International Journal For Multidisciplinary Research

E-ISSN: 2582-2160   •   Impact Factor: 9.24

A Widely Indexed Open Access Peer Reviewed Multidisciplinary Bi-monthly Scholarly International Journal

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Analyzing The Economic Viability of Implementing a Battery Energy Storage System in A Renewable Energy Project for Peak Shaving vs. a Micro-Grid

Author(s) Shereef Jinadu, Gideon Akune
Country United States
Abstract As renewable energy sources like solar and wind expand, utilities and large consumers increasingly turn to Battery Energy Storage Systems (BESS) for grid stability, cost control, and improved reliability. This study directly compares the financial returns of two key BESS deployment methods: dedicated peak shaving and full microgrid integration. Peak shaving focuses on charging batteries during off-peak hours and discharging during peak demand to reduce expensive demand charges. Microgrids, on the other hand, integrate batteries with on-site generation (like solar PV and backup generators) to form resilient, islandable networks capable of delivering multiple revenue streams beyond demand reduction. Detailed cash-flow models were constructed, incorporating capital and operating costs from NREL and local utility tariffs, and calculating key financial metrics including net present value (NPV), internal rate of return (IRR), profitability index, and payback periods. Analysis of the study drew on technical insights, such as the finding that lithium-iron-phosphate (LFP) cells offer 86 percent more usable energy over a decade than other chemistries, and leveraged empirical data from commercial sites in the U.S. and industrial facilities in Norway. The findings clearly show peak shaving as the financially superior option, delivering an NPV of $23.9 million, an IRR of 20.8 percent, and a payback period of 4.8 years. In contrast, microgrid deployment resulted in an NPV of $5.8 million, an IRR of 12.0 percent, and an 8.3-year payback. While peak shaving dominates in pure financial terms, particularly where demand charges are high, microgrids provide essential durability, comprehensive energy management, and revenue stacking opportunities (e.g., frequency regulation, solar self-consumption), despite their higher initial investment and operational complexity. Challenges for future consideration include the difficulty of valuing durability in standard financial models, variability due to regional market and regulatory structures, and the ongoing evolution of battery costs and technology. Ultimately, as BESS costs decrease and ancillary service markets mature, hybrid strategies that blend both approaches may offer the best solutions.
Keywords Battery Energy Storage Systems (BESS); Peak Shaving; Microgrid; Net Present Value (NPV); Renewable Energy
Published In Volume 6, Issue 6, November-December 2024
Published On 2024-11-09
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E-ISSN 2582-2160
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