A brief exploration of electricity costs

A brief exploration of electricity costs

If you haven’t already, I invite you to play with the Battery System Pricing calculator. It allows you to determine the per kilowatt and per kilowatt-hour pricing of a system as well as a rough estimate of the cost of delivered electricity. Evaluating both power and energy pricing makes it easier to compare different battery system offerings and see beyond the “best foot forward” pricing that a developer might choose to share publicly.

Because the calculator doesn’t include important operations and wind-up phase expenses such as operations & maintenance, loan payback, insurance, and  end-of-life revenue (expense), our picture of the actual cost of delivered electricity is merely an estimate.

Two of the easiest expenses to understand are:

  • Station Power: Some battery systems have auxiliary systems such as heat, cooling, and air conditioners which require power, which must be paid for at retail or contracted rates.
  • Charging: Unless the battery system is tied to wind or solar generation, there will be a cost to charge the battery system from the grid or for fuel for a diesel genset that charges the batteries. This is separate from, and in addition to, Station Power costs.

Lastly, electricity costs (as the main source of project revenues) are sensitive to the structuring of loan payback. The cost of delivered energy supports the loan payback schedule and project requirements for cover ratios and IRR. Battery system developers would do well to understand the loan payback schedule, cover ratios, and required returns that likely lenders and equity participants will demand for their projects.

 

 

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