level of network investment currently happening in New South Wales.

So using the NSW tariffs as a guide, and including forecast increases in electricity prices for NSW, the ATA calculated the necessary retail tariff rates to achieve a positive net present value within a 15 year analysis period. This included consideration of both the off-peak rate (paid to charge the batteries); and the peak rate (to be avoided by drawing on the battery bank).

On the basis of the fixed parameters above, we found that when the off-peak tariff is in the range of 10 to 14 cents per kWh (consistent with the current offerings in NSW), the peak tariff must be at least 36 cents per kWh higher than the off-peak tariff (i.e. in the order of 50 cents per kWh) for the investment to break even over 15 years. This analysis assumes that the peak tariff is constant over the six-hour period, as is the case with the NSW tariffs mentioned above.

The results of how long it takes to payback the investment based on different peak/off-peak tariffs is shown in Table 3 and Figure 1 below:

Peak to Off-peak Tariff Differential

Battery Investment Payback Period[3]

Peak tariff is 36 c/kWh higher than off-peak

15 years

Peak tariff is 48 c/kWh higher than off-peak

10 years

Peak tariff is 65 c/kWh higher than off-peak

7 years

As shown above, to obtain a shorter payback to the customer of under seven years, the tariff structure would have to include a peak to off-peak tariff difference of at least 65 cents per kWh. The difference between the two scenarios in Figure 1 reflects the assumption that peak tariff rates will increase slightly more than off-peak tariff rates over the analysis period.

It should be noted that for all but the most expensive ToU tariffs currently available in NSW (and likely in the rest of the country), the difference between the peak and off-peak tariffs is not currently high enough to warrant this type of investment.

In more remote locations at the end of long powerlines, the business case for grid-connected battery inverter systems may not rely purely on the tariff rates, but also on the benefit of the avoided cost of an upgraded connection for a customer who is looking to increase their electrical capacity.

As the market for ToU evolves, it is likely that tariffs with high enough differentials between the peak and off-peak will be seasonal (i.e. may only be high enough in summer) and will likely have a shorter peak duration (probably two or four hours). Consumers will need to be aware of this in considering different tariff options.

And how could distributed generation such as solar be considered in the above scenario?

The off-peak rate for charging the battery bank can be thought of as the required levellised cost that electricity from a solar PV system must reach for a grid connected solar-battery system to achieve the same NPV or return on investment.

Given the NSW context above, a 1.5 kW system installed in Sydney currently having an installed cost of $2.70 per watt before STCs, has a levelised cost of energy of 13.7 cents per kWh, after STC incentive and over the life of the system.

But with solar being potentially able to contribute directly to consumption during peak periods and the options around storing more solar energy with a larger battery bank – this proposition needs further modelling.

ATA’s next article will model the inclusion of solar with a grid-connected battery system.

Damien Moyse is Energy Projects & Policy Manager at the Alternative Technology Association.

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