The economics of behind-the-meter battery storage. Part 3: Providing network capacity

A quick recap

Behind-the-meter battery storage can create value for a C&I business in four ways. By:

1. Reducing energy supply costs
2. Earning revenue from providing market services
3. Providing network capacity (as an alternative to traditional network infrastructure)
4. Delivering reliability (backup power), so critical loads can continue to run when there is a supply interruption.

In Part 1 of this blog series we looked at how a battery can help reduce a site owner’s energy supply costs, including some worked examples based on different energy supply arrangements.

In Part 2 we dialled up the ambition and also exposed our battery to market services. We modelled a project in the UK where the site owner could make use of the recent P415 rule change. The battery was able to generate 3x more value compared to simply trying to reduce the supply costs

In this post we’re tackling the next opportunity for behind-the-meter battery storage owners which is using the battery to provide network capacity as an alternative to the traditional network connection.

Out of grid capacity? How a battery can offer an alternative to costly network upgrades

As the energy transition gathers pace, businesses are electrifying their operations, installing EV chargers, adding heat pumps, electrifying manufacturing processes, or simply expanding their sites. But often there’s a bottleneck:

Their grid connection isn’t big enough to support the extra load.

For businesses connected at the low or medium voltage level, upgrading that connection can at best be slow, costly, and disruptive. At worst it simply won’t be possible at all. 

Depending on the region, the upgrade might involve reinforcement of the local distribution network or even the upgrade of a substation. Costs can run into hundreds of thousands of pounds, euros, or dollars and just as importantly take years to complete.

To put grid connection capacity in context, the map below shows constrained areas of the distribution networks across the Netherlands. If it’s red or orange then as a business owner you have a long wait if you’re needing to increase the connection at your site.

This is where behind-the-meter battery storage can provide an alternative solution. By enhancing a site's usable electrical capacity without upgrading its grid connection, a battery can help businesses do more with the connection they already have.

Let’s walk through a simple example.

The Problem: Grid constraints at a growing business

A small supermarket on the outskirts of Utrecht in the Netherlands is looking to expand its operations by installing 5 x 50kW EV chargers for its customers to top up whilst they shop. 

Modelling shows this has the potential to deliver significant revenues, but will also increase the site's peak demand by around 130kW.

However, the site's existing grid connection is limited to 150kW and it already peaks at 110kW during busy periods.

The chart below shows the simulation results of adding EV charging for a single week of the year at 30-minute resolution. 

The top trace shows the baseline energy consumption for the supermarket with maximum demand staying comfortably within the site connection limit of 150kW.

The lower traces shows how that would change with the addition of 5 x 50kW EV chargers with stochastic utilisation during the supermarket’s operating hours. Electrical demand from the EV chargers is shown in grey, with the total site demand in blue. 

For this week, the site connection limit is exceeded on several separate occasions, most notably on Thursday where peak demand hits 234kW, well above the site limit of 150kW.

In practice this could lead to either a tripping of the main circuit breaker for the site - and a loss of power - or more likely a throttling of the EV chargers and a loss of charging revenue, plus grumpy customers. 

At this point the supermarket owner has a few choices. They could scale back their ambition and offer fewer or slower EV chargers for their customers - or throttle the charging speeds to keep within the 150kW limit - at the cost of lost charging revenue and quality of service. 

As a second option they could approach their local network operator, in this case Stedin, and see how long it would take and how much it would cost to increase their site connection limit. In heavily constrained parts of the network, and the Netherlands is very heavily constrained indeed, they could easily be waiting several years. 

Or they could consider augmenting the site connection themselves with a battery.

The Alternative: A Behind-the-Meter Battery

Here’s how it helps:

• During off-peak hours and periods of low site demand, the battery charges slowly from the grid
  
• When EV charging or other new loads are active, the battery discharges to limit the site's net demand on the grid
• The result: peak demand seen by the grid stays below 150kW and outside of the red zone, avoiding the need for an upgrade

In effect, the battery acts as a local buffer, smoothing out the site’s demand profile and keeping the supermarket within its existing capacity allocation.

The economics

The economics of using a battery in place of a traditional grid upgrade will always be site-specific. Factors like the cost of the battery system, the expected lifetime and operating profile of the battery, and the local electricity tariffs and incentives all play a role. But perhaps the biggest factor is time; how long a business is prepared to wait for a network upgrade to become available.

In regions where grid constraints are severe and queue times stretch into years, a battery can offer an immediate path to growth and flexibility. The ability to add new loads, like EV chargers or other site expansion, without waiting or paying for major network works can be worth a premium. 

On the other hand, if a grid upgrade is available at modest cost and within a reasonable timeframe, the business case for a battery may be harder to justify purely on this use case alone, not forgetting that the battery can potentially still capture additional value by either reducing the sites energy supply costs (see Part 1) and/or by providing market services (see Part 2)

The wrap-up

As grid constraints become an increasingly common hurdle to business expansion, behind-the-meter battery storage offers businesses a valuable tool to enable them to keep growing, without waiting for the grid to catch up.

While the economics will vary site to site, the flexibility, resilience, and speed-to-market can be compelling, particularly when batteries are deployed as part of a broader strategy to optimise energy use and earn revenue from market services. In a world where waiting years for grid upgrades is probably not an option, batteries can help businesses stay agile and competitive.

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