energies

Article
Optimal Component Sizing for Peak Shaving
in Battery Energy Storage System for
Industrial Applications
Rodrigo Martins 1, * , Holger C. Hesse 2 , Johanna Jungbauer 3 , Thomas Vorbuchner 2 and
Petr Musilek 1,4
1 Electrical and Computer Engineering, University of Alberta, Edmonton, AB T6G 1H9, Canada;
[email protected]
2 Department of Electrical and Computer Engineering, Technical University of Munich (TUM),
80333 Munich, Germany; [email protected] (H.C.H.); [email protected] (T.V.)
3 Smart Power GmbH & Co KG, 80333 Munich, Germany; [email protected]
4 Electrical Engineering and Computer Science, VSB-Technical University Ostrava,
70800 Ostrava, Czech Republic
* Correspondence: [email protected]; Tel.: +1-780-492-5368




Received: 6 July 2018; Accepted: 2 August 2018; Published: 7 August 2018


Abstract: Recent attention to industrial peak shaving applications sparked an increased interest
in battery energy storage. Batteries provide a fast and high power capability, making them an
ideal solution for this task. This work proposes a general framework for sizing of battery energy
storage system (BESS) in peak shaving applications. A cost-optimal sizing of the battery and power
electronics is derived using linear programming based on local demand and billing scheme. A case
study conducted with real-world industrial profiles shows the applicability of the approach as well
as the return on investment dependence on the load profile. At the same time, the power flow
optimization reveals the best storage operation patterns considering a trade-off between energy
purchase, peak-power tariff, and battery aging. This underlines the need for a general mathematical
optimization approach to efficiently tackle the challenge of peak shaving using an energy storage
system. The case study also compares the applicability of yearly and monthly billing schemes, where
the highest load of the year/month is the base for the price per kW. The results demonstrate that
batteries in peak shaving applications can shorten the payback period when used for large industrial
loads. They also show the impacts of peak shaving variation on the return of investment and battery
aging of the system.

Keywords: lithium-ion battery; peak-shaving; energy storage; techno-economic analysis; linear

programming, battery aging modelling

1. Introduction
In power systems, the load profile can be characterized by the “peak load times” of the
system—short periods of time when large amounts of power are required [1]. The peak load periods can
occur at different times during the day, depending on the season of the year and the load composition
(residential, commercial, or industrial). Peaks of demand impact the network planning because the
electrical infrastructure of transmission and distribution systems must be designed to support the
maximal demand of the system [2]. For this reason, the electrical power grid infrastructure may
be underutilized most of the time, reaching its loading capacity limit at only a few moments of
the year. Consequently, commercial and industrial customers are charged not only by their total
energy consumption but also by their highest power demand that dominates the grid construction

Energies 2018, 11, 2048; doi:10.3390/en11082048 www.mdpi.com/journal/energies

Energies 2018, 11, 2048 2 of 22

costs. The electricity charge can be discriminated in subcomponents like the generation cost, taxes,
and fees which represent a small portion of the total electricity payment of the customers. Accordingly,
commercial and industrial customers are interested in decreasing energy and power costs, which are
the most significant part of the total charges, without lowering their energy consumption. In this
context, energy storage systems (ESS) can be used to help customers flatten their demand profile by
storing energy during off-peak periods and releasing it during peak load periods.
The deployment of ESS can achieve another benefit besides the reduction of demand charges for
customers. For instance, system operators can reduce the need of network reinforcement by sizing the
infrastructure for a more flat profile coupled with ESS, instead of designing it for the highest power
demand [3]. Depending on the market conditions, other benefits can be achieved. The customers
can take advantage of time of use energy price [4] by discharging the ESS when the energy price at
the peak load periods is more expensive than the price during the off-peak periods. This can lead to
additional electricity bill reduction [5].
Energy storage system technologies are used for a variety of applications [6,7]. They can be classified
in many different ways, according to the application area [8], based on the energy conversion [9],
or depending on the quantity of energy that the ESS can provide [10]. For “power-type” applications
like peak shaving, the ESS have to maintain a constant delivery of power [11].
Although the improvements of battery energy storage system (BESS) efficiency and life cycle
are increasing the interest for this type of storage [12], the high investment costs necessary for
BESS solutions still raise concerns about the economic viability of this technology in power system
applications [13–16]. Therefore, an important aspect of the deployment of any BESS project is their
proper power and energy sizing [17]. If a BESS is not sized properly, it can generate negative results
from an economic perspective. While small BESS may result in excessive aging-related depreciation
cost, over-sizing systems may not attain optimal cost-benefit ratio due to their relatively high initial
investment cost.
In response to the need to properly size BEES, several studies aiming to find the optimal sizing
of BESS have been conducted [6]. Recent work by Merei et al. [18] concentrates on commercial
applications of BESS. The authors use sensitivity analysis to study the maximization of energy
self-consumption via storage integration. The techno-economic analysis reveals that, for most
commercial applications, BESS is not favored economically when battery degradation is taken into
account. Other previous work by Magnor and Sauer [19] and Merei et al. [20] analyzed the optimal
sizing of storage in the context of island grids and home storage systems. The authors propose a genetic
algorithm-based method to model a non-linear set of equations including battery-aging characteristics.
However, the solver results may not find a globally optimal solution to the described problem, and the
studies do not provide design rules for future storage systems.
A sophisticated optimization method applied to find the best-suited battery storage system
located in a residential suburban area has been described by Tant et al. [21]. A multi-objective function
is used to find the balance between voltage regulation, peak power reduction, and annual cost. A grid
operator can use this method to support the decision of temporarily installing a BESS in problematic
feeders to postpone grid upgrades in the short term due to work planning issues. By comparing the
cost of grid upgrades, the grid operator may conclude that the BESS is also a valuable alternative in
the long term. Recent work by Rahmann et al. [1] proposed an approach to determine the break-even
points for different BESS considering a wide range of life cycles, efficiency, energy price, and power
price. The results presented in this work show that depending on the values of round trip efficiency,
life cycles, and power price, there are BESS technologies that are already profitable when considering
only peak shaving applications. Although the authors model an optimization algorithm used for the
sizing of the storage system, only the distribution company perspective is considered.
In contrast to the important contributions mentioned above, this work proposes a linear
optimization method to define a cost-optimal sizing of the battery and power electronics for peak
shaving application in industrial settings. In addition, this paper also presents a case study conducted
Energies 2018, 11, 2048 3 of 22

