There are words that businesses love, and words that they don’t. Particularly in the case of energy management, the words flexibility, cost savings, and reliability are well-loved and aimed for. On the other hand, the mention of unpredictability, unreliability, or increasing costs isn’t a desirable thing.
For ages, management has pondered over ways to achieve flexibility, reliability, and savings – and one method that stands out well, at least in the province of Ontario, is using an Energy Storage System (ESS).
Today, an ESS is far more than just a backup power source, it brings other benefits such as GA (Global Adjustment) cost savings, reduced environmental footprint, and even revenue generation. Considering all the benefits together, it is no surprise that experts are touting energy storage as the next big thing on the Ontarian energy landscape.
Let’s take a look at all the benefits energy storage can bring to businesses:
1. Global Adjustment (GA) Cost Savings
The electricity bill for consumers in Ontario is split into different components, out of which the two main components are the Hourly Ontario Energy Price (HOEP) and Global Adjustment (GA). The GA part helps utility companies build and maintain new electricity infrastructure and deliver conservation programs.
Unlike HOEP, the GA value varies every month based on a few factors, and is charged differently for two different types of customers: Class A and Class B. We’ll focus on Class A customers since those are the ones who can slash GA charges by using en ESS.
Class A consumers are those who participate in the Industrial Conservation Initiative (ICI). In other words, their GA amounts will be decided based on the top 5 demand hours in the base period (also known as Peak Demand Factor or PDF).
So where does energy storage fit in? Customers can use stored energy during peak hours and reduce their peak demand factor, thus resulting in a reduced GA, which in turn means a reduced electricity bill!
What is the most basic advantage of installing energy storage? It is the ability to maintain continuous operations and keep the critical infrastructure going during sudden outages.
Natural threats like storms and the resulting power outages are not new to Ontario. Just a fortnight ago (Nov. 2021), the town of Stouffville had a pole on fire, leading to 19000 customers being without power. Many among these were businesses. This incident is neither the first nor the last for Ontario.
Specifically for businesses with critical electrical equipment, a seamless and uninterrupted power supply is a basic necessity. It not only maintains the desired rate of productivity but also safeguards critical infrastructure and reduces scrap costs.
Can energy storage systems help increase revenue? Unlike solar power, most people don’t assume that battery storage systems can have a significant positive impact on their bottom line, especially through income generation.
But in truth, thanks to certain mechanisms put in place by regulatory agencies, it is possible to use your ESS to generate revenue.
a) Capacity Auction:
The Capacity Auction mechanism allows any entity with a power supply source to supply a certain amount of power into the grid and be compensated for it.
The IESO (Independent Electricity System Operator) regards capacity auction as one which ropes in a broader mix of resources for Ontario’s energy needs. It thus brings flexibility as well as transparency of operations, while also increasing competition.
b) Operation Reserve:
As the name suggests, Operation Reserve (OR) means a reserve amount of energy in the case of a failure to supply consistent energy from the primary means. Customers with energy storage can participate in the Operation Reserve market and help deal with the demand-supply mismatch on short notice.
A price for this reserve energy is determined every five minutes based on offers in the market. All accepted offers are paid the market-clearing price for that class. When the operating reserve is activated, the suppliers are paid for the energy provided.
4. Enhanced Time-of-Use (TOU) and Energy Arbitrage
There are certain times of the day when energy consumption in the province is at a peak, for example, around the starting hours of offices in the morning. For the utility companies, that means having to maintain an infrastructure equivalent to the peak consumption, and running it on part load at other times of the day, which is an inefficient method and leads to higher costs.
A way to prevent or reduce this effect is to make customers use lower power during peak hours, and the simplest way to do this is to charge the consumers more for peak-hour usage.
For the customer, this means having to buy costly power just when they need it the most. Having energy storage allows users to store energy during off-peak hours and use it during peak hours, thus being able to use cheaper power even at peak hours.
Recently, the province of Ontario rolled out new pilots under its plan to redesign the electricity pricing. Accordingly, under the Regulated Price Plan (RPP), the OEB has put into place a pilot for the ‘Enhanced Time-of-Use’ model, wherein customers will experience a larger difference between on-peak and off-peak pricing.
What this means for someone with energy storage is that they are practically able to reduce that difference by using their ESS during peak hours.
5. Reduced Environment Footprint
It may not feel intuitive right away, but energy storage systems help reduce carbon emissions in specific ways.
Traditionally, the go-to backup source of energy was diesel generators, which is one of the most polluting ways of generating power. Using battery energy storage is significantly cleaner in comparison to gensets.
Secondly, for a long time, the intermittent nature of renewable energy sources like solar and wind did not encourage people to adopt these technologies. But with energy storage, customers can generate enough solar power for 24 hours during the day and store some of it in a battery bank.
This means less grid power is consumed and more reliance is on renewable energy, thus naturally reducing GHG emissions.
Similarly, using ESS also reduces dependency on the natural gas plants employed for peak electricity generation.
“Can businesses in Ontario benefit from Energy Storage?” is not even the correct question anymore. The more relevant question is “How much can Ontarian businesses benefit from energy storage?”
The answer, as we’ve seen above, is that businesses can benefit significantly from an ESS, in more than just one way. Thanks to reduced equipment prices and superb potential for cost savings, if there was the best time to get an energy storage system, it is now!