Businesses face growing pressure to reduce operating costs, improve energy efficiency, and cut their environmental impact. Battery energy storage systems (BESS) are one of the technologies that is currently receiving a great deal of attention. Although they were previously mainly linked to large-scale utility renewable energy projects, battery storage is now increasingly being considered for use in commercial buildings, such as office buildings.

A battery energy storage system enables an office to store electricity for later use. The battery may be charged when electricity prices are low and then discharged when prices are high, depending on the system and the utility's rate structure. It can also reduce the building's peak electricity demand, supply backup power to certain loads, and operate in conjunction with solar panels. What matters most to a business manager or someone who owns an office building is not merely whether battery storage is environmentally beneficial. The more significant financial question is this: Do the savings and other economic benefits offset the cost of installing and operating the battery system?

The answer is… sometimes, though not in all cases. The financial aspect depends largely on the building's electricity usage, the structure of the utility rates, peak demand charges, the cost of the batteries, the operating strategy, the incentives available, and the value placed on having backup power. A typical commercial battery system includes battery modules, power electronics, control systems, safety gear, and the electrical installation needed to link the system to the building. The battery may be charged by the electrical grid, by solar photovoltaic panels, or by both. The stored electricity can then be discharged to meet the building's needs. For instance, an office could charge its battery when electricity prices are relatively low and then use the stored electricity when prices rise. More importantly to many commercial customers, the battery can discharge during the periods when the building's electricity demand reaches its monthly peak. (Referred to as peak shaving or demand management.)

It is important to distinguish between energy charges and demand charges. Although an office might pay for the total number of kilowatt-hours it uses, its electricity bill can also have a charge depending on the highest level of power it requires during a billing period. Research by the National Renewable Energy Laboratory has shown that peak demand charges are one of the strongest indicators of whether commercial battery storage will be economically viable. A strong financial reason for having battery storage in many offices is the ability to reduce demand charges. Picture an office building functioning at a demand of 400 kilowatts most of the time, but at times reaching 600 kW since several systems such as the air-conditioning, the elevators, the computers, the lighting, and other equipment are all in use at the same time. In such a case, if the utility company bills the business in part based on its maximum demand, that short-term peak will affect the monthly electricity bill. A battery of the correct size can discharge during that peak period and thus decrease the amount of electricity that the office takes from the grid. For instance, if a battery is able to provide a power output of 100 kW during a peak event it could in principle bring the grid demand which is 600 kW down to about 500 kW, on the assumption that the battery responds properly and the building's load is otherwise unaltered.

The amount of financial value is determined by the demand charge rate of the utility. Research carried out by NREL has shown that demand charges are a particularly important factor in deciding whether behind-the-meter storage is economically attractive. A national survey revealed that millions of commercial customers are served by tariffs which include significant demand charges. As a result, an office facing high demand charges has a much stronger business reason to install battery storage than one with a relatively simple, low-cost electricity tariff.

A further possible source of cost savings is energy arbitrage. Certain utility companies employ time-of-use pricing, under which the cost of electricity changes by time of day, being cheaper during low-demand periods and more expensive during specified peak periods. A battery can charge when costs are low and discharge when costs are high. Yet energy arbitrage alone does not mean a battery will be financially attractive, since the price difference between charging and discharging must be large enough to offset the battery's losses, equipment costs, maintenance, financing, degradation, and other operating expenses. Hence, companies should look at the real tariff that applies to the building rather than suppose that time-of-use pricing will result in significant savings.

Battery storage becomes especially useful when combined with a solar panel installation in an office. Solar panels produce electricity during the day. While an office might be able to use much of this electricity directly, sometimes the amount of solar electricity produced does not match the building's demand. In such situations, a battery can store the surplus solar electricity and make it available later. A business cannot only increase the value it gets from its solar investment but also use the battery for demand management. Research on the economics of solar-plus-storage for commercial buildings has shown that financial results depend on building characteristics, solar resources and other site-specific factors.

Battery storage can offer another financial advantage that is harder to calculate: resilience.