with real industrial profiles, a techno-economic analysis evaluating the return on investment (ROI) of
the system and battery degradation, and a linear programming (LP) approach allowing exact solution
determination for BESS sizing. At the same time, the power flow optimization reveals the best storage
operation considering energy purchase, peaks of consumption, and battery aging.
The remainder of this paper is organized as follows: Section 2 introduces the system layout,
parameters necessary as input for the subsequent optimization procedure, and the aging model.
The concepts of LP methodology, including equations and constraints for optimization, and a case
study where different industrial profiles verify effectiveness of the proposed model are presented in
Section 3. Finally, Section 4 provides the conclusion and outlines possible directions for future research.

2. System Layout and Storage Model

2.1. System Layout

The energy management system proposed in this study is derived from measured and simulated
data for an exemplary BESS. The simulations involve a grid-connected system shown in a schematic
diagram in Figure 1a. The arrows in this figure illustrate the power flow direction for all component
links. Additionally, Figure 1b illustrates all price components for industrial customers: the total energy
consumption Etotal = ∑ loadi where i denotes an averaged time segment of 15 min, the maximum
power peak in the billing period Pmax , and the maximum power peak after peak shave PPS . Other
variables necessary for subsequent modeling are explained in more detail later, along with the
optimization problem definition.

2000

1750

1500
Power (kW)

1250 Load
Pmax
1000 PPS

750

500

250

0
0 1 2 3 4 5 6 7
Time interval (days)

(a) (b)

Figure 1. System configuration showing all (a) considered power flows and (b) customer load curve
with price components.

2.2. Economic and Legal Framework for Industrial Customers

BESS are very flexible devices that can be used for many different applications [6]. Depending on
the application, several factors influence the attractiveness for energy storage systems. Particularly in
behind-the-meter-scenarios (BTM), the economic attractiveness of energy storage systems depends not
so much on the electricity price itself, but on the pricing structure [22].
Peak shaving is a typical BTM application that concentrates on the reduction of the peak demand
of consumers. Peak shaving systems are only attractive in markets where demand charges amount to
a proportionally large part of the electricity price. Already at a very early stage of electricity system
development, system operators introduced electricity tariffs that included a demand based part added
to the usage based part of electricity costs [23]. This scheme has been established to provide an
incentive for efficient grid usage. This is a so-called cost reflective tariff, since the level of demand is
the main driver of network costs (i.e., grid reinforcement and transformer overloading) [24].
Energies 2018, 11, 2048 4 of 22

Battery storage is still a new technology associated with high perceived investment risk. This is
likely the reason why most storage projects are currently conducted in well-developed countries [25].
According to a study by Azure International, the most attractive countries for demand charge
management in the commercial and industrial (C&I) sector are Australia, France, the USA (California),
Japan and Germany.
Electricity costs are paid via the utility company selected by the consumer. The utility company
keeps a small percentage for itself to cover generation and retail costs. Also, it transfers taxes, fees and
surcharges to the relevant authorities and transfers network costs to the system operator responsible
for the corresponding system. Therefore, the location of the network connection point defines
network costs. For instance, the two eastern transmission system operators (TSOs) in Germany charge
significantly higher prices than the two western TSOs, but prices also differ from one distribution
system operator to the next inside the same regulation zone. Specifically, commercial and industrial
customers who (typically) exceed 100.000 kWh energy consumption per year or 500 kW of average
power demand pay an additional power price per kW to the energy price per kWh. The electricity
price in the C&I sector typically has the following components:

• Electricity generation (wholesale prices and retail costs); prices depend on negotiations between
customer and utility company.
• The network costs (transmission and distribution) are subdivided into two categories. First,
power price per kilowatt, based on the maximum power peak in the billing period; this is the
only power-specific price component; prices vary with connected voltage level, billing period,
distribution system operator and duration factor. Second, energy price per kilowatt hour, based
on the total energy consumption.
• The total for standard rates including taxes, fees, surcharges (including renewable energy
surcharge, electricity tax, CHP surcharge etc.).

