What to Consider When Using Price Arbitrage to Improve ROI for Your Energy Storage Projects
Energy storage is a crucial component of the transition towards cleaner and more sustainable energy sources. To continue leveraging deployment at the scale needed to meet global clean energy goals, owners and developers of storage projects must ensure their projects deliver a positive return on investment (ROI), an essential condition to deploy systems. In this blog, we’ll explore strategies for improving ROI for your energy storage projects and what to pay attention to.
The ROI Challenge: Price Arbitrage and Battery Degradation
In some markets, one of the primary strategies for maximizing ROI in energy storage projects is price arbitrage. Price arbitrage involves buying electricity when it’s less expensive and storing it for later use or selling it back to the grid when prices are high. While this approach can yield substantial financial benefits, it comes with a potential drawback when not managed correctly—accelerated battery degradation.
The rapid and frequent charge and discharge cycles associated with price arbitrage can put significant stress on batteries, leading to reduced lifespan and increased maintenance costs. High intensity usage also increases thermal runaway risk and accelerates battery degradation, which can decrease revenue by as much as 46% .This poses a challenge for investors looking to strike the right balance between energy cost savings and the long-term sustainability of their energy storage systems.
How to Reduce Degradation and Improve ROI
Battery storage degradation rates depend on a variety of factors including: features of Battery Energy Storage System (BESS) itself, how the BESS is used, and external conditions. Thus, there are many things to consider when using price arbitrage to improve the ROI of your BESS project.
- Lithium Iron Phosphate (LFP) batteries, such as those provided by EVLO, have become the industry standard due in part to their exceptional cycle life. They can withstand a higher number of charge and discharge cycles compared to other lithium-ion battery chemistries, making LFP a durable choice for energy storage used for price arbitrage.
- LFP batteries also deliver better temperature tolerance, meaning they perform well across a wide range of temperatures.
- Extreme hot or cold temperatures can accelerate battery degradation.
- In addition to choosing a battery chemistry with high temperature tolerance, like LFP, the BESS should include other features designed to maintain an optimal temperature within the enclosure.
- The EVLOFLEX features an Arctic Package option that allows the system to operate at external conditions from -40°C to +55 °C (-40°F to 131°F).
- Leading-edge energy management systems (EMS), such as EVLOGIX, allow you to configure charge/ discharge settings to optimize for long-term performance and ROI.
- EMS also provide continuous monitoring to ensure the battery is operating optimally and reduce downtime by issuing alerts if the battery is malfunctioning or needs general maintenance.
Long-Term Maintenance and Support:
- Long-term maintenance and support helps ensure that the BESS is always performing optimally and helps extend the overall lifespan of the system and helps overall ROI
- Without a long term maintenance and support plan in place, it is more expensive and difficult to make repairs when issues arise.
Price arbitrage can be an effective strategy for improving the ROI of your energy storage projects, but only if you take proactive steps to minimize battery degradation. Battery degradation is influenced by a variety of factors, so it’s important to take a holistic approach to mitigation.
Each EVLO BESS comes equipped with industry-leading safety measures and EVLO offers a variety of features and services designed to improve ROI by reducing battery degradation and maintaining optimal performance on a continuous basis. Contact us to learn how we can help improve the ROI for your energy storage projects.