Battery Energy Storage System (BESS) at Fort Carson. Image: Lockheed / Cypress Creek.

The Economics of Using Batteries to Reduce Installation Energy Costs

Recent improvements in battery and power electronic technology have created a unique opportunity for energy managers to implement battery storage at their facilities as a way to save on utility bills. In utility bill structures with variable time-of-use rates, battery energy storage systems (BESS) can be applied to shift daily peak demand from times of the day when energy is more expensive to hours with a lower cost per kilowatt-hour (kwh). Other utility billing structures include a demand charge based on the highest power demand during any 15-minute interval during the billing cycle, and a BESS can reduce these peak demands if they can be anticipated. Fort Carson is an excellent example of such a system where an 8500 kwh BESS has been employed to reduce peak demand from predictable air conditioning system loads, resulting in a guaranteed $600,000 savings per year in demand charges and a 13-year payback period. The batteries in this system are expected to last for 26 years (80 cycles per year), making this a great long term investment.

The potential savings from a BESS are highly situational depending on energy demand characteristics and your local utility’s billing structure, but a number of tools are available for free online to help determine potential savings. ReOpt by National Renewable Energy Laboratory (https://reopt.nrel.gov/tool) and ESyst by Growing Energy Labs Inc. (https://geli.net) are two examples of such tools that use real utility rate structures and the user’s actual energy data to determine the potential cost savings of implementing BESS, but energy managers should be cautious when using the results from these tools to inform investment decisions; these tools do not take into account the large costs associated with navigating the approval processes inherent to working within the DoD.

Because battery energy storage systems are an emerging technology, naval facilities managers may not feel confident in their ability to design, implement, and maintain a BESS. In these cases, energy managers may wish to use a contracting mechanism such as an Energy Savings Performance Contract (ESPC) to avoid the hassle of managing and maintaining battery systems themselves. The BESS at Fort Carson is an example of such a case where the base formed an ESPC with GELI and other contractors to delegate responsibilities for maintaining their BESS while also guaranteeing a minimum return on their investment.

Battery storage has the potential to deliver significant cost savings, and the business case for battery storage will only improve as batteries improve and become less expensive. In the near term, there are still challenges in finding reliable contractors and suppliers to provide and service battery systems, but this will become less of a problem as the market matures. Navigating DoD processes to get a BESS approved will remain a persistent challenge, but the payoff can be significant. In summary, battery energy storage for facilities can be a great long term investment, but energy managers must take care to ensure that a proposed BESS is appropriate for their facility’s needs, that they have chosen to work with reliable contractors and suppliers, and that they are familiar with the procedural challenges that must be overcome to 
get a BESS approved.

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For more information regarding the business case for battery energy storage at naval facilities, contact Mr. Brandon Naylor at blnaylor@nps.edu.