It's Time to Think Seriously About Behind-the-Meter Energy Storage, Says BNEF

As the cost of lithium-ion batteries continues to fall, businesses gain a competitive edge with behind-the-meter energy storage. They can deploy energy storage to avoid peak electricity rates and high demand charges. Storage technologies can also maximize companies' use of renewable energy and help to improve the quality and responsiveness of their electrical systems. That's all in addition to gaining a buffer against power outages.

The battery market has been accelerating rapidly, and the latest Long-Term Energy Storage Outlook report from Bloomberg New Energy Finance (BNEF) suggests that companies without their own batteries will be at a disadvantage as the trend takes hold.

Behind-the-meter energy storage

Behind-the-meter energy storage refers to small-scale battery arrays that are installed on the ratepayer's premises.

According to BNEF, the behind-the-meter market will grow at a relatively slow pace through the 2020s, compared to utility-scale storage, but companies should be prepared to climb on board by the mid-2030s. BNEF emphasized the advantage for both business and residential customers:

Behind-the-meter, or BTM, installations will be sited at business and industrial premises, and at millions of residential properties. For their owners, they will perform a variety of tasks, including shifting grid demand in order to reduce electricity costs, storing excess rooftop solar output, improving power quality and reliability, and earning fees for helping to smooth voltage on the grid.

If you caught that thing about earning fees, that's a particularly interesting development for businesses.

Smart-grid technology is already enabling grid operators to aggregate small-scale renewable energy resources into a "virtual power plant," helping to avoid the cost of building new utility-scale facilities. BNEF foresees that behind-the-meter batteries can provide a similar service.

Ideally, the aggregation of behind-the-meter batteries would help participating businesses offset their costs and help improve grid services throughout their host community:

There is significant opportunity for energy storage to provide flexibility—to help balance variable supply and demand—and systems will undoubtedly be used in complex ways. Energy storage will become a practical alternative to new-build generation or network reinforcement. Behind-the-meter storage will also increasingly be used to provide system services on top of customer applications.

The rise of the electric vehicle

The report also provides new motivation for companies to transition their fleets from fossil fuels to electricity. BNEF points out that if you combine the expected growth in behind-the-meter and utility-scale storage, you still get to only 7 percent of the total expected battery demand by 2040.

The vast bulk of the energy storage growth BNEF predicts will be in the mobile energy storage sector, aka electric vehicles.

Companies that are not in a position to take advantage of behind-the-meter batteries could still reap some of the benefits—including vehicle-to-grid aggregation—by deploying their EV fleets as a form of behind-the-meter energy storage with wheels.

Utility-scale energy storage

Even without a behind-the-meter advantage, in general businesses stand to benefit from the explosion of interest in batteries. Energy storage leverages more wind and solar into the electricity grid, helping to stabilize rates and improve resilience throughout the system.

In this context, it's worth noting that the BNEF report focuses on battery technologies that are available globally. It excludes pumped hydro, which is constrained by geographical and regional factors.

For those of you new to the topic, pumped hydro refers to systems in which water is pumped to an upper reservoir during periods of surplus or low electricity demand, and released downhill to a generating station as needed.

Here in the U.S., pumped hydro already accounts for the vast majority of energy storage capacity, and improvements in the pumped hydro sector are helping to drive the new wave of energy storage in this country. Technological improvements can expand the efficiency and capacity of the existing fleet without the need to find new sites.

Earlier this year the U.S. Energy Information Agency ran the numbers and confirmed that lithium-ion technology still dominates the large-scale battery storage market in the U.S., with an 80 percent share.

However, companies that are looking to the future may have a wider array of energy storage options at their disposal, including flow batteries and, of course, hydrogen.

Image credits: 1) Portland General Electric via Flickr 2) BNEF