Commercial electricity customers who are subject to high demand charges may be able to reduce overall costs by using battery energy storage to manage demand, according to research by the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL).
The analysis represents the first publicly available survey of commercial-sector demand charges across the United States. By determining locations where comparatively high demand charges are currently in place and the number of customers that may be paying them, researchers provide insight into commercial battery storage market potential across the United States.
The white paper, Identifying Potential Markets for Behind-the-Meter Battery Energy Storage: A Survey of U.S. Demand Charges, details an analysis of more than 10,000 utility tariffs in 48 states. The findings indicate that approximately 5 million commercial customers across the country may be able to achieve electricity cost savings by deploying battery storage to manage peak demand.
Many medium to large commercial customers are subject to utility demand charges, yet customers often do not understand how these charges are structured or calculated. Demand charges are a portion of an electricity bill based on a customer’s peak level of demand and are typically based on the highest average electricity usage occurring within a defined time interval–usually 15 minute intervals–during a billing period. In many cases, these demand charges can account for anywhere from 30% to 70% of a customer’s electricity bill.
“Declining costs for energy storage products have created opportunities for commercial customers to deploy batteries to manage peak demand and lower their electricity bills,” said Joyce McLaren, lead author of the study and a senior energy analyst at NREL. “However, prior to this analysis, no one had performed a comprehensive survey of demand charge levels across the country and how many customers might be subject to them. Our research seeks to fill that information gap.”
The analysis looked at the number of commercial customers potentially eligible for utility rate tariffs that include demand charges of $15 or more per kilowatt, an industry benchmark for economic storage opportunities using current technology and pricing. The findings, grouped by utility service territory and state, are presented in a series of maps and tables in the paper.
High-level insights include the fact that some the of the country’s highest demand charges–and therefore potentially viable market environments for utilizing energy storage to reduce peak demand–were found in states not typically known for having high electricity prices, such as Colorado, Nebraska, Arizona, and Georgia. The analysis also determined that economic opportunities for storage may exist beyond the first-mover states of California and New York, into portions of the Midwest, Mid-Atlantic, and Southeast.
