Storage and tariffs

By harnessing the power of energy storage technology, companies can both save money and generate further income while preparing for future advancements in energy distribution, argues Dr Alex Mardapittas

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Dr Alex Mardapittas

Pictured: the Virtue storage system

Credit: Powerstar

In this year’s International Energy Outlook produced by the US Energy Information Administration, it was reported that total world consumption of energy will increase by 48 per cent from 2012 to 2040.

However, at present, there are simply not enough global resources to control the forecasted growth.

Currently, to manage demand and prevent over-use throughout the UK national network, there are significant charges placed for consuming electricity at certain times of the day, which are in addition to standard fees.

Distribution use-of-system (DUoS) and Triad tariffs are two examples, with the amount charged continuing to rise yearly.

To avoid or decrease some of the additional charges, many businesses can invest in energy storage technology, which harnesses the electricity produced during low tariff periods and stores it for later use. Energy storage solutions harness power from both renewable and non-renewable resources, giving users greater flexibility and control of electricity when choosing between National Grid and stored supply. Users can also make the choice to direct electricity back to the grid, giving the opportunity to access additional Demand Side Response (DSR) incentives provided by the UK National Grid.

Energy tariffs

The most widely-recognized electricity usage charge, and the one which most impacts companies’ energy bills, is DUoS tariffs. The fee is controlled by the UK’s Distribution Network Operators (DNOs), with a significant portion of the funds contributing to the operation, maintenance and development of the country’s electricity distribution network. DUoS tariffs are split into four subheadings: fixed, capacity, reactive power and unit.

Regardless of how much energy has been consumed, a business will be charged an additional ‘fixed’ daily cost on its electricity bill. The second charge, capacity fees, are related to a site’s Maximum Import Capacity (MIC). If a company is importing more electricity than required, the company will be penalized. Some products and electrical items require reactive power, which increases energy flow on the distribution network. If a building uses more reactive power than the pre-determined figure, the company will be charged again.

The most significant DUoS tariff is the unit charge, which is based on how many kilowatt-hours of electricity have been used during a specific period of high demand on the National Grid. Unit charges vary regionally throughout the country (see Table 1) and account for approximately 15-19 per cent of a typical non-domestic electricity bill. However, as each DNO has a local monopoly on the supply of electricity, it is not possible to seek out the cheapest DUoS tariff.

During high peak periods – usually Monday to Friday between 16:00 and 19:00 – many companies will simply try to limit or reduce energy consumption, although a full shutdown may not be an option for companies that rely on using significant levels of electricity for day-to-day operations.

One way to negate DUoS tariffs is to use a load management solution, such as energy storage technology. The system will store the less expensive electricity at night, or during off-peak periods, usually from 00:00-07:30, 21:00-24:00 and across the weekend. The batteries will then be able to discharge the stored energy at peak DUoS periods, allowing companies to save up to 10 per cent on electricity cost.

A further additional energy charge that many companies can avoid are Triads, three half-hour periods with the highest system demand between the winter months of November and February. Similar to DUoS fees, Triads are affected by the geographical location of businesses (see Table 2). However, Triads are notoriously difficult to predict, with most electricity suppliers attempting to warn customers when they believe a Triad period might be coming. These warnings are intended to give users the opportunity to reduce the amount of electricity used.

Due to the significant charges, many large consumers of energy will simply choose to shut down operations when the company believes a Triad period is going to occur. However, similar to DUoS, the shutting down process can be highly disruptive to business operations and potentially lead to missed revenue opportunities.

Figure 1. Example of DUoS charges varying throughout the day (South West UK)

The only way to avoid Triad charges completely, whilst operating all electrical systems as normal, is for businesses to come off the National Grid and use the electricity harnessed through an energy storage medium. The technology has already been shown to be successful, with a 2016 Carbon Trust report listing Triad avoidance as a key benefit for energy storage in customer-focussed services.

Demand Side Response incentives

A further benefit of using energy storage can be accessed by large consumers of energy providing the UK National Grid with additional support when required, known as Demand Side Response (DSR). DSR is any method of providing reserve, frequency response, peak avoidance and capacity on the electricity network. DSR incentives are broken up into three categories: Demand Side Balancing Reserve (DSBR), Firm Frequency Response (FFR) and Enhanced Frequency Response (EFR).

DSBR is a relatively recent incentive, given to large energy users that reduce electrical requirement during high periods of demand, mainly through the winter months and weekdays between 16:00 and 20:00. During the high load period, businesses can either dramatically reduce consumption or switch to a backup supply and continue to operate as usual at four hours’ notice, for at least one hour. Supporting grid capacity using energy storage can be significantly cheaper than maintaining electricity use through periods of high demand hours. DSBR also provides businesses the opportunity to showcase their green credentials by reducing overall carbon emissions and improving energy security with the local community.

FFR payments are delivered to companies that are able to keep the National Grid stable when frequency is either too high or too low, usually occurring with a large loss of generation. Due to the nature of the support, companies need a system that can monitor grid frequency in real time. Unlike diesel generators and combined heat and power (CHP) units, energy storage mediums have the ability to be connected to the National Grid, allowing the solutions to pick up frequency changes and discharge electricity almost instantly.

Providers also have to deliver the service within two seconds up to 30 minutes and in order to access its benefits, users should be able to supply frequency response when the low frequency trigger point is activated. Battery energy storage technology ensures all businesses successfully respond to at least 95 per cent of all FFR demands from the grid.

The most financially beneficial National Grid incentive is EFR, which is currently the fastest dynamic frequency response service. EFR is defined as a frequency source that achieves 100 per cent active power output at one second, or less, of registering a frequency deviation. Introduced by the UK National Grid in August 2016, the new scheme is being developed to improve the management of system frequency.

Not much is currently known about EFR. However, battery energy storage technology is likely to be one of the only systems that will benefit as it provides users the opportunity to respond to changes in grid frequency within an 11-millisecond timeframe.

Developing future energy networks

Alongside providing businesses with financial benefits in the present, energy storage technology has a vital role to play in the future development of the energy network, within a ‘Smart City’ microgrid distribution infrastructure.

Even with the amount of discussion surrounding smart cities, there is no firm definition for the concept. However, a background paper published by the UK government’s Department for Business, Innovation & Skills suggests that “it brings together hard infrastructure, social capital including local skills and community institutions, and (digital) technologies to fuel sustainable economic development and provide an attractive environment for all”.

As the report states, the role of hard infrastructure is integral to the smart city framework and it is critical that any system includes controlled street lighting, road signals, water flow and, crucially, the supply of energy to homes and businesses within an ‘Internet of Energy’ framework.

One way the ‘Internet of Energy’ can work successfully is through integration with microgrid networks. Within a microgrid system, energy storage solutions will have the ability to control local electricity demand for businesses, homes and electric vehicles. The microgrid system will give users greater control and flexibility in electrical usage, with energy storage solutions providing a constant and reliable supply of electricity.

A smarter solution

Avoiding DUoS and Triad charges and giving access to UK National Grid incentives are currently the most beneficial reasons to invest in energy storage technology. However, with consumer-focussed energy storage technology in its infancy, it is apparent there are even greater advantages in store for users and the wider population, including the technology’s ability to address the growing concern that national energy grids are struggling to cope with the surge in demand for electricity, which continues to accelerate.

Dr Alex Mardapittas is Managing Director of Powerstar and inventor of the Virtue energy storage system. Powerstar will soon be adding Virtue EV, an electric vehicle rapid charging station, to its product range.

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