The most commonly used terms related to BESS systems: EC, AES, peak shaving, and energy arbitrage
When evaluating the payback period of a BESS system, you will encounter terms such as EC, AES, peak load, peak shaving, and energy arbitrage. These terms will help you understand the economic benefits of storage systems for a business: how much energy is consumed, when it is used, which consumption periods are most expensive for the company, and the annual savings expected.
EC (Energy Cost) refers to the price of electricity. The price of electricity indicates how much one kilowatt-hour or megawatt-hour of consumed energy costs, while total energy costs depend on how much energy the company consumes per month or per year. When analysing the payback period of a BESS system, EC is one of the most important indicators. The potential savings and the overall financial viability of a BESS project depend on fluctuations in electricity rates throughout the day.
AES (Annual Energy Savings) refers to annual energy savings. This metric shows the annual benefits achievable through smarter energy consumption, peak shaving, or exploiting price differentials. AES depends on the specific facility’s consumption profile, input power, operating mode, fluctuations in electricity prices, and the selected control logic.
Peak load occurs when a facility requires a large amount of electrical power at a single moment. This can happen when several energy-intensive devices are started up, during periods of intensive production, or when charging stations are used. Such moments increase costs, and the available input power may no longer be sufficient during peak load. Therefore, businesses have an interest in managing and reducing loads during peak times.
Energy arbitrage is an energy management strategy in which a BESS system is charged when electricity prices on the exchange are lower, and the stored energy is used to meet the company’s needs when prices on the market rise. Arbitrage should not be equated with a guaranteed profit. The actual financial benefit depends on numerous variables—not only the price difference on the exchange, but also the battery’s capacity, efficiency, number of cycles, and how closely the system’s operation aligns with the company’s peak energy consumption hours.
The terms mentioned above help to better understand the economic benefits of a BESS system: EC relates to the price of electricity, AES to potential annual savings, peak shaving to managing the most expensive periods of load, and energy arbitrage to taking advantage of differences in electricity prices. However, when evaluating storage systems, technical terms are also important: capacity, power, efficiency, charge and discharge cycles, and the energy management system (EMS) itself.