This article is the second part of our series on the fundamentals of energy storage.
A Battery Energy Storage System (BESS) helps your business optimize electricity usage and reduce utility bills. A BESS solution stores energy during periods of overproduction and cheap electricity, and releases it for later use as needed.
A battery energy storage system allows you to capture and store renewable energy you’ve generated on-site, prepare for power outages and electricity price fluctuations, even cut peak power consumption, and support the national grid.
With a BESS you can take advantage of electricity price swings by storing electricity when it is cheap and discharging it during expensive times. In addition, it serves as an uninterruptible power source, allowing you to keep your core functions going during power outages. The smartest solutions also participate in ancillary service markets, benefiting BESS owners and the whole national electricity grid.
Battery energy storage systems are becoming increasingly common as part of energy solutions for both households and businesses. In this article, we will discuss BESSs from the perspective of businesses and organizations. If you are considering purchasing a BESS, we will help you understand everything you need to know about their operation, benefits, and available solutions:
A battery energy storage system can store electricity and use it later. This allows you to optimally use the electricity you produce on-site, buy less energy from the grid, and do this at a cheaper time. This way, every kilowatt-hour that passes through the system can be better monetized. At the same time, the system also prepares for disruptions in electricity distribution.
With a battery energy storage system, you can:
Battery energy storage systems can be divided into three different groups based on their intended use:
In local use, the battery energy storage system optimizes the electricity consumption of your property. These systems can store electricity generated by renewable energy sources such as solar and wind power, but they can also be charged from the grid. Use this stored energy later to even out peak power consumption and shift consumption from expensive hours to cheaper ones.
Stored energy also serves as a backup power source during electricity price spikes and power outages. This is critical for businesses whose production process depends on a continuous electricity supply.
In ancillary service use, battery energy storage systems help the national electricity transmission system operators maintain the grid frequency at the desired level. This is crucial because if the frequency fluctuates enough, the entire electrical system is in danger of collapsing or crashing. BESSs that participate in the ancillary service market charge and discharge their batteries according to the grid frequency. BESS-using companies are paid for this through ancillary service market revenue.
In combined use, the BESS meets local electricity storage needs and participates in the ancillary service market at the same time. Such a system captures surplus self-generated electricity, anticipates and evens out peak electricity consumption at the property, takes into account hourly electricity price fluctuations, serves as a backup power source, and generates revenue by participating in the ancillary service market.
For example, Cactos's battery energy storage systems operate in combined use, striving to provide users with the highest possible financial benefit at all times.
While energy can be purchased practically from any electricity provider, the grid operator is determined by location. The pricing model for electricity transmission depends on the grid company.
Rule of thumb: the more electricity the grid operator must be ready to transfer to the property, the more expensive the connection will be. However, the price per kWh transferred is lower for big clients.
In the transmission pricing of businesses and communities, there is often a so-called capacity charge. This is determined by the highest amount of electricity transmitted during the review period. If consumption is very spiky, it will be much more expensive for the company than a steady load on the grid.
A BESS helps to even out these consumption peaks. When electricity previously stored in batteries supports the grid during a process that requires a lot of power (e.g., fast-charging electric vehicles), the momentary load on the grid is also smaller.
An increasing number of businesses are using exchange electricity, where the hourly price varies greatly according to the demand and supply of electricity. With a BESS, you can take advantage of the price fluctuations of exchange electricity and use electricity cost-effectively.
In most countries, the hourly prices of exchange electricity are published the day before. This helps both producers and consumers to anticipate electricity production, consumption, and storage. If electricity is more expensive in the morning than in the afternoon, it is worth storing it in advance. It is also possible to schedule electricity-intensive activities smartly when the price is known.
Similarly, if the price of electricity is about to fall, it is wise to postpone high-consuming activities and try to get by on battery power instead of expensive grid power.
A BESS and your renewable energy production support each other well. The availability of solar and wind power is always dependent on the weather. With stored electricity, you can prepare for daily and hourly fluctuations and use your renewable energy production more effectively as part of your property's energy solutions.
When the sun shines and the wind blows, all the panels and wind turbines in the area push virtually free energy into the grid. Instead of selling the electricity you produce for a poor return, you can store it for your own needs. This reduces your need for grid electricity in the future and gives you a relatively better price for your production.
A BESS provides security against distribution disruptions. In such backup power applications, the solution is known by the acronym UPS (Uninterruptible Power Supply).