These prices are based on a load profile considering a duration factor calculated as

∑i Pgrid-loadi · ∆tres
∆feh = , (1)
Ppeak
where ∆feh is equal to the full load equivalent hours, ∑i Pgrid-loadi is the total energy consumption per
year, and Ppeak is the yearly peak power at network connection point.
Table 1 summarizes the costs of electricity for industrial customers in Germany. For customers
with ∆feh ≤ 2500 hours per year, the energy price of 0.18 e/kWh and power price of 12.78 e/kW are
assumed. Customers with ∆feh ≥ 2500 hours per year are charged an energy price of 0.13 e/kWh and
a power price of 139.12 e/kW. This pricing scheme produces a dependence of cost versus duration
factor as shown in Figure 2. The total cost decreases as the duration factor increases.

Table 1. Electricity price for exemplary industrial customer in Germany [22,26].

Full Load Equivalent Hours (∆feh ) <2500 h/a >= 2500 h/a
Electricity generation 0.035 e/kWh
Network-energy price 0.055 e/kWh 0.005 e/kWh
Network-power price 12.78 e/kW 139.12 e/kW
Taxes, fees, surcharges 0.09 e/kWh
12.78 e/kW 139.12 e/kW
Total
+ 0.18 e/kWh + 0.13 e/kWh
Energies 2018, 11, 2048 5 of 22

Total cost (Etotal[kWh] + Ppeak[kW])

Duration factor < 2500h/a
8000 Duration factor > 2500h/a
Duration factor threshold

6000

4000

2000

0
0 1000 2000 3000 4000 5000 6000 7000 8000
Duraction Factor (h/a)

Figure 2. Network cost vs. duration factor at constant total energy consumption of 100 MWh in a given
network area, medium voltage tariff, 2017.

A typical lithium-ion battery available on the market can provide up to 3 C (i.e., a 50 kWh battery
can be discharged with 150 kW or in 1/3 h). As specific capacity costs are higher than specific power
costs, load profiles with peaks below 1 hour are ideal for peak shaving with BESS. Typical loads
producing steep peaks are power intensive plants and machinery with short start-up times or heat-up
periods, like furnaces in the steel industry. Another precondition for the feasibility of peak shaving
is periodic, predictable behavior of the load. Forecasting algorithms ensure that the storage system
will be able to discharge its maximum energy when needed [27]. Although such prediction tasks are
indispensable for achieving the best BESS operation, they are outside the scope of this work.
A nonrepresentative study of nearly 300 industrial load profiles, conducted by Smart Power
(https://www.smart-power.net) in 2017, showed that about 10% of all load profiles result in a static
ROI of five years or less, and thus can be directly considered for peak shaving application (cf. Figure 3).
Under the assumption that storage system prices will decrease by about 30% and demand rate will
rise by about 30%, the number of loads interesting for peak shaving will rise to about 33% in the next
few years [14].
60
55
Static ROI
51 Static ROI projection
50
43
Number of load profiles

40 39
36 36
32
30 29
30 27
23
21
20 19
17
13 13
11
10 8 9
7
4 5 4
11 1 1 1
0
1-2 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11-12 12-13 13-14 14-15 >15
Years

Figure 3. Static return on invest (ROI) of peak shaving storage systems in years based on 288 industrial
load profiles analyzed by Smart Power in 2017 (blue), and the static ROI projection where the investment
is reduced by 30% and the energy rate is raised by 30% (yellow).

Interestingly, Schmidt et al. [28] construct a comparative study for promising electrical energy
storage technologies. The authors also investigate how the derived rates of future cost reduction
influence when storage becomes economically competitive in transport and residential applications.
In terms of price per energy capacity, the technology that brings the most energy density to market is
Energies 2018, 11, 2048 6 of 22

likely to become the most cost-competitive. For instance, lithium-ion batteries can be used in multiple
applications and secure high-capacity markets such as battery packs for electric vehicles.
For the sole battery storage investment without an inverter, the following price structure
is considered.
Cbatt (Enom nom
batt ) = Cfix + Copex,batt + (Cvar,batt · Ebatt ), (2)

where Cbatt represents the total battery investment cost, Cfix corresponds to the fixed cost including
the housing of storage and all the peripheries, Cvar,batt denotes the energy specific cost of a storage
system, and Copex,batt is the storage operation and maintenance (OPEX) cost within the battery lifetime.
As such, the overall cost Cstorage for the energy storage system can be expressed as:

Cstorage (Enom nom nom nom

batt , Pinv ) = Cfix + Copex,batt + (Cvar,batt · Ebatt ) + (Cvar,inv · Pinv ) (3)

which includes battery storage with energy content Enom nom

batt , and inverter with nominal power Pinv .
As container storage systems predominantly have battery racks and inverter units assembled to the
same casing, no separate fixed costs for inverters are assumed, but are given as part of the overall
storage fixed cost Cfix .

