If you own a fast-food restaurant in Florida, then you might want to consider investing in battery storage now. That is one of the conclusions of a study looking into battery storage economics in America's largest regulated energy state.
The research, published by a team from the School of Global Policy and Strategy at the University of California San Diego, finds many commercial and industrial users would already benefit from a positive business case for energy storage in Florida.
The study looks at the savings that could be achieved, through demand-charge management alone, by residential customers and four types of commercial and industrial users: a warehouse owner, a fast-food chain, a small hotel and a hospital.
Although residential customers would see no benefit because they are not subject to demand charges, all of the commercial and industrial users could potentially see a positive internal rate of return (IRR) on a battery investment today, assuming a low energy-storage cost estimate.
Based on an installed energy-storage cost of $620 per kilowatt-hour in 2015, the IRRs by 2020 would range from around 10 percent for the hospital to more than 40 percent for the fast-food chain.
Even at a higher installed energy-storage cost of $1,200 per kilowatt-hour in 2015, the IRR would be positive today for all the commercial and industrial users except the hospital.
By 2025, all the users in the study would see a positive IRR, even assuming battery installed costs are at the high end of predictions. And if costs are at the low end, the IRR for fast-food restaurants could top 60 percent.
The fast-food restaurant came out on top in the IRR analysis because of the highly peaky nature of its energy consumption. Installing batteries would help restaurants avoid the most punitive demand charges.
Hospitals, meanwhile, came out with the lowest IRR because their energy use tends to be fairly static. Net present value (NPV) calculations also looked rosy for the different load profiles analyzed in the study, particularly when low battery costs were assumed.
“Battery systems are already ‘in the money’ under a variety of scenarios at the low end of today’s cost estimates,” conclude the authors of the report, Battery Energy Storage in Florida: Value, Challenges, and Opportunities.
They also note: “As lithium-ion battery prices fall, the set of scenarios with positive NPV will expand in coming years to encompass even cases representing the high end of battery cost projections.”
Importantly, the study likely underestimates the potential value of energy storage in Florida because it only covers one use case.
“We focused on demand-charge management, because Florida is a state that has demand charges and that’s a use case that is fairly easy to study,” said Taylor Marvin, one of the report’s authors.
Another author, Travis Lindsay, who is now an economist with the Massachusetts state regulator, added: “The thing that surprised us is just the amount of different use cases and load profiles for which storage was already profitable. Right here, right now, you have this ability for storage to be making money for certain customers.”
This potential remains almost entirely untapped. So far, most of the energy storage interest in the state has focused on the residential sector, even though the business case for it is practically nonexistent.
“Residential storage systems are being deployed in the state, though this is primarily driven by emotional rather than economic drivers and still amounts only to a handful of systems each quarter," said Brett Simon, an energy storage analyst with GTM Research.
There are signs the picture could change soon, though. This January, Holly Merrill Raschein, a Republican member of the Florida House of Representatives, introduced a bill to support solar-plus-storage for energy security and disaster resilience.
And the state’s top two utilities, Duke Energy Florida and Florida Power & Light, have put forward procurement plans for $230 million on front-of-meter energy storage by 2021, the University of California San Diego study notes.
