The energy-intensive refining industry contributes up to 8% of global industrial CO2 emissions and makes refineries more vulnerable to fluctuations in energy prices.
Many refineries have begun to turn to on-site energy storage (typically in the form of battery storage) to reduce costs and, potentially, carbon emissions. Energy storage systems allow electricity to be stored—and then discharged at the most strategic times, allowing refineries to better insulate themselves against energy price volatility.
In this blog, we will discuss how on-site battery storage systems can help refineries lower energy costs without disrupting operations.
Understanding the Key Drivers of Energy Costs in Refining
The large amount of power 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).
Due to their importance, demand charges typically comprise a significant portion of an industrial facility’s utility bill.
Key factors exacerbating price volatility in the refining industry include:
Operational Sensitivity to Frequency Drops: Refineries are highly sensitive to frequency drops—just a few hertz can result in losses ranging from millions to tens of millions of dollars.
Fluctuating Crude Oil Prices: Crude oil price fluctuations are a significant concern for refineries. The volatility of oil prices stems from the low responsiveness of both supply and demand to price changes in the short term. This means that while refineries can adjust some operational aspects, they often face increased costs when crude oil prices rise. This can negatively impact profitability and operational stability.
Inventory Reductions: The U.S. Energy Information Administration (EIA) has projected that U.S. inventories of refined petroleum products, including gasoline, distillate fuel oil, and jet fuel, will reach their lowest levels since 2000 by next year. This is largely driven by increased fuel consumption and planned refinery closures, which further heighten the industry's exposure to energy price fluctuations and supply disruptions.
Given these challenges, refineries are naturally looking to battery storage systems to optimize energy consumption and efficiently manage energy costs .
How Battery Storage or Solar-Plus-Storage Can Boost Your Bottom Line
The operation of industrial facilities, particularly refineries, relies on a high-quality, reliable, and resilient electricity supply. Even minor fluctuations in power can have outsized financial consequences.
Critical processes, such as ethylene crackers in petrochemical refining, are particularly sensitive to frequency deviations; a brief drop in Hertz can force a shutdown and disrupt production schedules. This makes battery storage particularly relevant for two key reasons. First, the demand savings generated by batteries can help mitigate these financial risks. Second, any battery storage system must be seamlessly integrated to ensure it has zero impact on refinery operations or power quality.
Similar vulnerabilities exist in sectors like VLSI chip fabrication, tire manufacturing, and data centers, where power disturbances can cause equipment failures and costly downtime—resulting in millions of dollars in losses annually.
On-site battery storage systems play a crucial role in optimizing energy costs, reducing exposure to price volatility, and helping facilities better manage their overall energy strategy.
Without energy storage (i.e., how the electric grid has been for the past century), electricity must be produced and consumed exactly at the same time. Energy storage systems allow energy to be stored when it is least expensive—and least carbon-intensive–and discharged—at the most expensive, carbon-heavy times. A win-win!
By strategically charging and discharging, battery storage enables businesses to take control of their energy usage and mitigate financial risks associated with fluctuating electricity prices.
Battery storage can significantly reduce environmental impacts. Recycling batteries instead of mining new materials reduces greenhouse gas emissions, water usage, and energy consumption, leading to less pollution and a smaller carbon footprint.
Further, battery energy storage systems are particularly effective when combined with solar PV (solar-plus-storage), making facilities power supply both more reliable and eco-friendlier.
Conclusion: Reducing Energy Costs and Enhancing Resilience with Battery Storage (and Convergent!)
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%.
Convergent finances, owns, and operates industrial-scale energy storage and solar-plus-storage systems on behalf of our partners to lower their energy costs and carbon emissions at the same time.
Our contracts are performance-based, which means we only get paid if we create value. Our no-Capex solution allows businesses to avoid tapping into capital budgets while sharing in the cost savings we deliver.
Partnering with Convergent can help you lock in a lower energy price now, hedging against future energy price fluctuations and increases. The more you spend on your energy bill, the more you can save.
Take the Next Step: No Capital Required
The refining industry’s significant energy consumption exposes it to volatile energy prices, making it essential to explore strategies to manage costs and ensure operational efficiency. On-site renewables, like battery storage and solar-plus-storage, can play a strategic role in mitigating the impact of rising energy costs and hedging against future price fluctuations—all without disrupting refinery operations.
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.
Our tagline is “Powered by Results.” We have delivered millions in savings to our industrial customers while enabling them to access more cost-effective, cleaner, more reliable power.
If you’re ready to lower energy your costs without impacting operations schedule a free, no-obligation introductory call with our team today.
