Energy storage for businesses: What you need to know

Energy storage is a great option for commercial properties looking to cut energy costs and improve reliability. With storage prices decreasing in recent years, state and federal incentives to install storage, and increasingly complex–and pricey!–electricity rate schedules for businesses, there's never been a better time to install solar and storage at your business. To help you decide whether storage is right for your organization, here's a rundown of how storage works and the primary reasons that businesses are installing storage.

Energy storage systems provide a very straightforward service: they store electricity for use at a later point in time. When paired with a solar panel system, an energy storage system will store any excess electricity produced by your solar panels for you to use after the sun goes down or when it's cloudy.

There are a number of different technologies that provide energy storage, but the most commonly installed both at the residential and commercial levels are lithium-ion batteries. There are two primary types of lithium-ion battery technologies available on the market today–lithium nickel manganese cobalt (NMC) and lithium iron phosphate (LFP)–which operate exactly the same way but differ across a number of variables: physical size, cycle life, materials used, pricing, and safety certifications.

Energy storage systems seamlessly integrate into your business's electrical system, automatically kicking in when the grid goes down to ensure your operations don't miss a beat.

There are two key benefits that energy storage provides. First and foremost, most homes and businesses install storage for the resiliency benefit: backup power in the event of a grid outage. But for many commercial applications, energy storage can provide much greater financial benefits than it can to homeowners, especially if your business is on a complex utility rate with either demand charges or a time-varying price for electricity.

Resiliency benefits

Seventy percent of solar shoppers who request storage quotes on EnergySage say they are interested in storage for emergency backup power. For commercial properties, resilience takes a number of different forms: it could mean keeping refrigerators and freezers cool in the event of an outage, allowing a gate to open into a storage facility, or keeping the lights on in a restaurant while the rest of the block is out.

All resilience really means is just emergency power in the event of a grid outage event. Energy storage allows part or all of your business to run even when the grid is down. It's not quite "off-grid," but it does mean you can operate without the grid when you have to.

If you operate in an area where you experience frequent outage events, energy storage can help mitigate the impact of those outages.

Financial benefits

There are a few key ways that storage can provide financial benefits to businesses: demand charge mitigation, price arbitration on time-varying rates, and incentives.

Demand charge

The biggest financial benefits from storage come if you have demand charges on your utility rate. While electricity rates historically have focused on a volumetric charge where you pay a certain rate per kilowatt-hour of (kWh) electricity that you consume per month, demand charges are based on the maximum amount of power required over a single hour (or fifteen-minute period) in a given month.

Because your demand charge is set based on your maximum hourly power requirement, there is less incentive to reduce your overall usage throughout the month but rather to adjust how much electricity you require at once. If you're on a demand charge electric rate, the only way to decrease your electric bill is to use less power all at once.

This is where storage comes into play – while solar can reduce the amount of electricity you use in a given month, batteries can help reduce your peak demand in a month. Since demand charges are often $15 per kilowatt (kW) of demand or more per month, and given many businesses use dozens of KWs of demand per month, decreasing your demand is a great way to reduce your monthly electricity spending.

Time-varying rates

Similarly to how some utilities have transitioned to demand charges, others have transitioned to time-varying rates. A time-varying rate–i.e., a time of-use rate–is an electricity rate where you pay more for electricity you use at certain times of day or during certain times of the year than others. In places like California, the rate can be higher in the evening, meaning you'll pay more for electricity after the sun goes down.

With energy storage, you can store electricity produced during the day from your solar panels when electricity rates are low to use later in the evening when rates increase, allowing you to, in essence, arbitrage the rate you pay for electricity throughout the day.

Incentives

When batteries are paired with solar, they're eligible for a number of different incentives at the federal level, including the investment tax credit and bonus depreciation or the modified accelerated cost recovery system. Certain states and utilities also offer additional incentives for storage, like through the Self Generation Incentive Program (SGIP) in California.

Whether you're interested in solar-plus-storage or solar on its own for your business, EnergySage can help. We take a consultative approach to helping businesses explore their solar options, walking through your goals for the project, gathering the information needed to generate a quote, and providing a free solar feasibility report for your organization. Sign up for EnergySage to get started today!