Corporations aren’t just interested in renewable energy; they are a leading driver of its growth. According to data from Wood Mackenzie Power & Renewables, corporate customers procured a total of 5.8 gigawatts of wind and solar projects in 2018, an increase of 109 percent over the previous year.
As the market for commercial and industrial (C&I) renewables gains momentum, it’s also evolving to include increasingly cost-competitive energy storage, which many see as critical to harnessing value from a more decentralized energy system.
“As the electricity markets globally get more deregulated and decentralized, you have to have a way to manage this two-way flow of power,” said Eren Ergin, general manager for renewables and distributed assets at Honeywell.
“At the center of that is energy storage, which we see as an energy management and optimization tool.”
Energy storage-as-a-service
When Honeywell announced in September that it would partner with Toronto, Canada-based NRStor C&I to deploy what the companies assert is the largest behind-the-meter energy storage program in the world, it emphasized that the partnership was driven by the belief that energy storage can deliver unique cost and sustainability benefits for commercial customers.
The partnership, dubbed the Experion Energy Program, will result in the deployment of a total of 300 megawatts of lithium-ion battery storage-as-a-service to commercial customers in Ontario, New York and Massachusetts. NRStor C&I and Honeywell expect approximately 100 megawatts of storage be operational by mid-2020, with the rest to follow in the next couple of years.
“What we’ve experienced with C&I customers in general is that they don’t want to deploy their capital on non-core assets, yet they want to reduce costs and have set aggressive sustainability targets,” said Moe Hajabed, CEO of NRStor C&I. “We have a service model where we own the assets that we deploy at customers’ sites, we provide turnkey execution, and once operational, we monetize the assets and either share the revenue generated with customers or set up a [power-purchase agreement] so they don’t have to deploy their own capital.”
In the partnership, NRStor C&I owns the assets and is responsible for installing the storage systems, and Honeywell provides NRStor C&I with a software platform to maximize cost savings and revenues through smart dispatch. It is a natural outgrowth of Honeywell’s end-to-end automation and energy control services, which already provide building controls for energy management across the globe and software and controls to utilities to run their operations more efficiently and cost-effectively.
For the project with NRStor C&I, Honeywell will use two remote operations centers that deploy artificial intelligence peak prediction and value stack optimization algorithms in order to optimize the operation of the energy storage systems. Hajabed projects that customers will save 20 to 30 percent on their electricity bills.
“The remote operations platform can apply to most markets and use cases, like peak shaving and energy arbitrage and energy capacity,” said Ergin. “We see revenue streams across North America with peak shaving and a lot of demand-side management, but also market-based revenue streams such as demand response and frequency regulation. We also see the opportunity as smart grids evolve for utilities to [use] these assets down the line for their own needs when those assets are not being fully utilized by the company.”
Though it predates the partnership, an example of how this arrangement works is NRStor’s energy storage services agreement with Monarch Plastics’ injection molding facility in Oakville, Ontario. NRStor developed and financed a 2-megawatt/4-megawatt-hour battery storage system. NRStor also operates the system and shares the electricity savings achieved through energy arbitrage, peak shaving to reduce demand charges and participation in Ontario’s demand response auction.
KPIs crafted to commercial customers
As part of the partnership, the two companies are offering performance guarantees customized to the specific objectives of corporate customers. It’s a process that involves collaboratively identifying and quantifying specific key performance indicators (KPIs). If NRStor and Honeywell achieve and exceed those KPIs, there’s a financial incentive for those two companies — and there are consequences if they fall short.
“Sometimes that can mean KPIs focused around megawatt-hours or kilowatt-hours from storage when peak shaving is a requirement and electricity prices are high,” said Ergin. “In other cases, reliability of power is more of a requirement and KPIs can be crafted around uninterrupted power supplies.”
Hajabed says there are three primary reasons why businesses are considering storage-as-a-service: lower costs; the need to achieve aggressive sustainability targets; and resiliency and redundancy.
“In the North American market, where we have aging infrastructure, more customers are exposed to power quality issues and some are looking at this to be a resiliency and backup solution for a facility,” he said.
Large customers with megawatt-scale demand are the current focus of the partnership, including oil and gas, automotive, and food and beverage companies. Healthcare and agriculture companies are also future target verticals.
While there is plenty of interest among developers and utilities in serving the commercial market, Honeywell’s Ergin believes the partnership with NRStor is unique. “There are certainly all kinds of solutions out there, but they are more point solutions,” he said. “We have an end-to-end solution that we don’t see happening with behind-the-meter storage-as-a-service at scale today. It’s a brand-new market and a brand-new take on the market.”