If the battery system is properly set up, it can supply electricity to certain office equipment when the electrical grid fails. The loads this might include:

• Computer equipment

• Network infrastructure

• Internet equipment

• Security systems

• Emergency lighting

• Communications equipment

• Servers

• Access-control systems

• Refrigeration or other critical equipment

For an ordinary office, the value of having a backup power supply is not always the cost of electricity. The greater value might lie in preventing lost productivity, disrupted operations, damaged equipment, missed deadlines, or lost business. Research by NREL has shown that, in some cases, you can considerably improve the economics of energy storage by assigning a monetary value to resilience. It therefore makes battery storage potentially appealing even if the savings on electricity bills alone are not enough.

Battery storage is more financially sensible when several advantageous conditions occur at the same time.

1. High Demand Charges

This is one of the most important factors, since research has repeatedly found demand charges to be a major driver of the economics of commercial batteries.

2. Significant Electricity Consumption

Generally, larger commercial establishments have more opportunities to use storage strategically than very small offices.

3. Predictable Load Patterns

A predictable electricity-consumption pattern makes it easier for an energy-management system to forecast peak periods and deploy the battery effectively.

4. Time-of-Use Pricing

Energy arbitrage opportunities can arise because of large differences between off-peak and peak electricity prices.

5. Solar Generation

A solar power installation that is already in place, or one that has been planned, can provide another reason to consider installing storage.

6. Costly or disruptive power outages

Businesses which suffer large financial losses when the power grid fails may place a great deal of importance on having resilience backed by batteries.

7. Available Incentives

The economics of a project can be greatly affected by federal, state, local and utility incentives. Since incentive programs and eligibility rules may change, companies should assess the incentives that apply to their particular project and the date it is installed.

Companies should not assess a battery by asking, "How much electricity will it save?"

The better question is: What financial and operational benefits could this battery offer?

A commercial battery may simultaneously provide: Demand management, energy arbitrage, solar optimization, backup power, resilience, and energy-management capabilities. The total value can be much greater than each individual benefit. A recent study of commercial buildings also stressed the need to analyze the building's load profile and the structure of its electricity bill when deciding if energy storage is suitable. An office should carry out a site-specific financial analysis before buying a system. The analysis must start with a minimum of 12 months' worth of utility bills, and ideally with interval electricity data which shows the building's load profile.

The business should determine:

1. Current electricity consumption

2. Current demand charges

3. Peak demand levels

4. Time-of-use pricing

5. Peak-demand timing

6. Solar production, if applicable

7. Proposed battery capacity in kWh

8. Proposed battery power rating in kW

9. Installed project cost

10. Financing costs

11. Maintenance costs

12. Expected battery degradation

13. Warranty period

14. Expected useful life

15. Available incentives

16. Expected demand-charge savings

17. Expected energy-arbitrage savings

18. Value of backup power

19. Expected return on investment

20. Simple and discounted payback periods

21. Changes to insurance premiums

The analysis must also account for different scenarios, since electricity prices, demand charges, operating schedules, and battery performance can vary over time. Battery energy storage may be a sound financial decision for an office, but it is not always economical. The most suitable buildings usually have high demand charges, considerable electricity usage, advantageous time-of-use rates, predictable load patterns, solar power generation, or a high financial cost linked to power interruptions. The case for using electricity becomes less attractive when electricity rates are low, demand charges are negligible, the battery is used only to a limited extent, or the installation cost is too high.

The most important lesson is that the battery itself is not the investment thesis. The investment thesis is the collection of services the battery can provide to the building. For an office considering the technology, the best approach is therefore not to begin with a battery size or a particular manufacturer. Begin with the building's utility tariff and 12 months of electricity-use data. Model the building's peaks, electricity prices, outage exposure, solar generation, and potential battery operating strategy. Then compare the resulting savings and resilience benefits against the complete installed cost.

In conclusion, battery storage can be a smart financial investment when the numbers work for the specific building. A professional energy analysis can determine whether the system is likely to deliver an acceptable return and whether battery storage should be prioritized over other energy-efficiency investments.