Behind-the-Meter Microgrids-Virtual Batteries Cheaper Than Physical Batteries

by Kevin Klustner, Powerit Solutions

Commercial and industrial (C&I) facilities don’t need physical batteries for microgrids. The cheapest, most flexible solution is a virtual battery: the storage capacity an advanced demand management system (ADMS) creates by manipulating a facility’s energy flexibility and process buffers.

A DMS creates this storage at a much lower cost than batteries. We’ve seen battery costs with a 1-MW solar system ranging from $500 to $1,600 per kilowatt. That compares with $125 per kilowatt for a DMS shedding peak load and $240 per kilowatt shedding demand response load. A virtual battery reduces peak demand for less than one-quarter to one-thirteenth the cost of a physical battery. It’s also easier. Installing a software-based DMS typically does not require build-out and reduces or eliminates the need for permits.

Physical batteries can be worth the cost, depending on what you want to achieve. Early implementations we’ve seen fall into three levels of behind-the-meter microgrid, based on capacity and capabilities.

Solar Power + Demand Management (Virtual Battery)

Solar power plus demand management are needed for a behind-the-meter microgrid providing essential control capability. In addition to creating a virtual battery that balances solar intermittence, the DMS enables participation in auto-DR programs, controls demand peaks and manages loads against dynamic pricing structures-without compromising essential production.

An 8-MW beverage facility in California showed the volatility of the facility’s demand from the grid increased 30 to 50 percent after adding a 2-MW solar photovoltaic system. The facility was drawing less power from the grid, but its demand was less efficient. Spara DM could shift potentially 370 kW of demand on peak and 400 kW at midpeak to smooth the demand profile, saving some $127,000 annually. From the utility point of view, this is a more stable customer-the utility doesn’t have to balance the intermittence because it’s in the facility’s interest to do it itself.

Solar Power + Demand Management + Basic Battery

Once a facility has optimized use of the cheapest, most flexible option-the virtual battery-it can add a physical battery to create more capacity and expand its ability to participate in fast DR and the transactive energy market.

With a basic battery capable of storing 5 to 10 percent of the facility’s peak demand, responsive (designed for shorter-duration discharge), and allowing the facility to operate independently from the grid for less than one hour, the facility would gain increased demand charge shaving and solar firming (compensating for solar volatility), and additional capacity to provide ancillary services to the grid (a form of DR that yields the highest payments).

A smaller battery offers the best ROI in utility environments where a relatively modest increase in energy flexibility will max out the benefits of peak demand shaving and ancillary services provision.

Solar Power + Demand Management + Deep-storage Battery

A facility that adds a deep-storage battery capable of storing 40 percent or more of the facility’s peak demand can operate independently from the grid for more than an hour and go off the grid in emergencies. Big batteries protect a facility from extended outages and with demand management maximize that capacity. The combination of a big battery and virtual battery allows a facility to balance any remaining solar volatility, arbitrage energy purchases by charging off-peak and discharging on-peak, participate in DR programs without any change to plant operations, and provide more ancillary services.

For businesses that need protection from grid outages or opportunities to earn revenue from their load flexibility, a battery with deep storage capacity can be worth the investment.

Incorporating a DMS as a microgrid controller is a no-brainer for C&I facilities that install solar panels. The microgrid controller can monitor the availability of solar power and optimize facility loads, storage, on-site fossil-fuel generation and power draw from the grid to produce the lowest-cost, highest-revenue energy solution for the facility. Installing these intelligent controls at the grid edge enables utilities to create new grid-balancing programs and avoid costly new grid infrastructure and generation projects. Everyone benefits.

Kevin Klustner is CEO of Powerit Solutions.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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