Understanding the Return of Investment (ROI): battery energy storage system
Factors Affecting the Return of Energy Storage Systems
“How many years do I need to get my money back?”
“When will the system start to be profitable?”
These are some of the first questions our clients ask when they are deciding to get a system.
This article explores the various factors influencing the return of energy storage systems (ROI) and the main indicators that you need to be familiar with.
Several key factors influence the ROI of a BESS. In order to assess the ROI of a battery energy storage system, we need to understand that there are two types of factors to keep in mind: internal factors that we can influence within the organization/business, and external factors that are beyond our control.
External Factors that influence the ROI of a BESS
Energy Prices and Tariffs
The cost of electricity, including peak and off-peak rates, significantly impacts the ROI. Energy storage systems can store cheaper off-peak energy for use during expensive peak periods.
Government Incentives and Policies
Subsidies, tax credits, and rebates offered by governments can enhance the financial attractiveness of ESS installations.
Grid Services Revenue
BESS can provide grid services like frequency regulation, demand response, and ancillary services, generating additional revenue streams.
Internal Factors that influence the ROI of a BESS
Initial Capital Costs
The upfront investment required for purchasing and installing the BESS can vary significantly based on the technology used (e.g., lithium-ion, lead-acid, flow batteries) and the system’s size and capacity.
Usage Patterns and Load Profiles
The specific energy usage patterns of a business or household will influence how effectively an ESS can reduce energy costs.
Degradation and Lifespan
The rate at which a BESS degrades over time affects its long-term viability and the frequency with which it needs to be replaced.
Operational and Maintenance Costs
Regular maintenance, management, and potential replacement of parts contribute to the ongoing expenses of a BESS. With Cosmos EMS, you can enjoy low maintenance and reduced labor, as you receive notifications whenever there is an issue with the batteries or the system.
Indicators for Assessing BESS Return
To accurately assess the financial viability of a BESS, several key indicators are used. This is a list of the main indicators we need to know and understand in order to assess the ROI. Here, we explain briefly what each one means:
Total Cost of Ownership (TCO)
The comprehensive cost of owning and operating the ESS over its entire life cycle.
Levelized Cost of Storage (LCOS)
The average cost per unit of energy stored, considering all costs incurred over the system’s lifetime.
Indicators to enhance ROI Analysis
Additional indicators that can enhance ROI analysis include:
Capacity Factor
The ratio of actual energy output over a period to the potential output if the system operated at full capacity continuously.
Cycle Life
The number of complete charge-discharge cycles an ESS can undergo before its capacity falls below a specified percentage of its original capacity.
Energy Density
The amount of energy stored per unit volume, influencing the physical size and space requirements of the BESS.
After reading all of this, if you are not familiar with these terms, don’t worry. At Ampowr, we have a full team dedicated to finding the best solution for your case. Tailoring the system to meet the unique needs of different sectors can further optimize returns. As energy storage becomes increasingly essential for modern energy management, understanding and enhancing its ROI will drive both economic benefits and sustainability.
To make an accurate calculation for your case and understand the potential ROI of the system, it’s best to contact an expert. At Ampowr, we are fully dedicated to creating tailored solutions for our clients, is here to assist you. You can reach out to us, and we will help with a solution.
