The four revenue streams from battery storage

Towards the end of last year, a new database to be launched by RenewableUK suggested that a massive increase in battery storage was about to take place – could 2019 be the year for battery storage?

So, let’s start with a quick definition of what a battery is: “a container consisting of one or more cells, in which chemical energy is converted into electricity and used as a source of power.”

There are now dozens (if not hundreds) of batteries available on the market, from the first lead-acid batteries to lithium ion batteries which TESLA have developed in the production of their fleet of electric vehicles. The most likely next developments in the world of battery storage are solid state batteries which are still very expensive but are being used in research projects in a number of universities across the world, such as Tohoku University.

Now, how do we make money from battery storage? The more important question! Well, there are a number of revenue streams:

Tariff avoidance

By installing a battery, we can charge it at a cheap tariff overnight and discharge during peak tariff, therefore, avoiding a large amount of demand during the most expensive times. However, for reducing carbon this does nothing as you are still using the same amount of kWh and omitting the same amount of carbon. Therefore, consumption must be increased during charging times and decreased during point of peak tariff.

Capacity charge avoidance

This derives from how electricity charges can be levied on certain commercial sites. For example, medium to large scale sites would be charged for the maximum power that they may draw down at any given time. Therefore, as in the below example, this site is paying for the privilege to draw down 70kVa but if it exceeded that amount then it would pay an additional penalty per kWh for every kWh drawn down over the kVa limit.

If a battery was to be installed, negotiations could be made with your electricity supplier to reduce the maximum kVa charge to something like 52kVa and that would provide a standing charge decrease on the electricity bill. This would save money and the battery would be used to control the peak period (between 50kVa and 70kVa) and ensure that higher than 52kVa was never imported from the grid. As a result, if maximum capacity charge reductions can be made, savings will be made and the battery will enable you to reduce your capacity charge by as much as possible and ensure that you are not subjected to penalty charges.

Deferred usage (with onsite generation)

This only applies when you are able to generate excess capacity from onsite generation. This example shows that solar panels are generating enough energy during the day to be used in the evening when required:

This example is effectively grid independent as this site is able to charge its battery entirely from Solar PV during the day and it is able to support usage for the whole night. Although this may not be possible all year round, during the summer months it is very likely that this level can be maintained.

Flexibility market 

These are schemes run by the National Grid to balance the difference between load and a variable supply from wind and solar. Run as auctions, they tend to be short term, variable in price and constantly changing. As a result, they can be quite dangerous to rely on and by themselves are unlikely to generate the type of revenue which justifies investment. Overall, the other three revenue strands are the justification for investing in battery storage.

During our recent webinar on battery storage and onsite renewable energy deployment, we asked a poll question to the audience for them to vote and decide which answer(s) they believed were the most relevant to this question:

What are the barriers to deploying onsite battery storage?

  • Lack of finance
  • Lack awareness
  • Not appropriate for premises
  • Too early for technology
  • Too expensive

Probably not too surprising, but the most popular answer was Too expensive. This is most likely because it is still a niche market. However, the price of batteries is decreasing significantly, therefore, hopefully there will be a stronger uptake throughout the rest of the year in battery storage deployment.