Are behind-the-meter battery energy storage systems the secret enabler of our 2030 climate targets?

Context

The world aims to at least triple its Renewable Energy capacity and double its Energy Efficiency by 2030 to reach its climate targets. The USA, the EU, and China set very aggressive targets to build a strong power infrastructure to welcome a massive fleet of Electrical Vehicles and Heat Pumps, all this to reduce their GHG emissions and their dependency on fossil fuel thanks to electrification.

But the task is immense, and we face many hurdles to achieve this transformation in time.

The six most common roadblocks mentioned are :

• Slow permitting and authorization process for renewable energy and energy storage projects.
• Long interconnection queue for grid-tied assets.
• Late upgrade and digitalization of the Electricity Grid to support high penetration of Renewable Energy.
• The weak supply chain for key materials equipment. Availability of skilled workforces.
• High volatility in the financial markets (inflation, interests), availability, and cost of capital for clean energy investments (equity, debt).
• Potential negative cost impact for energy consumers.

In this article, I will share my thoughts on how behind-the-meter Battery Energy Storage systems can be critical in addressing some of these challenges.

Bottom-up approach

To be practical and data-driven, I use my home as a base for my reflection and simulations.

In a previous article , I explained the first plan I laid out to decarbonize my household: choose a green energy provider, install solar panels, install a smart heating system, buy a hybrid car, upgrade to LED lights, install new HVAC, etc... This plan has been fully implemented, and I am now thinking about my next steps: switch from hybrid to EV, install an additional heat pump dedicated to my water floor heating, install a home battery, etc...

When building my plan, I always try to find an optimal solution for not only our family (save on energy bills and reduce our GHG emissions) but also at the system level (contribution to the overall energy system from cost and GHG reductions). I also evaluate the replicability of such a plan to other households.

As part of this personal project, I did some analysis and research to identify and quantify the potential benefits of installing a home Battery Energy Storage System (BESS). In my situation, I am not interested in grid backup or off-grid capabilities. I live in the Netherlands, and the electricity providers are highly reliable. My interest lies in reducing my energy bill and carbon footprint by maximizing the quantity of the low-carbon electricity I consume.

For this, I evaluated how a home energy storage solution can impact the demand profile of my house. The demand profile is very important because every kWh consumed needs to be matched by a kWh on the generation side. The electricity grid operator has to balance the demand with the supply side constantly. Traditionally, the supply side did most of this balancing work, but with the intermittency of renewables, the demand side plays an increasing role.

Impact of batteries on a home's load profile

To determine the impact of a BEES on my home's demand profile, I ran several simulations for various battery capacities.

The graphs cover two years of my consumption and show clearly the peak of solar generation during the summer months (blue). It also shows a typical house energy consumption with two tariffs (off-peak in green and peak hours in brown).

For my simulation, I assume conservatively that the battery will do a single full cycle per day.

As you can see on the graphs, the BEES delivers several important benefits.

- it increases the amount of rooftop solar energy consumed (yellow).

- it reduces the amount of solar energy exported to the grid to avoid congestion and negative pricing (blue).

- it reduces the electricity consumption during peak hours (brown).

- it maximizes the energy used during non-peak hours (green).

Based on this analysis, a 10kWh home battery seems the sweet spot for my home from a technical and decarbonization point of view. Maximum positive impacts can be achieved with a 15 kWh battery.

The battery achieves this by virtually shifting load and production and by reducing the amount of solar energy exported to the grid by 70%. At the same time, it doubles the amount of solar energy consumed directly in the home. It means the home battery can reduce the peak inflow of solar energy during the summer into the network by up to 30%.

It is tempting to oversize the battery slightly as the benefits will be even higher once our family has added a heat pump to our house and/or an electric vehicle and so increase our overall electricity consumption.

An electricity grid is a bit like our road network. You have small, medium, and large roads, and you also have highways and bridges. The more cars are using the roads simultaneously, the more likely you will face congestion somewhere.

Adding BESS on the electricity network behind the meters allows you to add into the mix much more renewable energy without costly grid upgrades (not only rooftop solar but also grid-tied solar and wind power plants). These systems can easily integrate all the required logic (electricity tariffs and solar generation optimizations) and do not require advanced smart meters.

BESS could become even more interesting when coupled with dynamic tariffs. Dynamic tariffs reflect almost in real time the electricity market prices and the imbalance between demand and supply. Such tariffs, when using smart BESS, can support even further the integration of Wind and Solar energy into the mix by providing flexibility and preventing the usage of gas-peaker plants.

Home BESS is a very attractive solution from a decarbonization point at households and system levels. It explains why such systems have succeeded in Australia, California, Texas, and Germany.

Financial analysis

Before getting too excited about the benefit of BESS, I wanted to check if it makes sense financially for our family to invest in such equipment. In the table below, I calculated the potential savings on our energy bill for different sizes of BESS.

The calculation below uses my household electricity prices and feed-in tariff structure. It may not be relevant for other countries than the Netherlands.

With a 10kWh battery, I can save today 600 euros per year, resulting in a payback time of just above ten years, assuming, very conservatively, that electricity price does not increase in the coming years.

To maximize the home battery capacity while limiting the initial investment, I am considering using the battery of my future EV as a home energy storage thanks to Vehicle-to-home (V2H) technology. Permanent behind-the-meter storage provides more value to the grid and homeowners because it is always available. However, the V2H provides greater capacity at a lower cost as the battery is mutualized for two usages. A household will likely consume the most energy when the car is parked in the driveway. On the other hand, the absence of a car during the daytime can prevent effective solar generation shifting.

Conclusion

The Netherlands has been very successful at growing its solar energy capacity, mainly thanks to a fantastic up-take of solar rooftops. At the end of 2022, around 2 million households (25% of households) had solar rooftop systems installed. BESS provides a unique opportunity to double down on this success.

For households to invest in new equipment, a payback time closer to 5 years is needed. It means the end-consumer price of such BESS must still be reduced by at least 40%.

Battery prices have decreased significantly in the last few years. Still, if the regulator wants to see these systems in many Dutch homes, they must integrate a financial support scheme to motivate consumers to invest.

Unfortunately, the latest changes in tariffs and solar feed-in tariffs made the business case for BESS even less attractive.

Integrating BESS into their subsidy programs can be attractive for the Dutch authorities as it is a good way to get more private capital to finance the energy transition. Indeed, individual consumers can pay for part of their energy storage equipment while delivering value to the overall electricity system and all other network consumers.

We need to scale multiple solutions to do the energy transition. And behind-the-meter solutions are complementary to large grid-tied ones. Like with the rock, pebble, sand, and water experiment to fill up a jar, there are plenty of levers we can use to maximize the utilization and the efficiency of the electricity grid.

Note: If you are interested in this topic or would like to understand more in detail the simulations, then do not hesitate to reach out.

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