2. Demand Charge Reduction - Battery Sizing Case Study
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RevisionHistory
Revision Date Notes Author Reviewer
1.0 12/2/2015 Initialrelease PR CSG
3. Demand Charge Reduction - Battery Sizing Case Study
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1 Introduction
A study was carried out to determine the applicability of a Battery Energy Storage System (BESS) to
reduce utility demand charges. Annual load data (15-minute interval data) from a commercial
installation was used for the study.
2 System Description
2.1 Annual Demand Data
The annual facility demand data is shown in Figure 1.
Figure 1 Facility Demand Data
2.2 Utility Rate Structure
The utility rate structure applicable to this commercial installation is summarized below.
Energy Charges
Description Time Rate
Summer Peak May 1st
– October 31st
11 am to 6 pm – weekdays
$0.1218 / kWh
Summer Mid-Peak May 1st
– October 31st
6 am to 11 am – weekdays
6 pm to 10 pm – weekdays
$0.112 / kWh
‘Summer Off-Peak May 1st
– October 31st
10 pm to 6 am – weekdays
weekends and holidays
$0.0808 / kWh
Winter Peak November 1st
– April 30th
5 pm to 8 pm – weekdays
$0.11 / kWh
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Winter Mid-Peak November 1st
– April 30th
6 am to 5 pm – weekdays
8 pm to 10 pm – weekdays
$0.0942 / kWh
Winter Off-Peak November 1st
– April 30th
10 pm to 6 am – weekdays
weekends and holidays
$0.0725 / kWh
Demand Charges
Description Time Rate
Summer Peak May 1st
– October 31st
11 am to 6 pm – weekdays
$21.4 / kW
Winter Peak November 1st
– April 30th
5 pm to 8 pm – weekdays
$7.66 / kW
Demand Ratchet Higher of maximum monthly
demand or 50% of maximum
annual demand
$24.43 / kW
2.3 Assumptions
The following are assumed in the analysis:
1) No third-party incentive is available for battery installation.
2) Battery annual maintenance costs are 1% of per-kW installation cost, 1% per-kWh installation
cost and 5% base installation cost.
3) Battery capacity fade is not included since specific battery chemistry details are not available.
4) Battery self-discharge of 1% of rated power is assumed.
5) Battery availability is assumed to be 100%.
6) Investment term is assumed to be 20 years.
2.4 Calculations
The following calculations are used:
Utility bill savings = utility bill without battery – utility bill with battery
Annual savings = utility bill without battery – (utility bill with battery + battery maintenance costs)’
Upfront costs = battery kWh rating * cost/kWh + battery kW rating * cost/kW + installation cost
Internal Rate of Return (IRR) is calculated using the following formula:
𝑈𝑝𝑓𝑟𝑜𝑛𝑡 𝑐𝑜𝑠𝑡𝑠 = ∑
𝐴𝑛𝑛𝑢𝑎𝑙 𝑠𝑎𝑣𝑖𝑛𝑔𝑠
(1 + 𝐼𝑅𝑅) 𝑛
𝑁
𝑛=1
where N = investment term in years
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3 Battery Sizing Analysis
Various battery sizes (energy and power ratings) were considered and the maximum savings the utility
bill in each case was evaluated. In order to assess the cost feasibility of the BESS, battery costs (per kWh)
were considered. For simplicity, the inverter and balance-of-system per-kW costs were considered to be
equal to the per-kWh battery costs. For each selected battery size, the maximum IRR was calculated.
This was used to determine the optimal battery size.
3.1 Results
Annual Utility Bill Savings
The annual utility bill savings for the battery sizes selected are shown in Table 1 below, with the
maximum savings highlighted:
Table 1 Battery Size and Annual Utility Bill Savings
Battery Energy Rating (kWh) Battery Power Rating (kW) Annual Utility Bill Savings ($)
10 5 1763
10 10 3262
10 20 4386
20 10 3469
20 20 5335
20 40 5566
39 20 6556
39 39 7382
39 78 7244
59 30 8368
59 59 8669
59 118 8497
78 39 9697
78 78 9718
78 156 9511
Note: It is assumed that the closest commercially available battery / inverter combination will be used.
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Cost-effectiveness of BESS
In order to determine the cost-effectiveness of the BESS, the following initial costs were assumed:
battery cost of $500/kWh and $500/kW
base installation cost: $10,000
The Internal Rate of Return (IRR) for each battery size was calculated and is shown in Table 2 below,
with the maximum IRR highlighted:
Table 2 Battery Size and IRR
Battery Energy Rating (kWh) Battery Power Rating (kW) IRR (%)
10 5 3.1
10 10 11.8
10 20 13.6
20 10 9.4
20 20 14.3
20 40 9.8
39 20 13.1
39 39 11.2
39 78 5.3
59 30 12.0
59 59 8.4
59 118 2.5
78 39 10.5
78 78 6.3
78 156 0.4
The optimal battery selection is a 20 kW, 20 kWh system. The details are as follows:
Battery Size: 20 kWh, 20 kW
Upfront costs: $29,555
Annual Savings: $4,530
IRR: 14.3%
Effect of Battery Cost on IRR
A range of battery costs were assumed. At each cost level, the battery system with the maximum IRR
was determined. The results are shown in Table 3. It may be noted that at the highest selected cost of
$900/kWh, a 10 kWh/20 kW battery has the highest IRR instead of the 20 kWh/20 kW battery that has
the highest IRR for all the other cost levels.
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Table 3 Battery Cost vs. IRR
Battery Cost per
kWh ($)
Battery Cost per
kW ($)
Battery Energy
Rating (kWh)
Battery Power
Rating (kW)
IRR (%)
400 400 20 20 17.1
450 450 20 20 15.6
500 500 20 20 14.3
550 550 20 20 13.1
600 600 20 20 12.0
650 650 20 20 11.1
700 700 20 20 10.2
750 750 20 20 9.4
800 800 20 20 8.7
850 850 20 20 8.0
900 900 10 20 7.3
A plot of the IRR vs. battery cost is shown in Figure 2. The reduction in IRR with increasing upfront costs
is fairly linear.
Figure 2 IRR vs. Battery Cost
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3.2 Effects of Battery System
The impact of installing a 20 kWh/20 kW battery system in the commercial facility considered in this
study may be seen in Figure 3. The reduction in peak demand can be clearly seen.
Figure 3 Peak Demand Reduction with Battery
