Maximizing Energy Storage Value: Bill Savings and Demand Response Participation

This article was written for NYSERDA’s Energy Storage Program to help building operators and owners understand the value of energy storage and to provide technical assistance to implement these projects in New York.  For more information visit the NYSERDA Energy Storage Portal.
Kerry Burke, ERS for Zondits, September 17, 2018

With the recent release of the New York State Energy Storage Roadmap along with the New York City permitting guide for outdoor lithium ion systems, the momentum behind storage as a viable solution continues to grow. Simultaneously, the New York State Energy Research and Development Authority (NYSERDA) and partners are collaborating to reduce non-hardware costs and to answer the multitude of questions surrounding the technology and its dynamic market. An increase in energy storage implementation, spurred by Governor Andrew M. Cuomo’s target of 1,500 megawatts of energy storage by 2025, will improve numerous aspects of the electric grid, making it more reliable and more resilient. Another benefit of energy storage is its ability to simultaneously reduce customer demand charges while relieving pressure from the grid during critical peak hours via demand response.

Peak Shaving

If you are privy to the cost of running a large commercial, industrial, or other multi-use property, you are no stranger to the demand charges on your electric bill each month. These demand charges are determined based on the highest average amount of electricity that your building requires during peak hours. Depending on the electric rate you are on, your peak hours and cost per kilowatt will change. Choosing the best rate structure for your building can be complicated but, along with an energy storage installation, could drastically lower your electric costs each month.

In the scenario below, Building A and Building B do not consume the same amount of energy throughout the day. Building A might be an industrial site that runs its production 24 hours a day, giving it a steady electric load profile. In contrast, Building B might be a commercial office space, using substantially less electricity during the morning and evening hours but spiking mid-day when occupant traffic is high. Because the commercial building has a mid-day spike in electricity consumption, its peak load is the same as the industrial building. Thus, both buildings could have the same demand charges, despite the difference in daily energy consumption.

energy storage peak demand

To combat this issue, the commercial site (Building B) has elected to install an energy storage system (ESS) in scenario 2. In this scenario, the ESS charges during the morning hours when the building’s electricity needs are lowest. When demand spikes mid-day, the ESS discharges to offset this spike. As a result, the commercial site has lowered its peak demand threshold and, ultimately, its electricity bill.

Demand Response Programs

Many utilities (like Con Edison) and grid operators (like New York Independent System Operator – NYISO) offer payment for buildings to reduce their demand during peak hours. These programs are known as Demand Response (DR) programs. DR programs compensate customers for participating in demand reductions during predetermined peak periods, also known as “event windows.” A variety of strategies can be used by buildings to lower demand during event windows and building operators (typically working through DR aggregators) can get compensated for those tactics. A building can curtail its energy consumption during that time and/or deploy an energy storage system. Utilizing energy storage during DR event windows can maintain normal building operations while capitalizing on DR revenue. The same energy storage system can reduce the building’s demand charges and enable participation in DR programs.

Demand Management Programs

Con Edison also has the Demand Management Program (DMP) that is driving system-wide permanent demand reduction. Managing demand in Con Edison’s entire utility territory (with a peak load of over 13,000 MW) will help maintain a reliable and affordable network for ratepayers. By incentivizing energy efficiency and distributed energy resources, the utility can defer expensive transmission and distribution projects. Energy storage can help buildings participate in DMP and capitalize on incentives offered through Con Edison for implementing these projects. This year, Con Edison is offering incentives for thermal and battery storage.

Stacking it Up

To maximize value, a building can use a storage system to peak shave at certain times and participate in demand response programs and DMP. The flexibility of energy storage technology allows for “value stacking,” where the system can not only reduce a customer’s demand charges, but also provide a benefit to the grid. However, the ability to value stack and determine the optimal operation strategy can be a highly nuanced endeavor. NYSERDA’s Energy Storage Program is actively helping vendors and customers understand these dynamics by providing technical assistance, and by supporting feasibility studies and demonstration projects. The Energy Storage Roadmap recommends NYSERDA establish a bridge incentive for energy storage in 2019 and the Public Service Commission will be considering this recommendation later this year.

Considering Storage at Your Building?

In addition, NYSERDA is actively assisting the storage market with initiatives to help reduce soft costs associated with permitting and siting, interconnection, accessing multiple value streams, and customer acquisition. Through the Energy Storage Program, NYSERDA is able to provide consumers with free technical assistance and information to determine if storage might be a viable solution for a particular site including providing a high-level screening analysis on storage viability, electric rate options, and payback for your site. If you are interested in learning more or considering energy storage for your building, contact NYSERDA at or NYSERDA’s implementation partner, ERS, at for assistance.

This article was written for NYSERDA’s Energy Storage Program to help building operators and owners understand the value of energy storage and to provide technical assistance to implement these projects in New York. For more information visit the NYSERDA Energy Storage Portal.