Businesses considering energy projects have options when it comes to commercial battery storage that can save on power costs, offer energy security, and make it easier for businesses to make maximum use of renewable energy sources. Waaree Tech helps businesses determine whether BESS battery energy storage systems should be used with respect to power consumption, tariffs, conditions, and possible savings instead of generic numbers.
Return on Investment for Commercial Battery Storage Systems
The return on investment depends on how effectively the system reduces energy costs and enhances smooth operations at the company. Commercial battery storage systems store energy that is manufactured using renewable energy sources like solar and wind energy. The same stored energy is used when solar energy isn’t available to generate electricity or when prices are higher.
When thinking of investing, four factors need to be taken into account:
- Capital investment: This includes batteries, power conversion system, installation costs, and others.
- Savings in energy: These arise due to consumption shifts to times with lower tariffs.
- Battery usage: The more the system is charged and discharged efficiently, the higher the ROI.
- Life span of the system: Battery deterioration and replacement affect the ROI.
How Commercial BESS Creates Financial Value
There are several ways a commercial BESS helps in improving savings. Peak demand management is one of the most critical ways. The company pays high demand charges and discharges batteries during peak times, reducing consumption of energy from the grid.
The other method is energy arbitrage. When electricity rates are lower, the batteries are charged, and the discharge takes place when the price goes up. Companies that have installed solar panel systems may store excess generation capacity rather than feed it into the grid and use it later.
Finally, power reliability might also bring some savings for businesses, as if it affects their production or leads to data losses and interruption of operations, it might cause significant money losses.
Commercial BESS Payback Calculation
The most straightforward formula involves calculating the simple payback period using total costs of the project and annual savings it provides:
Simple Payback Period = Total Investment ÷ Annual Savings
For example, if a business invests ₹5 crores in a BESS and achieves annual savings of ₹1 crore, the payback period would be 5 years.
However, the business must understand that there are many aspects that need to be considered while doing ROI calculations besides the payback period.
The annual return can be estimated as:
ROI = (Annual Net Benefit ÷ Initial Investment) × 100
For a more accurate investment decision, businesses can also calculate net present value (NPV) and internal rate of return (IRR). Such methods take into account the time value of future cash flows and give a better understanding of the financial performance of the investment over the long run.
Factors That Influence Commercial Battery Storage Return on Investment
Commercial battery storage returns on investment are quite different from one business to another. The electricity pricing is important here as greater discrepancies between peak and off-peak prices result in higher savings potential.
Solar compatibility and battery capacity also influence the economics of such investments. The system capacity is important as too large a battery could result in unnecessarily high initial costs without proportionate benefits, whereas an inadequately sized battery would not meet the needs of the business.
The battery chemistry, efficiency, warranty period, degradation, installation specifics, and maintenance are other parameters to compare.
Building a Strong Commercial BESS Investment Case
Instead of picking a battery system based on its capacity alone, businesses should start with a review of their detailed electricity invoices and load profiles. It will be easy to assess at what time the cost of energy and demand charges is the highest. Another important step is the comparison of different operational scenarios. One should consider potential savings from peak shaving, renewable energy production, backup, and tariff arbitrage individually. It will be wise to make the right inquiries about the warranty, cycle life, degradation, maintenance, efficiency, and performance of the battery system. Working with experienced companies will ensure that savings projections are realistic.
Conclusion
An investment in a commercial BESS needs to be considered as an energy strategy as opposed to a mere purchase of batteries. To ensure the investment is worthwhile, businesses need to look at demand charges, tariff differences, production of renewable energy, battery performance, project costs, and savings.
Collaborate with leading lithium-ion suppliers such as Waaree Technologies to analyse these parameters and choose the right storage strategy that best matches the needs.
Frequently Asked Questions
1. What is the typical payback period for a commercial BESS?
The typical payback period depends on electricity pricing, system cost, utilization, battery size, and operating conditions.
2. Does adding solar improve battery ROI?
Incorporating solar enhances battery ROI as companies consume more renewable power when there is less solar generation by using stored power.
3. Is commercial battery storage useful without solar?
Yes. Batteries can deliver benefits in terms of peak shaving, time-shifting, and backup even without solar.
4. How does battery degradation affect ROI?
The battery capacity may decrease over its lifetime due to usage and wear and tear. The financial modelling should reflect that as opposed to constant capacity throughout the lifetime.
5. What should businesses compare when choosing a battery provider?
The price should not be the only criterion to choose a battery supplier. It is worth comparing efficiencies, warranties, guarantees against degradation, safety features, life expectancy, and system controls.