From shopping centers to office space and hotels, commercial buildings consume massive amounts of electricity powering their HVAC systems, namely for air conditioning and heating during the summer and winter months respectively. When aggregated, these commercial buildings place considerable stress on the U.S. electricity grid, particularly during the late afternoon and evening as renewable energy (i.e. solar) production declines and energy consumption rises.
This temporary divergence in electricity supply and demand, colloquially referred to as the “duck curve,” is costly for businesses and ratepayers alike. It also interferes in ongoing decarbonization efforts as grid operators are forced to temporarily ramp up fossil fuel combustion with inefficient “peaker plants'' to address the power shortage. Peaker plants are designed to run only during periods of peak demand — hence the name — and employ some kind of hydrocarbon combustion source, such as coal or gas, for energy. Although often necessary to ensure the grid and the buildings they serve have adequate energy supply, these sources of power produce heavy amounts of carbon emissions, contributing to the climate crisis.
Buildings and their occupants who are heavily dependent on power produced by fossil plants face a difficult task when seeking to reduce their carbon footprint. Many organizations have established environmental, social, and governance (ESG) goals as part of their commitment to combating climate change, with carbon footprint reduction comprising a key component of such plans. Performance against ESG goals and metrics is a growing focus for commercial real estate investors, as businesses and building owners are facing greater scrutiny over their sustainability. And yet, commercial and industrial buildings need to find a way to power their HVAC systems while operating.
A cheaper and more sustainable way of addressing energy demand is to utilize energy storage technologies. Installed on-site, this technology reduces a building’s reliance on the grid and its peaker plants, instead storing power that was generated by cleaner sources at times when such energy was more abundant (such as solar power generated during the day, when the sun was shining). This energy can be utilized to power HVAC systems during peak demand periods, reducing the carbon footprint of a building.
By reducing energy costs for commercial buildings, behind-the-meter (on-site) storage also improves building profitability. Instead of pulling electricity from the grid during periods of high demand, behind-the-meter technologies let commercial buildings make use of their own previously stored energy. Power from the grid during periods of high demand tends to be more expensive, and can account for a large portion of a building’s operating costs. If instead, power that was generated and stored when it was much cheaper is utilized, this positively supports a building’s bottom line.
The recent passage of the Inflation Reduction Act — which offers 30% tax credits for standalone energy storage technology — means commercial buildings have an even greater incentive to invest in behind-the-meter energy storage technology, and are now directly supported by government funding. Also, those who may have previously been wary of battery energy storage due to concerns about toxic materials and fire hazards now have access to groundbreaking technologies that store energy without the use of lithium batteries. For example, new ice-based energy storage technologies use clean energy during the day to freeze water, and utilize this ice to support HVAC cooling systems during peak demand hours.
Behind-the-meter energy storage presents a massive opportunity for building owners and operators to profitably address the need to improve sustainability. As commercial buildings account for more than a third of the U.S.’s electricity consumption, energy storage also has a clear role to play in fighting climate change as well. With effective, affordable, and safe technologies now available, the commercial building sector is poised to execute a much-needed reduction in carbon emissions.
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