Heating Up: The Value of On-Site Renewable Energy to Petroleum Refineries
Why Battery Storage Makes “Cents” for Petroleum Refineries
Global demand for petrochemicals is surging and is projected to continue to grow at roughly 4% annually, driven by demand for plastic resins, films, and fibers.
At the same time, refiners are being tasked with lowering emissions due to stricter regulations around environmental responsibility.
An energy-intensive sector, refineries represent ~15% of industrial energy consumption in the United States and above 4% of energy consumption overall.
Taken together, these factors make refining an optimal sector for on-site renewable energy. On-site renewables lower operating costs and boost sustainability objectives at the same time. Further, they require no change to operations.
On-site battery energy storage systems, with or without solar PV, are an effective way to reduce refiners’ electricity costs while also reducing carbon footprints. A battery storage system can shave peak demand charges and provide energy arbitrage by charging during low-cost periods of the day when renewables are plentiful. When paired with solar PV (known as solar-plus-storage), industrial-scale batteries can discharge solar energy whether or not the sun is shining. Deploying onsite battery solutions may also allow the early retirement of increasingly more difficult-to-operate diesel gen-sets.
What is “Fueling” Refineries’ Motivation to Reduce Energy Costs and Carbon Emissions?
The large amount of power that is required for refining poses a concern: cost. The costs include energy charges and demand charges. Energy charges are based on the consumption of energy in kilowatt-hours (kWh) and prices can change depending on the time of the day, the day of the week, and the season. Demand charges are related to the rate of energy usage rather than the amount of energy used; they are calculated based on the maximum amount of power a customer uses at any given time within an interval (typically 15 minutes).
Utilities use demand charges to incentivize commercial and industrial customers to use energy at a steady, predictable rate to prevent shortages in generation and demand capacity. A flat-rate tariff without demand charges can also pose problems related to revenue instability, poor price signals, and subsidization of low-usage customers by high-usage ones. Due to their importance, demand charges typically comprise a significant portion of a customer’s utility bill.
In addition to costs, there is another concern: meeting new environmental standards or corporate sustainability goals. Because the refining process is highly carbon-intensive, many refineries have made it a priority to adopt and pursue sustainable practices. For others, the cost to reduce emissions is both burdensome and expensive. The ability to reduce emissions without investing capital or altering operations is an attractive solution for refineries looking for the “low-hanging sustainable fruit.”
Background on Battery Energy Storage Systems
Energy storage, most often in the form of a battery energy storage system (BESS), is the linchpin of the clean energy transition.
Batteries turn chemical energy into electrical energy and vice versa, enabling utilities and power users to store energy for later use. Batteries are charged from the grid or a power generator and discharged later when energy prices are high, or grid power is unavailable. As the world increasingly looks to renewable resources and away from fossil fuels, energy storage can help bridge this energy transition.
First, battery storage can address the intermit nature of solar and wind power by capturing it upon generation, so renewable power can be used when it is needed and not only when it is generated. Battery storage can also serve the grid by quickly responding to large fluctuations in electrical demand, taking load off the grid and therefore making it more resilient and reliable. In places such as California where blackouts occur during summer months, battery storage can help meet demand during peak times.
Several different battery chemistries exist, and each has its advantages and disadvantages. The predominant technology globally for grid-scale batteries in recent years is lithium-ion. Other chemistries also include solid-state, sodium-based, and redox flow.
Key characteristics of battery storage systems, regardless of the technology include their rated power capacity, energy storage capacity, and storage duration. Rated power capacity indicates the total instantaneous discharge capability of a battery in kilowatts or megawatts from a fully charged state.
Energy storage capacity is the maximum amount of stored energy in kWh or MWh of a battery. The storage duration is the amount of time the battery can discharge at its power capacity before depleting its energy storage capacity. For example, a battery with 1 MW of power capacity and 3 MWh of usable energy capacity will have a storage duration of three hours.
How Energy Storage or Solar-Plus-Storage Can Mitigate Volatile Energy Prices
As recently as five years ago, battery storage was not necessarily on the radar of most industrial companies as a way to manage energy costs. Today, however, battery storage, often paired with solar PV, offers companies a proven way to reduce energy costs and reach sustainability goals at the same time.
As the world increasingly looks to renewable resources and away from fossil fuels, energy storage can help bridge this energy transition. The more renewable energy on the grid, the better—but these resources only produce power when the sun is shining, or the wind is blowing. Battery storage can “firm up” renewable resources, maximizing their value to the grid—and to you.
If your business is considering a battery storage or solar-plus-storage solution to lower your energy bill and hedge against rising energy costs, you are in good company. Businesses like Shell, Ford, and Pilkington (NSG Group) have done just that with a development partner (spoiler alert: that partner is Convergent Energy and Power).
Convergent, a leading developer of energy storage solutions in North America, has been in the energy storage and solar-plus-storage industry since its infancy, more than a decade ago. Throughout that time, we’ve worked closely with businesses to take the hassle out of energy storage by building, owning, and operating systems on their behalf.
With battery storage, we’ve lowered our customers’ energy bills up to 40%. The more you spend on your energy bill, the more you can save with battery storage.
Conclusion: Reducing Energy Costs and Carbon Emissions with Battery Storage
The large amount of power used by refineries drastically exposes the sector to fluctuations in energy prices and increasing environmental regulations. On-site renewables can play a strategic role in plans to mitigate the impact of rising energy costs and hedge against future fluctuations. Further, on-site renewable generation is critical to getting ahead of and meeting increasing sustainability goals.
Battery storage systems are an ideal technology to deliver significant cost savings to refineries through peak demand savings, energy arbitrage, and other potential territory-based value stacks. When combined with solar photovoltaics, storage enhances the value of solar by energy shifting – charging during low-cost periods and discharging during higher-cost periods.
Our tagline is “Powered by Results.” We have delivered millions in savings to our industrial customers while enabling them to access cleaner, more reliable power. This opportunity is a win for all involved.
The best part: there’s no capital required from your business. The shared-savings contract Convergent offers means we share in the upside and only make money if our customers do.
If you’re ready to lower energy costs without impacting operations—and do it sustainably—schedule a free, no-obligation introductory call with our team today.