2.3. Battery Aging Model

As described in our previous work [17], storage deterioration is a significant cost driver during
energy storage operation. As a result, the aging of storage devices must be taken into consideration
when simulating BESS operations. Lithium-ion batteries [7] suffer from continuous aging. For most
batteries of this type, it is possible to separate the degradation into a pure time-dependent irreversible
loss of battery capacity called calendric aging, and an energy throughput dependent cyclic aging [29–32].
For calendric aging, the growth of the solid electrolyte interphase (SEI) is considered to be the major
aging factor [33]. The SEI protects the negative electrolyte from decomposition and corrosion and
it is mainly formed during the first charging process [34]. With time and usage of the battery, the
SEI undergoes a structural conversion, reformation, and a slow growth of the SEI takes place [33].
The cyclic aging can be attributed to either Lithium plating (particularly at low temperatures and
high current rates), to exfoliation/particle cracking (particularly at higher currents and often at high
SoC levels), or to irreversible structure changes (induced by frequent intercalation/de-intercalation of
lithium ions) [31]. All of the above effects could be summarized as loss of lithium inventory and/or
capacity reduction at the anode/cathode side. The battery cyclic and calendric lifetime define the
remaining state of health (SoH) until a certain capacity fade for a battery cell becomes evident. In this
paper, we assume that the BESS must be replaced when SoH drops to 80% of the nominal capacity.
The overall aging can be estimated using the superposition principle [29]

agingtot ≈ agingcyc + agingcal . (4)

Value agingtot = 0 represents a new, unused battery, while agingtot = 1 corresponds to a situation
when the remaining capacity of the battery is 80% of its original capacity. However, it is important to
note that additional use of the storage system with agingtot > 1 may be allowed if the replacement of
storage is set to below 80% of the SoH. A detailed analysis and validation of battery performance and
aging models is provided in [35].
Accelerated aging tests performed at the Technical University Munich were used to build an
equivalent circuit based aging model coupled with a thermic model [36] for a cell with graphite anode
and nickel manganese cobalt (NMC) cathode. The key factors making this model appropriate are the
analytic equations for estimating the cell degradation and the superposition of calendric and cyclic
aging. Both are essential for an implementation of a linear model. The aging model and its linearization
can be described as follows [37].
Energies 2018, 11, 2048 7 of 22

The analytical term for the calendar capacity fade Cfade,cal as a function of battery state of charge
SoC (%), temperature T (◦ C), and time ∆t , takes the following form

Cfade,cal (SoC, T, ∆t ). (5)

Considering that a BESS enclosure can maintain the temperature constant, it is possible to fit a
linear capacity fade for each time step. This is shown in Figure 4 where the piecewise line represents
the calendric aging per time step dependent of the SoC [36], and the straight line shows its linearization.
The accelerated aging test reveals that the aging rate increases faster at very low and very high values
of SoC. This resulted in the kink at 90% SoC and small bends at the other test points.

6
Ni
Capacity fade per time step [%/tstep]

Ni-linearized
5

0
0 10 20 30 40 50 60 70 80 90 100
SOC [%]

Figure 4. Calendric-Linearization (t = 10 years).

The linearization of the calendric aging for each timestep i can be expressed as follows:

Cfade,cal,lin (SoC)i = 3.676 × 10−7 · SoC + 6.246 × 10−6 . (6)

The NMC model also holds a detailed cycle aging model, but this can be neglected as very few
peaks occur [37]. For this reason, in this work, the cyclic aging is represented by the number of full
equivalent cycles (FEC) that provides the overall energy throughput (counting either only charge or
discharge direction) with any Depth of Discharge (DoD) per cycle divided by the available capacity
battery storage [38]. The number of FEC can be defined as
R
1 | Pbatt | dt
Z
FEC = 0.5 · SoC(t)dt ≈ 0.5 · . (7)
t Enom
batt
The factor of 0.5 results from the conversion of charge throughput to full cycle counting. SoC
denotes the state of charge, Pbatt the power flow via the battery, and Enom
batt the nominal energy capacity
of the battery. The maximum charge/discharge throughput is achieved at 80% SoH if there is no
calendric aging.

