How Battery Energy Storage Systems Work​

When people think of the battery industry, associations likely go towards electric vehicles, but the battery industry isn’t just propelled by EVs. Utility-scale battery energy storage (BESS) has also entered the race and is more important than ever before. So, this article will explore how battery energy storage systems work. 

What is BESS and how does it work?

Understanding how battery energy storage systems work is essential for those who want to know the knots and bolts of the industry. Battery Energy Storage Systems (BESS) are in simple terms big batteries that store energy for later use, ensuring a reliable supply of energy when the primary energy source is unavailable. These systems are crucial for utilities, businesses, and homes, providing a buffer against energy supply fluctuations caused by weather, blackouts, or geopolitical issues.

Battery energy storage systems have quickly gone from being overlooked to becoming a fundamental component of modern energy strategies, particularly those leveraging renewable energy sources like solar power and wind.

Solar and wind energy, while abundant, isn’t producing energy all the time. By integrating battery energy storage systems with photovoltaic (PV) solutions or wind turbines, solar and wind energy is stored for later use. This integration ensures a continuous and steady power supply, mitigating the intermittent nature of solar energy and enhancing overall energy reliability.

How battery energy storage systems work​​​

The operating principle of a battery energy storage system (BESS) is simple. Batteries get electricity from the power grid, directly from a power station, or from renewable energy sources like solar panels or wind turbines. They store this electricity as current, which is released when DSOs need the extra power. 

That’s the very simple version, but there’s more to BESS.

When combined with advanced software, a BESS transforms into a sophisticated platform that merges the storage capacity of batteries with intelligent energy management. By harnessing AI, machine learning, and data-driven solutions, these systems can optimize energy consumption, adapting to fluctuations in demand and supply. This intelligent management makes BESS a powerful asset in combating climate change by enabling more efficient and flexible energy use.

Battery energy storage systems support the increased deployment of renewable energy sources, helping to reduce carbon emissions and lower energy costs for businesses and households.

Main applications​

Battery storage can be used in various ways that go beyond simple emergency backups during energy shortages or blackouts. Applications differ depending on whether the storage is utilized by businesses or homes. 

Let’s check them out.

For commercial and industrial use, BESS applications include:

• Peak shaving: This involves managing energy demand to avoid sudden short-term spikes in consumption.
• Load shifting: Businesses can shift their energy consumption from one time period to another by using the battery when energy costs are higher.
• Flexibility: Customers can reduce their grid demand at critical times without changing their overall electricity consumption. This makes it easier to participate in Demand Response programs and save on energy costs.
• Microgrids: Batteries are crucial for microgrids as they provide the necessary energy storage to enable disconnection from the main electricity grid when needed.
• Integration with renewable energy sources: Batteries ensure a smooth and continuous electricity flow when renewable energy sources are not available.

For residential users, BESS offers several benefits:

• Self-consumption: Homeowners can produce solar energy during daylight hours and use stored energy to run their appliances at night.
• Emergency backup: Batteries provide a reliable backup power source during blackouts.
• Going off the grid: BESS enables complete detachment from electrical or energy utilities, providing energy independence.

Advantages of battery energy storage systems

The advantages of using battery storage technologies are numerous. They enhance the reliability and viability of renewable energy sources. Solar and wind power supplies can fluctuate, so battery storage systems are essential for “smoothing out” this flow to provide a continuous power supply, regardless of whether the wind is blowing or the sun is shining. Additionally, they protect users from grid fluctuations that could compromise energy supply. Here are some key advantages of battery storage:

• Environmental gains: Installing a battery storage system in homes or businesses powered by renewable energy reduces pollution, contributing to the energy transition and combating global warming.
• Lower energy costs: Storing low-cost energy and consuming it during peak periods when electricity rates are higher allows users to shift consumption and avoid higher charges, saving money. These savings are magnified when combined with solar power, which is free.
• Reduced grid dependency: Battery storage systems guarantee a continuous energy supply, even when the energy grid is unstable due to peaks in demand or extreme weather.
• “Always on” supply: Since the sun is not always “on,” a battery storage system works around the clock, compensating for any fluctuations in solar energy supply by storing excess power.
• Resilience: A battery storage system provides emergency backup during power outages, ensuring business continuity and household comfort.

What are the main types of battery energy storage systems?

Battery energy storage systems come in two primary varieties: “Behind-the-Meter” (BTM) systems, also known as “small-scale battery storage,” and “Front-of-the-Meter” (FTM) systems, which belongs on the utility side of energy distribution.

Behind-the-meter systems (BTM):
These systems are installed on the user’s premises and are typically smaller than Front-of-the-Meter systems. BTM systems, such as residential PV plants and battery storage units, reduces stress on the public grid when solar power isn’t produced, for instance, when the sun isn’t shining. The main function of a BTM is to improve the stability of the owner’s energy supply and reduce costs. If local regulations permit, these batteries can also feed energy back into the grid, providing an additional revenue stream.

Front-of-the-meter systems (FTM):
FTM systems are larger and directly connected to the power grid, typically belonging to utilities. These systems include large-scale energy production and storage facilities like power plants, solar parks, and substantial energy storage units. FTM systems help solve network congestion issues and can serve as alternatives to building new power lines.

How long does a battery energy storage system last and how to give it a second life?​

Most battery energy storage systems last between 5 to 15 years. As integral components of the energy transition, these systems not only enable sustainability but also must be sustainable themselves. Reusing batteries and recycling their materials at the end of their life aligns with broader sustainability goals and applies circular economy principles effectively.

Recovering materials from batteries and giving them a second life offers significant environmental benefits, both in the extraction and disposal stages. Additionally, battery reuse provides economic advantages, reducing the need for new materials and lowering overall costs.

BESS revenue streams

As BESS is not generating energy on its own and is acting as a flexible asset in our energy system it can gain revenue through many different ways depending on the market. The most common ways of gaining revenues in European markets are either ancillary services or energy arbitrage. 

Ancillary services are services that the grid provider buys from the asset owner, the most common one here is ‘Frequency services’. which can be divided into what’s known as ‘Frequency containment reserve’ (FCR) and ‘Automatic Frequency restoration reserve’ (aFRR).

Energy arbitrage is basically using the market fluctuation of the electricity price to gain revenue – charging when the price is low and discharging when the price is high.

How to find the right investor for battery energy storage projects​

Whether you’re a new or seasoned developer, you’ve probably already witnessed first-hand that there are many investors out there, many of whom are willing to invest in renewable energy projects.

Although finding investors for energy storage projects is easy in theory, finding just the right one typically proves itself to be a whole different game, oftentimes taking multiple months, especially if you want to be sure that you also get the optimum price for your project.    

Having been in this business for nearly a decade, we know the struggle, but we also know the solution to it.

Read more about how we help developers find the right investor for energy storage projects.