| News and announcements from EE Business Intelligence | Issue 136 November 2024 |
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| After load shedding – the lasting business case for batteries by Adam Roff, Peter Klein, Ndivhuwo Segakweng, Rachel Calaz, Nicholas van Doesburgh, Rian Brand and Grové Steyn, Meridian Economics Meridian Economics has recently conducted an important study on the lasting business case for battery energy storage in commercial and industrial installations. The study report was released on 4 December 2024. Download the full 72-page study report by Meridian Economics here |
The aim of the study
The aim of the study was to evaluate the business case for commercial and industrial (C&I) companies to invest in behind-the-meter batteries.
It includes identifying the different value streams created by batteries and quantifying the associated contributions to reducing the cost of grid-purchased electricity.
While batteries have been valued for mitigating load shedding, their benefits extend beyond ensuring security of supply. To reflect this, security of supply benefits provided by batteries in the event of load shedding are excluded from the analysis – these would accrue to the customer as a ‘bonus’.
The value streams and associated costs for a range of battery sizes (both storage duration and inverter capacity) were tested across a wide range of representative scenarios using the following parameters:
- 6 different sizes of pre-existing onsite solar PV generation (scaled from 0% to 100% of customer peak demand).
- 3 archetypal load profiles (large industrial, medium industrial, commerce/retail).
- 2 geographical locations (Cape Town, Ekurhuleni).
- Eskom and municipal supply in each location.
- Current tariffs as well as proposed restructured tariffs based on Eskom’s latest Retail Tariff Plan (RTP) and previous Eskom roposals (which can be found here and here) indicating future plans.
- Whether or not a customer is willing to reduce their notified maximum demand (NMD), i.e. reduce the size of capacity reserved for them.
Summary of key findings
Optimally sized batteries offer immediate opportunities for many commercial and industrial operations to reduce their electricity costs.
For consumers with varying load profiles, it is concluded that:
- At current battery costs, installations with a power capacity of 30 – 40% of peak demand and a storage capacity of 5 – 10% of average daily consumption provide maximum financial value in net present value (NPV) terms. Smaller battery capacities provide higher return on investment (IRR) although lower NPV.
- Eskom’s proposed tariff restructuring will improve the value proposition for batteries provided customers are willing to reduce their reserved capacity (i.e. notified maximum demand, NMD).
- It is not worth waiting for battery costs to fall further when considering the cost of paying higher electricity tariffs during the wait. As costs fall, additional battery capacity will become viable and can be incrementally added to existing installations.
For baseload consumers, it is concluded that:
- The opportunity is currently for smaller battery installation investments, which provide attractive returns with battery power capacity ~10% of peak demand and storage capacity ~2% of average daily load.
- For larger battery installations the primary cost saving opportunity is dominated by energy arbitrage which alone is insufficient to make an investment case at current and forecast energy tariffs. However, this will change should the cost of battery storage decrease significantly (by approximately 25% – 30%).
In all cases, the opportunity for batteries to create value is significantly enhanced when more rooftop solar is installed.
Installing behind-the-meter batteries presents an opportunity for municipalities to alleviate peak demand on distribution infrastructure and create capacity for new customer connections.
Download the full 72-page study report by Meridian Economics here
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