3. Case Study
This section presents the application of the introduced model for dimensioning BESS for industrial
peak shaving application. The industrial customer is responsible for buying, installing, maintaining,
and operating the storage system. In this model, the energy used to charge the battery and the
energy used for immediate consumption have the same cost, and both are considered in the industrial
Energies 2018, 11, 2048 8 of 22

customer peak power calculation. As a result, the usage of a storage system is transparent from the
point of view of the utility company.

3.1. Linear Optimization of BESSs

The economically optimal battery storage component sizing for an industrial customer equipped
with storage system is obtained using LP. The load demand profiles considered in this study cover
one full year, to capture all seasons with their characteristic. As the intent is to minimize the overall
electricity cost, three types of costs are considered: the energy cost Cenergy_tot , the power cost Cpower_max ,
and the battery degradation cost Cstorage_deg . The energy cost is composed of the base energy price,
fees, taxes, and stock exchange price. The power cost is charged by the network operator on the basis
of the duration factor. The battery degradation cost, also called aging cost, is the major cost driver
during storage operation, caused by cyclic and calendric aging.
The annual cost flow analysis presented here takes into account the discounted storage cost
caused by degradation. As such, this simulation allows to estimate the profitability of a BESS for a full
life of the battery.
All variables and parameters considered in this study are described in Table 2.

Table 2. Variables and parameters used for the battery modeling and optimization routines.

Variable Description (At the Time Slot i) Unit Constraints/Comments

Ploadi load demand (historical data) kW ≥0; input data
nom
Pinv Nominal power of the battery inverter kW Subject to optimization
Enom
batt Nominal battery capacity kWh Subject to optimization
Ppeak−shave Maximum power for the full year kW Subject to optimization
Pbatt Bidirectional power flow to the battery kW Result of optimization
Pbatt-loadi Power transferred from the battery to the load kW See Equation (8)
Pgrid-loadi Power imported from the grid to the load kW ≥0; see Equations (8) and (9)
Pgrid-batti Power imported from the grid to the battery kW ≥0; see Equation (9)
SoHi State of health p.u. [0 . . . 1]; see Equation (14)
Ebatti Battery energy content at time i kWh See Equations (12) and (13)
SoCi State of charge p.u. [SoCmin . . . SoCmax ]

To meet the electrical demand, Ploadi , the system attempts to use power from the battery, Pbatt-loadi ,
or it draws power from the grid, Pgrid-loadi , i.e.,

Ploadi = Pbatt−loadi + Pgrid−loadi . (8)

In the same way, the power imported from the grid (Pgrid−loadi + Pgrid−batti ) in each time step i is
restricted to the maximum power for the period. The two constraints can be represented as

Pgrid−loadi + Pgrid−batti ≤ Ppeak−shavej , (9)

where Ppeak−shavej represents the highest point of demand in the billing period j. For instance,
considering only the highest load of the year, all data points i should be limited to the same maximum
annual limit Ppeak−shavej . However, if we consider the seasonal billing period where there are two
independent thresholds, each season is limited to its own limit. The peak power is used to calculate
the optimal solution power cost.
The bidirectional power flow from the storage inverter to the battery is stored in an auxiliary
variable, Pbatti , and correlated with the inverter efficiency, ηinv , as follows

1
Pbatti = (ηinv · Pgrid−batti ) + (− ·P ), (10)
ηinv batt−loadi
Energies 2018, 11, 2048 9 of 22

where ηinv is the average one-way efficiency of the inverter. The reciprocal efficiencies are the battery
charge power Pgrid−batti and the discharge power, Pbatt−loadi , both limited by the nominal power flow
from the inverter to the battery
nom
0 ≤ Pgrid−batti ≤ Pinv ,
(11)
nom
0 ≤ Pbatt−loadi ≤ Pinv ,
nom corresponds to the inverter size. The battery energy content at time step i (E
where Pinv batti ) satisfies
the recurrence relation
SDbatt
Ebatti = (Ebatti−1 · ) + (ηbatt · Pbatti · ∆tres ), (12)
d
where SDbatt represents the self-discharge factor of the battery and d = 96 the conversion factor of time
steps per day. The energy content of the storage system is furthermore confined by an upper boundary,
that decreases upon usage and aging according to the SoH. The SoH is defined as the irreversible
capacity fade over time, related to the nominal battery capacity, and Ebatti is a fraction of the total
energy content of the battery installed:

Ebatti ≤ Enom
batt · SoHi . (13)

The state of health of the storage system at time step i also satisfies the recurrence relation

SoHi = SoHi−1 − 0.2 · (agingcali + agingcyc ). (14)

i

Using Equations (6) and (7), the calendric and cyclic aging can be estimated as

agingcali =(3.676 × 10−7 · SoC + 6.246 × 10−6 ) · (i · ∆tres ) (15)

and
 Pbatt · ∆tres 
 
i 1
agingcyc = agingcyc + 0.5 · · · (16)
i i −1 Ebatti Life80%
Cyc

The calendric aging is affected by the storage temperature and its SoC level according
to Swierczynski et al. [32]. Despite the fact that the charge/discharge process leads to dissipative heat
generation and unavoidable temperature changes within the battery, the very low utilization ratio
of the storage system and the restriction to a maximum C-rate of 3 limits the effects of temperature
variations significantly.
As a result, the additional cyclic aging degradation of time step i is estimated by the energy
throughput in time step i ( Pbattj · ∆tres ) divided by the energy content of the system Ebatti and is
normalized with the factor of 0.5 and the technology specific cycle life indicator Life80%
Cyc . Similarly,
the SoC can be expressed as
Ebatt
SoCi = usable i . (17)
Ebatt · SoHi
The inverter nominal power is limited to three times the battery nominal capacity

