Peak Shaving and Money Saving
How Energy Storage Can Reduce Operating and Capital Expenses
For the better part of a decade, forward-thinkers in the energy industry have been discussing the notion of peak shaving. Peak shaving does exactly as the name implies — removing peak energy consumption from the grid over a period of time. There are a number of reasons for an energy consumer to avoid these peaks, but the common thread amongst them all is cost avoidance. As demand on our grid increases and our infrastructure ages, both consumers and utilities are deploying peak shaving as an important component of power strategy.
Active and Passive Peak Shaving
Fundamentally, there are two ways to avoid an energy peak. The first is a more proactive approach — typically deployed on the demand side — to reduce load during a peak period. For example, a data center manager with advanced power monitoring may choose to throttle or turn off servers and other non-essential hardware during a peak. An example of supply-side controls is Xcel Energy, the primary utility in my area, offering rebates to customers willing to install a device that allows Xcel to adjust air conditioning remotely during peak periods. Both of these strategies require an implicit acceptance of reduced functionality, be it slower response time for a website hosted in the data center manager’s facility or warmer temperatures in the homes of Xcel subscribers.
Using secondary power supplies, customers can stay below a pre-determined threshold level while still fulfilling their power needs.
A less compromising but more capital-intensive method of peak shaving is to allow energy load to fluctuate as it will, but also provide a secondary power source to hold draw from the grid steady. Historically, this strategy was not necessary, as there were no immediate financial repercussions for an individual customer participating in a peak surge. Utilities would do their best to anticipate surges and adjust rates accordingly, amortizing the premium across all subscribers. Should a utility be forced to purchase additional infrastructure, such as installing a new gas turbine, that investment would also be passed on to subscribers. However, a combination of “mart meters” and increased awareness has given utilities an additional lever to pull, namely passing on the rate premium they experience when buying power on the open market to the subscribers that are using that power. This has led some customers to take matters into their own hands by installing on-site energy storage like batteries, ice cooling and generators.
Using secondary power supplies, customers can stay below a pre-determined threshold level while still fulfilling their power needs. Replenishment of the depleted energy is performed when grid demand is lower, such as at night or during high solar production. The avoidance of peak charges now creates a reasonable payback should individual customers purchase this equipment.
While utilities are benefitting to some extent from proactive commercial subscribers relieving some of the demand pressure on the grid, many are not willing to put their reliability and demand in the hands of a third party. For example, utilities in many western states with high rooftop solar penetration are looking to install energy storage battery systems to eliminate the “duck curve” problem.
When considering solar energy supply versus demand over a 24-hour period, the grid operators can struggle to absorb the steep increase and magnitude of load as solar generation tapers off and subscribers just home from a day at work increase demand.
Inserting batteries into a grid plagued by this supply-demand mismatch provides a short-term boost in power supply at the behest of the utility. The batteries can then charge overnight when demand and cost is low. Similar schemes are also beneficial for capital-expenditure delay or avoidance. The Arizona Public Service is working to install batteries for a remote, slow-growing population that does not and may never warrant a full power plant. In both of these examples, the utility is using energy storage to maintain control over supply and thus over pricing and profitability.
Peak Peak Shaving
The increased investment in energy storage by both companies and utilities is a significant and exciting move towards wide-scale traction of renewables. These installations are viable even in the absence of on-site solar; after all, the grid is ambivalent towards the source of the kilowatt, so long as it is available when needed. As batteries continue to decrease in size and increase in energy density, residential time-of-use rate structures could very well drive peak shaving into the home. This will actually further benefit utilities, as several hundred internet-enabled batteries installed on a grid effectively become distributed energy sources. The myriad ways in which energy storage can flexibly and creatively deployed mean we are seeing just a glimpse of the cost-savings and resiliency peak shaving affords.