7 steps to maximize front-of-meter and BTM battery ROI

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PGT Energy Storage Installation

By Gareth Dauley

Lithium-ion battery costs are tumbling, with research last year suggesting an 86% fall within 10 years—arriving at $73 per kWh by 2023.

Large stationary storage systems still involve high capital outlays, however, which is why investors and asset owners are usually keen to find ways to improve the return on investment (ROI) of battery acquisitions.

Fortunately, the flexibility of modern battery storage systems is such that there are often many ways that an asset can pay for itself, irrespective of whether it is located in a front-of-meter or behind-the-meter (BTM) setting.

The key is to plan your battery deployment to maximize ROI from the start, and to do that there is a series of steps you should bear in mind before, during and after commissioning.

Consider all possible revenue streams

If you are investing in an energy storage system then the chances are that you have a specific application in mind, such as delivering front-of-meter frequency response services or improving solar energy self-consumption in a BTM deployment.

However, one attractive feature of batteries is that they can usually deliver multiple services—and each one can contribute to the profitability of the asset. To take advantage of such revenue stacking opportunities, you first need to know what kinds of revenues are available.

For grid-connected assets, for example, a battery could provide frequency regulation while also acting as a peaker unit during times of high electricity demand.

Behind the meter, meanwhile, a battery can save money through demand charge avoidance while also serving as a source of backup power and helping to reduce corporate carbon emissions. 

Think about total system benefits

Batteries cannot charge and discharge unless they are connected to other assets, so when looking at ROI it makes sense to consider a battery as part of a larger system.

If deployed alongside PV, for example, a battery can help maximize the utilization of your grid connection and allow you to improve your profits from generation sales by storing energy when wholesale prices are low and discharging it to the grid when prices rise.

Similarly, in a grid-connected environment a battery could help avoid the need for transmission or distribution network strengthening.

Working out the total system benefit of such applications is less straightforward than it is for, say, a solar park or a wind farm, but it’s key to building a robust business case for energy storage investments.

When looking at ROI it makes sense to consider a battery as part of a larger system

Model your system before investing

Because of the potential complexity of a battery-related business case, it is important to seek expert help in modelling the benefits of different applications. Going through this exercise could help you:

  • Assess the ideal battery configuration for the applications that will yield greatest value.
  • Work out the total ROI that could be achieved through revenue stacking.
  • Identify the highest-value application(s).

Design your battery system for optimum ROI

Once you have a clear idea of where you will achieve the greatest value from battery storage, you are in a position to optimize the system design for ROI.

It is very important, for example, to decide whether the bulk of your value will come from short, sharp power applications or longer-discharge energy use cases. Factors such as cycle rates and average depth of discharge will have an impact on how your system should be configured.

System design extends beyond the battery. Certain applications, for example, may need advanced software controls. Alternatively, your battery system may require particular enclosure or fire suppressant features to meet the regulatory requirements of a given market and use case.

Be careful in selecting your supplier

It should go without saying, but one of the keys for a high ROI is to have a well-functioning, low-maintenance asset. Thus is it important to select a tried-and-tested battery technology and have it installed by a trusted, experienced engineering, procurement and construction (EPC) contractor.

At Pacific Green Energy Storage, for example, we have a team that has overseen the installation of more than 1 GWh of battery capacity around the world. Buying into this kind of expertise carries a premium, but it is an investment well worth making in the long run.

It can also help to have an EPC that is not tied to a particular battery maker, so your final choice of technology and design is guided by your requirements rather than the limitations of an original equipment manufacturer’s portfolio.

One of the keys for a high ROI is to have a well-functioning, low-maintenance asset.

Configure and operate your system for the best returns

Batteries are amazingly versatile assets, but to realize the value they can offer you need to set them up and run them in the right way. Take an application such as energy arbitrage, for example.

This could provide a valuable income stream, but to take advantage of it you need your battery to be able to respond rapidly to market pricing.

If you have followed the previous steps, then your EPC should be able to optimize your system configuration for the applications that will make or save you the most money.

Your EPC will also make sure you have the ancillary equipment and systems in place to operate your asset in a cost-effective way, ideally with maximum levels of automation and potentially using emerging technologies such as artificial intelligence to improve profitability over time.

Make sure you have a maintenance contract in place

In theory, batteries should be able to deliver many years of solid performance with minimal maintenance. In practice, of course, even the most reliable products in the world can sometimes fail, and if that happens you need to make sure your profitability is not affected.

Ideally, the company that you call upon to maintain and repair your battery system should be the one that installed it in the first place, as its engineers will have the most detailed knowledge of your deployment.

Providers such as Pacific Green offer a range of maintenance options, from supply only to full-service contracts where we operate an asset on your behalf. To find out more about how we can help you profit from your battery system, contact us now.