A properly sized BESS guarantees that vital operations can keep running even during power outages. Whether it's heating, managing difficult-to-shut-down production processes, or charging a logistics company's vehicles, backup power helps you overcome challenging situations.
Electricity transmission system operators maintain the power grid and ensure the grid frequency stays constant. Sudden disconnections of power plants, factories, or interconnections transmitting electricity between countries can cause the grid frequency to fluctuate momentarily. If these fluctuations aren't balanced immediately, the grid and connected equipment could be damaged.
Ancillary services market addresses this balancing need. Participating BESS systems react to the need for grid frequency correction by charging and discharging batteries. Owners receive financial compensation for maintaining power reserves, regardless of how much of their paid-for capacity is ultimately used.
The National electricity transmission system operator procures balancing power from its markets and activates it to stabilize the grid frequency, as needed. The minimum amount offered on the market is quite large, so it's difficult for individual participants to meet the required power level. However, smaller players can also contribute to grid balancing by joining larger pools.
Cactos offers an example of such an ancillary services-compatible BESS. Cactos' smart BESS systems participate in ancillary services markets as part of the Cactos’ market-specific pool. The BESS systems charge and discharge energy based on frequency, and all storage units within the pool receive compensation according to their market participation.
At its simplest, a BESS consists of a battery pack and an inverter. All sophisticated solutions also include control software.
The most obvious component of a BESS is the battery pack. It consists of battery cells that store electricity. The number of battery cells depends on the type and capacity of the battery pack.
Batteries store electricity as Direct current (DC). This can come from solar panels or an on-site wind turbine. Alternating current (AC) electricity, available from a regular electrical outlet, can also be converted into DC electricity. This requires an inverter.
The inverter changes the type of electricity. A standard inverter can only convert DC electricity to AC electricity, but a hybrid model works both ways.
A battery cell alone is not enough; something needs to control the inverter and thus the batteries to do something useful. Control software helps optimize the electricity flowing in and out of the batteries. The smarter the software running the system, the more efficiently you can use your battery.
Some BESS manufacturers offer their control software free of charge. However, the features of these may be quite limited. There are also paid programs available that are purchased either for a one-time fee or paid monthly. For example, in Cactos' model, the control software is included in the monthly leasing fee.
The fundamental function of batteries remains the same: to store electricity, preserve it with minimal loss, and discharge it back for use.
The requirements for batteries in BESSs differ slightly from those used in small electronics and electric vehicles. Since battery energy storage systems are stationary, mass and size are generally not an issue. Therefore, it is possible to use commonly available materials with lower energy density than, for instance, the lightweight battery materials used in electric vehicles. The following factors are particularly important for battery types suitable for BESS applications:
Below, we present both established battery types in the industry and a couple of promising solutions for the future.
The advantages of lithium-ion (Li-Ion) batteries include high energy density, a long lifespan of 10-20 years, and fast charging and discharging. On the downside, they are expensive and sensitive to high temperatures.
Traditional lithium-ion batteries are made with rare earth metals: nickel, cobalt, and manganese. This combination is also known by the acronym NMC. These metals are expensive, difficult to obtain, and pose challenges in supply chain responsibility. That’s why alternative materials have been developed.
Both battery materials and entire batteries can also be recycled: for example, the batteries in the Cactos One Classic BESS are recycled Tesla lithium-ion batteries.
One of the most promising alternatives to traditional lithium-ion batteries is the iron phosphate or LiFePO4 battery. The iron phosphate battery is still a lithium-ion battery, but instead of using rare earth metals, its cathode material is made of easily available and significantly cheaper iron phosphate.
The energy density of LiFePO4 batteries does not quite reach the level of NMC batteries. On the other hand, the iron phosphate battery is considerably more affordable to manufacture, and weight and size do not become threshold issues in static energy storage applications. LiFePO4 is more stable and safer than NMC material, as it is not prone to thermal runaway or explosions. It is also a long-lasting solution: an iron phosphate battery is estimated to last 15 – 20 years.
These properties make the iron phosphate battery the best choice currently available for BESS applications. For example, Cactos' First Life BESSs also use exclusively iron phosphate batteries.