Enom nom
batt ≥ 3 · Pinv . (18)

The optimal solution must satisfy all constraints described above. It aims to reduce the overall
cost by minimizing the expenses for energy purchase and implicit cost caused by battery degradation.
This cost model is divided into three components, i.e.,

minimize Cenergy_tot + Cpower_max + Cstorage_deg . (19)

 Energies 2018, 11, 2048 10 of 22

The first component Cenergy_tot comprises the cost of energy purchased from the grid, while the
second component Cpower_max is the peak induced cost based on the highest point of demand (or peak)
within billing period (monthly or annually). These two components are evaluated as follows:

Cenergy_tot = ∑ Cbuy · ( Pgrid-loadi + Pgrid-batti ), (20)

i

Cpower_max = Cpower · Ppeak−shave , (21)

where Cbuy and Cpower are the retail electricity price and the peak-power tariff, respectively. The third
component estimates the storage system degradation cost that can be represented as

∆SoH ∆t
Cstorage_deg = · Enom + Pinv
nom
· , (22)
(1 − αReplace ) batt Tinv
where ∆t denotes the time span covered with the simulation (here one year) and ∆SoH the total
battery aging. The full battery related cost is then calculated in consideration of the initial installation
investment cost.

3.2. Case Description

Four industrial load profiles (A–D) shown in Figure 5 are used to verify the effectiveness of the
proposed model. Data used for simulations was adapted from real measurements and averaged with a
resolution of ∆tres = 15 min [39]. This time discretization results from the fact that, in the model region,
the 15 minutes demand average is registered and its maximum value is used for tariff calculation over
a period of one month or one year [40]. It is assumed that temperature is kept stable at approximately
25 ◦ C. Parameters and price information for the BESS/inverter system used in the simulations are
listed in Table 3.
Profile A - 9350 MWh/a
2000

0
Profile B - 214 MWh/a
200

0
Power (kW)

Profile C - 10538 MWh/a

5000

0
Profile D - 7790 MWh/a
3000
2000
1000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure 5. Load profiles.

As described in Section 2, the electricity cost has two main components: the total energy
consumption, and the power peak cost in the billing period. According to German law StromNEV
§19I, every grid operator is obligated to offer a monthly billing scheme, i.e., instead of the highest load
Energies 2018, 11, 2048 11 of 22

of the year, the highest load of the month is the basis for the price per kW. Hence, this study considers
both yearly and monthly billing schemes. The results presented in the next section describe not only
the optimal BESS/inverter component sizes, but also the optimal billing scheme.

Table 3. Battery Energy Storage System(BESS)/inverter performance parameters and price

information [17].

Variable Parameter Unit Value

ηinv Average one way inverter efficiency % 97.5
Tinv Assumed inverter lifetime in years years 20
ηbatt Battery round-trip efficiency % 95
SDbatt Self-discharge per day % 0.02
[SoCmin . . . SoCmax ] Usable SoC % 5–95
Life80%
cal Battery calendric life indicator years 13
Life80%
cyc Cycle life indicator in FEC FEC 4500
Cvar,inv Variable inverter cost e/kW 1306
Cvar,batt Variable battery cost e/KWh 577
Fixed cost for storage
Cfix e 580
(housing, cooling, and periphery)

3.3. Effect of Sizing Considering BESS Degradation Cost

The objective function and the constraints structured in this study have linear relationships.
This means that the effect of changing a decision variable is proportional to its magnitude. For this
reason, the economically optimal battery storage component sizing for peak shaving is obtained using
LP. The linear optimization was implemented in MATLAB (MathWorks, Natick, MA, USA) code
using a dual-simplex algorithm, which is based on a conventional simplex algorithm on the dual
problem [41]. Each one-year simulation considered 15-min time resolution, co-optimized the storage
and inverter size, and took on average 700 s on a workstation with Intel Core i5 processor at 3.5 Ghz
and 16 GB of memory.
The optimal storage and inverter size for each profile (A–D), as well as a number relevant technical
and economical indicators, are presented in Table 4.

Table 4. Economical and technical comparison of system optimization results.

