Energy storage systems are gaining more public attention and will qualify for a dedicated 30% federal tax credit starting in 2023. Batteries can perform several functions that are useful to building owners, but even better results are possible when they are used in conjunction with a commercial solar system. variety. Here we will discuss why a combined solar PV + battery system makes sense from an investment perspective.
Save on energy bills and improve your building's energy resilience with a solar photovoltaic + energy storage system.
Using a self-constructed battery system
A battery system can be used as a backup power source during blackouts and other emergencies, but it can perform additional functions that reduce your electricity bills. In general, there are two main ways that batteries can reduce your energy costs :
- Energy arbitration
- Peak cut
Energy arbitrage consists of storing electricity during off-peak hours, when kilowatt-hour prices are low, and using it during peak demand times, where kWh prices are high. This way, you save the price difference between electricity during peak and off-peak hours. However, this strategy is only possible for building owners with time-of-use rates; If electricity prices remain constant throughout the day, energy arbitrage will not be possible.
Peak shaving involves using a battery to cover your building's peak kilowatt consumption, reducing the net demand measured by the energy meter. Most commercial and industrial tariffs include capacity charges, meaning you pay not only for energy consumption but also for maximum demand. By reducing the peak kilowatts measured by your energy meter, you can reduce capacity charges. This means that your overall electricity bill can be reduced, even if your total energy consumption remains the same.
Standalone batteries can perform both of these functions, but there is a limitation: you must rely on the electrical grid to charge the battery system . US electricity prices have risen sharply in 2022, and this trend is expected to continue into 2023 as long as demand for natural gas remains high. A battery pack that gets all its charge from the local grid will tend to have high operating costs and this will extend the payback period.
Using a commercial solar PV + battery system
When a building battery system is charged with a commercial solar array , its operating costs are drastically reduced. According to the latest data from the US Energy Information Administration , the average commercial rate is now 13.45 cents/kWh. For comparison, a commercial solar panel can achieve an LCOE (levelized cost of electricity) of less than 8 cents/kWh. Grid electricity is also affected by inflation, while a solar power system has predictable ownership costs over its lifetime.
The financial performance of each renewable energy project must be analyzed individually. However, when comparing a standalone battery and a solar PV + battery system, adding solar panels generally brings the following results:
- Higher internal rate of return (IRR)
- Higher net present value
- Greater benefit/cost ratio
- Shortest payback period
The cost difference between grid electricity and local solar is even greater in New York State, where the average commercial kWh price now exceeds 20 cents/kWh. If your commercial building is located in New York, a solar + battery system can also help you avoid emission penalties under Local Law 97 of 2019 .
The 2019 LL97 assigns an emission factor of 0.000288962 tCO2-eq per kWh when using grid electricity, while local solar has zero emissions. A stand-alone battery does not reduce your carbon footprint, as all its charge comes from the grid, even if energy bills are reduced. On the other hand, all electricity supplied by a commercial solar PV + battery system is emission-free.
Solar PV + Battery Combined Systems Get More Incentives
Thanks to the Inflation Reduction Act , stand-alone battery systems receive a 30% federal tax credit starting in 2023. However, a solar + battery system also receives 30% of the PV system cost as a tax credit and qualifies for other incentives exclusive to solar panels. . This includes the NY-Sun Megawatt Block Program that offers up to $1,200 per kW for commercial solar systems in the Con Edison region and up to $350 per kW for systems in upstate New York.
In general, a solar PV + battery system will be a better investment than a stand-alone battery, considering its lower operating costs and the potential to qualify for more financial incentives. Standalone batteries are useful for backup power, power arbitrage, and peak shaving; Unfortunately, your dependence on grid electricity increases operating costs.
