Craig from Jackson WY. Hearing a lot of claims from battery storage vendors about how their systems can dramatically reduce demand charges. The pitch is that the battery discharges during peak demand periods to shave the demand peak. Does this actually work and how do I evaluate the claims for clients?
Demand charges and battery storage — real savings or hype?
Mike D from Raleigh. Battery demand shaving does work in the right circumstances. The key variables are the frequency and predictability of demand peaks, the duration of peak events, and the cost of the demand charge per kW relative to the cost of battery capacity.
Walt. The math is straightforward to check. If a client's demand charge is $15 per kW and they can shave 50 kW with a battery that is $750 per month in savings. A battery capable of that shaving typically costs $200,000 to $300,000 installed. The payback is 22 to 33 years without incentives. The economics are often poor unless there are significant tax credits or incentives.
The vendor was quoting 5 to 7 year paybacks. That seems aggressive given your numbers.
Derek. Vendor payback calculations often assume the most favorable possible demand peak frequency, ignore maintenance costs, and include every available incentive at maximum value. Always do an independent calculation using your client's actual interval data.
Fair warning. I will do my own model before my client makes any commitments to a vendor.