Profile Profile A Profile B Profile C Profile D

Scheme Year Month Year Month Year Month Year Month
Peak Loading Capping 5% 6% 30% 13% 8% 1% 0% 0%
Battery Size (kWh) 39 51 57 21 1109 18 0 0
Inverter size (kW) 117 152 171 63 3326 55 0 0
∆feh (h/a) 4431 4453 1195 957 1517 1407 2709 2709
Investment (e) 72,601 91,962 97,187 42,351 3,266,112 37,126 0 0
Operation Cost (e) 1156 1512 1663 674 39,577 583 0 0
Saving Grid charges (e) 15,880 16,735 992 6666 7613 6173 0 0
Total Savings (e) 14,725 15,223 −671 5992 −31,964 5591 0 0
Total return (IRR) 19% 14% −169% 11% −171% 12% 0% 0%
Amortization Time (years) 5 6 – 7 – 7 0 0
Full equivalent cycles (FEC) 5 51 1 32 11 25 0 0
Number of capped peaks 20 243 5 751 176 185 0 0
SoH at the end of year 98.78% 97.76% 98.88% 98.19% 98.66% 98.34% 0.00% 0.00%

The investment comprises the overall cost Cstorage described in Equation (3). The operation cost,
Copex,batt , reflects the German market and is calculated as 0.6% of the investment plus 6 e/kW. Table 5
shows the OPEX components considered in this paper.
Energies 2018, 11, 2048 12 of 22

Table 5. Operation cost (OPEX) composition.

Insurance 0.30%
System management 0.20%
Service contract 1 e/kW
Maintenance reserve 5 e/kW
Administrative costs 0.10%

The total return equal to the internal return rate (IRR) [42], is calculated without inflation or price
changes based on the total savings of the first year. Likewise, total savings and amortization time are
static calculations

TotalSavings = SavingsGridCharges − OPEX, (23)

Investment
AmortizationTime = · (24)
TotalSavings
’Profile A’ has an annual load of 9350 MWh and features weekday peaks and small load during
weekends. As shown in Table 4, this profile exhibits similar results for yearly and monthly billing
scheme. Figures 6 and 7 illustrate the results obtained for the two billing schemes.

Profile A: 9350 MhW/a; Storage system: 39 kWh 117 kW

1.0 1.00
2000 0.98
0.8
0.95
1500
0.93
Power (kW)

0.6

SOH(p.u.)
SOC(p.u.)

0.90
1000
0.4 0.88
500 0.85
0.2
0.83
0
0.0 0.80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure 6. Industrial load profile A with yearly billing scheme (left), and battery state of charge and
state of health (right).

Profile A: 9350 MhW/a; Storage system: 50 kWh 151 kW

1.0 1.00
2000 0.98
0.8
0.95
1500
0.93
Power (kW)

0.6
SOH(p.u.)
SOC(p.u.)

0.90
1000
0.4 0.88
500 0.85
0.2
0.83
0
0.0 0.80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure 7. Industrial load profile A with monthly billing scheme (left), and battery state of charge and
state of health (right).

The yearly billing scheme requires an initial investment of almost e20.000 less compared to the
cost of the system optimized for monthly billing, and it can generate additional 5% of total return in a
shorter time. Although monthly billing scheme with a 51 kWh battery and 152 kW inverter (Figure 7)
can increase the peak load capping, it also shortens the battery end of life by seven years (Figure 8).
Therefore, all things considered, the yearly billing scheme is more suitable for ‘Profile A’ because
Energies 2018, 11, 2048 13 of 22

it delays the battery replacement and provides several extra years of saving grid charges before it
becomes necessary to invest in a new battery system.

100
Yearly billing scheme degradation
Monthly billing scheme degradation
90 EoL
SoH (%)

80

70

60
0 2 4 6 8 10 12 14 16
BESS time life (years)

Figure 8. Extrapolation of the one-year results to represent the degradation after 10 years of usage for
Profile A.

Further considering the monthly billing scheme, the optimizer determines the optimal storage
size of 51 kWh and inverter nominal power of 152 kW. Figure 9 illustrates the power flows for a
three-day period during the first week of May. The left panel shows the load consumption, the power
flow imported from the grid for direct use or to charge the battery, as well as the maximum power peak
after shave. The right panel shows the periodically changing charge level of the storage system (SoC),
and the evolution of battery degradation (SoH). It clearly shows that the capacity fade is stronger
when the energy throughput is high. Figure 10 shows the battery power profile and the same capacity
fade in the terms of C-rate.

2500 1
0.993

2000 0.8
0.992
Power (kW)

1500
SOC (%)

0.6 0.991 SOH (%)

1000 0.99
0.4

0.989
500 0.2
0.988
0 0
124 125 126 124 125 126

Consumption Peak shave Grid to load Grid to batt SOC (%) SOH (%)

Figure 9. Power flow analysis for a three-day period: load and power flows within the system
(left); time correlated evolution of battery state of charge (SoC) and resulting state of health (SoH)
decline (right).
Energies 2018, 11, 2048 14 of 22

Profile A: 9350.8 MWh/a ; Storage system: 51 kWh 152 kW

3

2 0.996

1 0.995

SOH (%)
C-rate

0 0.994
-1
0.993
-2
0.992
-3
124 125 126

Figure 10. Battery power profile analysis for a three-day period and resulting state of health decline.

