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Demand Charge Reduction Software vs. Energy Storage Solutions

Let’s explore the differences and similarities between solar plus demand charge management software and solar plus energy storage demand solutions.

As a commercial solar installer or facility manager, you’re probably familiar with demand charges and how they affect commercial solar utility bills, but if you need a good description, here’s a terrific demand charge explainer from the folks at Aurora Solar.

As their blog points out, installing solar on a commercial building is very effective for reducing the energy consumption charges, but solar is much less effective at reducing the demand charges. As a result, commercial solar projects often get shelved due to minimal savings and a less-than-inspiring payback period.

The issue is that a single demand peak at the wrong time of day can set a demand charge for the entire month. Peak demand can come from many sources, but it’s often due to some type of flexible load, such as an HVAC system powering up during the most expensive time of use (TOU) rate. Or it could be due to a passing cloud, blocking solar production, and causing a sudden need for grid power.

The Traditional Demand Charge Solution: Energy Storage

The traditional solution for reducing demand charges is pairing the solar PV system with an energy storage system, typically a lithium-ion battery system. Data is collected about the PV system and about the loads that cause demand spikes.

Rather than being used for back-up power, some or all of the battery’s capacity is designed to absorb some of the demand spikes. The battery can’t eliminate the spike, but it can smooth out the peaks (commonly called “peak-shaving”).

Thus, energy storage-based demand charge solutions are mainly reactive. That is, when anything turns on that exceeds a certain demand surge, the battery reacts and releases stored electrons to offset the surge. Engineers can also design systems that shift non-essential loads, directing them to turn on when TOU rates are lower.

All that being said, commercial storage for demand charge management may not help to close commercial sales due to several challenges:

  • Energy storage adds tens of thousands of dollars in equipment costs to a solar project, potentially dissuading building owners.

  • Energy storage has special design and permitting requirements that significantly increases installation time.

  • While a solar system lasts 25-30 years, a Lithium-ion based battery currently needs to be replaced every ten years, further increasing payback time and reducing ROI.

The New Demand Charge Solution: Intelligent Energy Management Software

Now let’s explore peak shaving/demand charge management software such as Extensible Energy’s DemandEx.

Just like the energy storage hardware solution, DemandEx collects some initial data about the commercial building’s energy consumption, load profiles, solar production, TOU rates, and information about loads that often cause demand spikes.

But that’s where the similarities end, because DemandEx is intelligent and dynamic. It doesn’t just react to load spikes, it proactively predicts and prevents peak spikes. That’s because the DemandEx algorithm is always analyzing current weather patterns, solar production, building temperature, and many more real-time data points. It then uses this data to adjusts flexible loads, intelligently reducing demand peaks.

For example, DemandEx uses real-time weather data to forecast high-risk periods where clouds might pass over the solar array of a building. Without DemandEx, the cloud would cut solar production and cause a demand spike. To reduce this surge, DemandEx proactively pre-cools the building and then reactively shuts off the HVAC when the solar output drops (i.e the cloud passes over). After the cloud passes, DemandEx slightly turns up the AC again, maintaining the building’s comfortable temperature. There will still be a demand charge, but the peak will be much smaller.

Instead of reactive demand charge management with a battery system, DemandEx’s proactive forecasting, real-time analysis, and automated building controls perform like a virtual battery for demand charges. The result is that a commercial building’s annual demand charges can be reduced by around 30%--and there are other advantages as well:

  • DemandEx software equipment costs are minimal and can be installed in less than a day.

  • DemandEx can be installed without extra permitting or project delays.

  • The cost of DemandEx is based on the building owner’s energy savings and pays for itself in about a year.

  • DemandEx works with energy storage, as well, so the battery size can be optimized for back-up and resiliency solutions.

Finally, as a SaaS product, our Extensible Plus solar installer partners receive a percentage of the customer’s savings, so DemandEx is a financial win for everyone.

View three case studies about DemandEx here. To learn more about how DemandEx software achieves demand charge reduction with or without energy storage systems, contact us or apply to become an Extensible Plus partner-reseller.

Keith Mosher is Extensible Energy’s Director of Engineering. He has 15 years of software architecture experience in solar and other industries.

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