The lead-acid battery is the cheapest of the battery types. It can store large amounts of energy. However, the downside is its low energy density: lead-acid batteries weigh significantly more than other battery types and take up more space. Additionally, their lifespan is shorter, so the batteries need to be replaced more often. Lead-acid batteries are also an environmentally short-sighted choice.
A typical lead-acid battery lasts only 5 – 8 years. However, the battery's lifespan can further be shortened by:
Lead is a toxic metal that pollutes soil and water. Recycling is used to mitigate these harms. In the EU, recycling of lead-acid batteries is mandatory, so manufacturers and sellers must take back used lead-acid batteries. However, recycling does not solve all the problems with lead-acid batteries. The production of new batteries still requires lead mining, which is harmful to the environment. In addition, lead can also be released into the environment during the recycling process.
A flow battery is a liquid battery that stores energy using two electrolyte solutions. Flow batteries are efficient and have a very long lifespan, up to 20 years. They are also safe, durable, and environmentally friendly.
The biggest challenges with flow batteries are their high cost and difficult installation. They are also quite heavy and take up a lot of space. The use of flow batteries is still relatively new, and the technology is being developed further. New materials and manufacturing methods are being researched to reduce costs and improve performance.
While flow batteries are a promising future technology, they may not be the best solution for most businesses right now or even in a couple of years. For the time being, they are more suitable for industrial and grid-level applications rather than solutions for individual businesses or properties.
Salt may be the future solution for storing electricity. Sodium salt-based batteries do not contain any rare earth metals whatsoever, making them quite affordable to produce.
Sodium batteries are already nearing commercial readiness. However, a few fundamental teething problems still need to be solved for a final breakthrough: low energy density and inefficiency in cold conditions.
The decision to get a battery energy storage system involves several factors. Businesses should consider a BESS as part of their overall property energy system. For instance, the heating method, on-site electricity generation, electric vehicle charging, and other devices all influence the amount of electricity and storage needed.
If you are considering purchasing a BESS, be sure to take into account the following:
PRO TIP: The size of a property's main fuse indicates the maximum amount of power that can be charged through it. You can calculate the maximum power in kilowatts by dividing the fuse's amperage by the number 1.44. For instance, a 63 A main fuse can be charged at a maximum power of approximately 44 kW. Of course, the property's other electricity consumption should also be considered in these calculations.
The price of a BESS, and on the other hand, the financial benefit it brings, is a sum of many factors and should be evaluated as a whole. Different purchasing, ownership, and pricing models also affect the bottom line.
The hardware side, i.e., the battery pack and inverter, has a significant impact on the price. The larger the battery pack you want to install on your property, the more it will cost. It is also a good idea to take into account the BESS's control software when calculating the price.
A BESS should not be installed on your own. Before installation, you must apply for and obtain the necessary permits. In addition, the installation itself must be carried out only by an electrical professional.
Purchasing a BESS should not be seen as just an expense but as an investment. In addition to the purchase price, it is worth considering how much you can save on your electricity bill with a BESS.
As a backup power source, a BESS is extremely valuable, as disruptions in operation or spoiled production due to a power outage can be very expensive. However, power outages are difficult to predict. A BESS that functions solely as a backup power source can be thought of as insurance, the benefit of which is measured only when something goes wrong.
Savings can also be achieved by optimizing your local consumption and production. Storing energy you’ve generated on-site for later use can reduce the need for purchasing electricity from the grid, especially during expensive hours. By leveling out consumption peaks, electricity transmission capacity charges can be avoided. If the property's electricity transmission is just about staying within the limits set by the connection size, the load shifting made possible by the batteries can help you get by for longer with a smaller connection. This allows you to keep the monthly fees down.
Although the savings achieved with these local optimizations are often substantial, they’re not always enough to quickly amortize the investment made in purchasing a BESS.
Especially with current electricity prices, the ability of a BESS to participate in the ancllary services market has become the most significant factor in seeking financial benefits. A BESS that operates both locally and in reserve mode helps to achieve financial returns through the reserve market, and the optimization benefits described above come as a bonus.
The payback period for a battery energy storage system purchased as a one-time investment can be long. Therefore, businesses and communities should especially consider purchasing a BESS through a leasing agreement.
In a leasing model, the price of the BESS is not paid off at once, but instead, the savings and returns offered by the storage can be utilized for a monthly fee.
There are differences between leasing systems. For example, Cactos' leasing model has many advantages that cannot be obtained simply by purchasing a large battery storage system as a one-time purchase:
