The role of energy storage in the decarbonization of industry

The role of energy storage in the decarbonization of industry
By Laurent Petithuguenin and Tom Lock
Senior Managing Consultant and Senior Expert, Energy-Related Products Policy
Mar 1, 2023

European industry increasingly recognizes the need to decarbonize to achieve the European Union’s net-zero goal by 2050. However, the strategies to decarbonize European industry are uniquely complex.

There are many paths forward, from switching to more efficient equipment to developing your own renewable energy on site. But even these new energy sources—from wind to solar—bring their own challenges, as renewable sources are often intermittent in nature, increasing the need to balance energy grids.

In this context, energy storage is just one option for companies to consider in their net-zero plan. These solutions come in many shapes and sizes. Businesses in the industry sector should consider which options as best for their specific needs.

Getting the right solution is crucial, not least because it can be an expensive investment in the short term. Businesses must therefore identify the key commercial goals they are trying to meet and the challenge that they believe an energy storage solution will address. Firstly, however, it is important to understand the energy solutions that are available.

What is energy storage, and what are the options?

Energy storage describes the process of capturing energy produced at one time so that it can be used later. This is often to balance the amount of energy being produced and the actual energy demand. Here, we will focus specifically on two methods: Battery storage and thermal storage.

Battery storage

One energy storage option is to store electricity—typically in batteries. For smaller settings such as an office, the battery can be relatively small, around the size of a domestic refrigerator. A battery of this size could be used to store electricity during the day to then release in the evening when electricity prices might be higher. Lead acid batteries are a cheap option here, but they are being increasingly replaced by Li-ion batteries.

In industrial settings, the battery would be larger. Redox flow batteries such as vanadium or zinc bromide are an effective option in these scenarios.

Most batteries are efficient in terms of the energy that goes into them and the energy that can be taken out of them again. They are also capable of responding at high speeds to demand signals. However, they are not particularly effective at keeping energy stored for a long time. They typically offer around 24-48 hours of storage, or up to a week at the most.

Thermal storage

Thermal storage also offers a broad range of options. Most thermal storage systems use large blocks of material with a high heat capacity, which are insulated from the outside. They can then be heated (or cooled through refrigeration) and with the energy trapped within them.

On a small scale, thermal storage could be used for storing heat for a building service, where it is stored during the day to then release at night. In an industrial setting it could be used for storing heat from one process to then use in a later one. For example, a factory producing food products is also producing lots of steam in the process. The business could then store some of that heat to use for the next day's production.

Thermal storage can also store heat created in a larger industrial process to be used to produce electricity in the future. Because thermal storage systems tend to be larger and more complex, they are more often used in industrial settings. The most common applications for this are in load levelling systems, where the grid needs to have electricity removed. In these cases, energy is stored during periods of light loading on the system, to be delivered later when demand is high.

How should you decide whether energy storage is suitable for your business?

There are many different energy storage options, and factors to consider—from the size of the unit itself, the amount of time they can store the energy for, to how fast the response time is. On a practical level, ICF has experience in helping procurers of energy storage equipment by advising them on and directing them to approved equipment. For example, for the Energy Technology List (a BEIS program on energy efficiency), we conducted an analysis based on engagement with the manufacturers of energy storage systems. We set out the minimum performance criteria for battery and thermal storage systems around energy density, lifespan, and roundtrip efficiency.

Yet every business has different needs and goals. For this reason, it is important for companies to think first about whether energy storage is suitable for their needs. Potential questions for decision makers to ask include:

  • Why do you want energy storage?
  • Where is the value for your business in energy storage? Is this a financial incentive, or will it allow you to make a reputational claim around relying only on renewable electricity?
  • What is the financial need or challenge you are trying to meet?

Every business will have different answers to these questions, which will in turn be framed by how the grid functions in their location.

How might energy storage add value to your business?

There are a number of ways in which an energy storage system could add value to a business. Potential operating benefits that procurement teams should review before investing in a solution include:

  • Reducing energy supply bills by using battery storage to ensure all energy from an onsite renewable generation is used (for example from onsite solar generation) or to maximize the energy from a renewable Power Purchase Agreement (PPA) scheme. This avoids volatile grid prices, which in many countries have increased significantly due to the rising cost of gas. This also maximizes the use of renewable energy resources—meaning a business can then claim towards a net-zero status, as they won’t need to use other grid electricity.
  • Lowering distribution costs by using storage technology to shift peak demand allowing to reduce costs linked to network connection infrastructure and peak demand. Alternatively, potential revenue could come from using onsite storage to modulate demand and offering grid balancing services such as “demand side response.”

These could happen at the same time. Here are three potential scenarios.

Scenario 1: “We want to shift to a net-zero business model”

A company looking to meet net-zero targets will look to source their electricity from renewable sources. They may do so by securing a PPA with a renewable supplier, or by having their own local renewable energy production on site and maximizing their usage through an energy storage device. For those purchasing from a PPA, the current market would mean their renewable energy rates are cheaper as they are likely to have agreed to them in advance of the gas price hike.

This is in contrast with other companies that might buy green power as part of their existing contracts, and yet will pay the same price for green electricity as fossil fuel-derived electricity. This is partly because all electricity prices have been pushed up by the high price of gas. So, while they might still be buying renewable energy, it is being sold at a much higher price. It is likely that the renewable electricity price may soon be decoupled from the gas price, in the U.K. at least, with the EU to potentially follow suit.

In contrast, companies that have a PPA will only use the green energy that is being produced at that time, coming from one generation site. Storage can be useful because it means that even if electricity prices go up or down externally, the business can enjoy a more stable price forecast for their energy. In this situation, a company with a PPA might have storage to maximize the use of the green power that they have already purchased in advance, at a lower price than other electricity sources.

For companies maximizing the use of their own renewable generation on site, a storage system can ensure the company consumes its own generated power, rather than export it. This is also advantageous financially as consuming locally generated power will avoid export costs due to the network connection. Key performance criteria for these storage capabilities are therefore likely to be around maximizing the round-trip efficiency of the charge-discharge cycle of the batteries.

Scenario 2: “We want to modulate demand using balancing mechanism services”

In the U.K., the National Grid uses the Balancing Mechanism (BM) to balance electricity supply and demand in real time. This means that they can purchase changes in generation and consumption when electricity generation and consumption are not in balance. For example, the grid might have too much power on it, or too little. If there is not enough power on the grid, the grid will turn on more generation, which would generally be fossil-based. In this way, demand response systems help avoid wider grid emissions. Conversely, if there is too much renewable generation (for example from wind generation during windy conditions), having storage capabilities can avoid the need to curtail this kind of renewable generation.

To support this, a business can reduce or increase their demand for electricity (known as “demand side response”) to modulate their demand, and energy storage can help. The balancing mechanism can therefore become a new income stream for companies being paid by network operators to change their consumption. In the U.K., we are already seeing this kind of modulation for non-domestic energy consumers. Suppliers in the U.K. are also rolling out demand side management as a national initiative to try and encourage householders to switch from using energy during peak times. In these scenarios, where one needs to respond quickly to grid signals under frequency response, a fast response energy storage solution such as a battery is recommended.

Scenario 3: “We want to reduce network connection and peak pricing costs”

We are seeing scenarios where some suppliers now charge energy at different prices at different times of the day. Energy storage can allow manufacturers to shift that consumption to low price periods and reduce their overall costs. For any company looking to take on this strategy, it is advised to discuss this directly with their energy supplier. If the consumption is high enough, the supplier may well change their price structure as they source electricity supply at different times of the day.

Furthermore, when a business establishes a new site, they also need a good energy connection. If they require peak power at a particular time, they will need a cable installed that allows for that amount of power. To identify the price they pay for this, the grid evaluates the three times in the year that the power is highest, and they will then ensure that the cable can manage that. They will then charge the business proportionally to those three times—a process known as “triad pricing.”

If a company is able to show that they can diminish the intensity of those high peaks in power by modulating their demand with a battery (or another energy storage solution)—and subsequently require a less strong connection—then that reduces the triad price cost. This is yet another way that energy storage can allow the industry to help the grid to manage supply while reducing their triad prices and any subsequent energy bills.

Understanding the energy solution for your needs

Storage systems come in many shapes, sizes, and technologies. The key operating goals and commercial ambitions behind getting energy storage—and the challenge that you think storage is a solution for—should be your first consideration. This will then influence how you will use the device, and how you will derive the most value from it. From there, you can deduce the technical parameters you need in any system or the software running it.

In some cases, storage may not be the solution. For example, if the goal is to reduce carbon footprint rather than maximize renewable energy usage, you could look at using more energy-efficient industrial equipment or installing renewable generation on site. If the site is already next to renewable generation production, installing storage may be a useful way to maximize their use, avoiding their curtailment or network export costs.

The key is to ask questions internally, before any procurement, and to talk to experts who can guide you to a solution that allows you to achieve your business goals, boost your green credentials, and benefit your organization financially.

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Meet the authors
  1. Laurent Petithuguenin
  2. Tom Lock, Senior Managing Consultant and Senior Expert, Energy-Related Products Policy

    Tom has more than 15 years of experience managing and delivering energy-related product policy programs for public and private sector clients spanning the United Kingdom, Europe, and internationally. View bio

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