Updated: Oct 25, 2022
Originally published on newenergy.ventures (Orkestra's predecessor).
We've been undertaking battery feasibility studies for a number of years now. Time and again, we're approached by clients seeking to sell or develop a battery project for the commercial and industrial segment, only to find they're stumbling into the same mistakes others have made before them. In our latest blog post, we share these common mistakes so you can avoid making them yourself! Mistake #1 - Targeting the wrong customer We often speak with companies who are trying to sell battery projects with no real sense of whether or not a customer is a ‘good prospect’. With batteries - unlike solar - careful attention to market segmentation is required. As outlined in our recent white paper: Opportunities for batteries & VPPs in the Australian C&I segment, only 25 to 50% of networks tariffs in the NEM offer viable battery projects today (the exact proportion depends on the value stack modelled). As a result, lots of time, effort and cost can be incurred trying to assess and sell battery projects, to ultimately poor prospects.
Battery profitability is sensitive to multitude of overlapping factors - the client’s load, tariff, location, and the value stack (see below). Hence the critical need for market segmentation to inform sales focus. Our long awaited White Paper: Batteries and VPPs for the Australian C&I segment unpacks C&I battery market segmentation in never before detail, helping you find and build viable projects, sooner. Mistake #2 - Building the wrong value stack Batteries are a ‘swiss-army knife’ – with up to 10 different use cases or value streams in the C&I battery segment alone. If you’re creating a battery project, a key job of yours is to identify the most profitable ‘value stack’ for any given prospect - that is the optimum combination of value streams the battery will be focusing on. Often, we see vendors trying to sell batteries with poor consideration of the value stack – for example, by only focusing on a single battery use case, or missing out on revenue streams which they believe to be too complicated. Our White Paper identifies the viability of common value stacks in each market of the NEM. It also shines a light on how to tap more advanced value stacks (for example, wholesale arbitrage - which is potentially easier than you think!). As a result, you can build right value stack for the right market - achieving what is often called product-market fit.
Mistake #3 - Incorrect battery sizing Does anyone reading this really know how to best size a battery for a C&I load profile? It’s ok if you don’t, because, in truth it’s not easy; rules of thumb simply don’t cut it in the C&I battery game. Again, it depends on diverse factors, including the customer load, tariffs and tariff structures, the value stack, and the investor risk appetite. The best way to size a battery system for both energy storage capacity and C-rating, is to leave it up to a computer model (like VIPPY) - which can simulate multiple scenarios and optimise to find the ideal configuration. The full white paper has a practical section dedicated to helping you design batteries for economically optimal outcomes, which is informed by the 280 hypothetical projects we’ve simulated to put together the White Paper.
You can get the executive summary of the White Paper here.