In contrast to ‘Profile A’, results for ‘Profile B’ show that the yearly billing scheme is not suitable
for profiles with low average load and relatively high peaks. Although it is possible to reduce 30%
of the peak load using a 57 kWh BESS with 171 kW inverter, this system configuration provides no
savings to support the initial investment. In this case, the monthly scheme is more profitable, resulting
in a peak reduction of 13% with a 21 kWh battery and 63 kW inverter.
Similarly, ‘Profile C’ has a negative IRR when considering the yearly billing scheme. This is
caused by the seasonal nature of the load. As can be seen in Figure 5, the consumption in the last three
months of the year is very high compared to the rest of the year. Analyzing the total return value in
Table 4, the monthly billing scheme appears to be the right choice for this profile. However, a peak
load reduction of only 1% is too slow to justify the installation of a BESS.
Finally, ’Profile D’ presents the most extreme case. Considering the exposed investment cost for
BESS and price schemes, there is no advantage to installing a BESS for peak shaving purpose for this
profile. Figure 11 illustrates the optimal annual peak shaving limit for the profiles B, C, and D, as well
as the state of charge and state of health for the storage system used in each case. Similarly, Figure 12
shows the optimal monthly peak shaving limit, the SoC, and SoH for the same three profiles. The
Appendix A provides the battery power profiles for all investigated scenarios.
It can be seen that the optimization process minimizes expenses using the capacity of the storage
system to decrease the peak power. The optimal power flow shows that the battery cycles are
short, meaning that the battery is charged to the maximum necessary level just before being drained.
This occurs due to the presence of SoC-dependent calendric degradation as one of the optimization
criteria. At the same, cyclic aging is not a determinant in peak shaving applications because the BESS
has only a low number of charging/discharging cycles and energy is never stored in the battery for a
long time. For this reason, calendric degradation is the most important cost driver in storage systems
for peak shaving applications.
To analyze the relation between load size and return of investment, consider Table 6. Optimization
runs were performed scaling the load size of Profile A from 10 to 40,000 MWh/a. The relation between
the peaks and the loads were kept the same as in the original profile, resulting in exactly the same
shape of battery SoC profile. As an overall trend, customers with large loads require BESS with
large storage size and large nominal power of the inverter. Loads smaller than 1000 MWh/a have
a negative IRR and an extensive payback period, rendering them unsuitable for BESS-based peak
shaving applications. On the other hand, larger load profiles have a substantial improvement in the
payback period. The results show that the BESS can be used for almost 18 years before reaching end of
life at 80% of SoH. Although the peak capping is the same in all simulations, the battery usage differs
for each load size because of the assumed discrete sizing of BESS and inverters in steps of 10 kWh and
10 kW respectively.
Energies 2018, 11, 2048 15 of 22

Profile B: 214 MhW/a; Storage system: 57 kWh 171 kW

1.0 1.00
250
0.98
0.8
200 0.95
0.93
Power (kW)

0.6

SOH(p.u.)
SOC(p.u.)
150
0.90
100 0.4 0.88
0.85
50 0.2
0.83
0 0.0 0.80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Profile C: 10538 MhW/a; Storage system: 1108 kWh 3325 kW

1.0 1.00
7000 0.98
6000
0.8
0.95
5000 0.93
Power (kW)

0.6

SOH(p.u.)
SOC(p.u.)
4000 0.90
3000 0.4 0.88
2000 0.85
0.2
1000 0.83
0 0.0 0.80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Profile D: 7790 MhW/a; Storage system: 0 kWh 0 kW

3000 1.0 1.00
0.98
2500 0.8
0.95
2000 0.93
Power (kW)

0.6

SOH(p.u.)
SOC(p.u.)

NO BATTERY 0.90
1500
0.4 0.88
1000
0.85
0.2
500 0.83
0.0 0.80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure 11. Industrial load profile B,C, and D with yearly billing scheme (left), and battery state of
charge and state of health (right).

Profile B: 214 MhW/a; Storage system: 21 kWh 63 kW

1.0 1.00
250
0.98
0.8
200 0.95
0.93
Power (kW)

0.6
SOH(p.u.)
SOC(p.u.)

150
0.90
100 0.4 0.88
0.85
50 0.2
0.83
0 0.0 0.80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure 12. Cont.

Energies 2018, 11, 2048 16 of 22

Profile C: 10538 MhW/a; Storage system: 18 kWh 54 kW

1.0 1.00
7000 0.98
6000
0.8
0.95
5000 0.93
Power (kW)

0.6

SOH(p.u.)
SOC(p.u.)
4000 0.90
3000 0.4 0.88
2000 0.85
0.2
1000 0.83
0 0.0 0.80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Profile D: 7790 MhW/a; Storage system: 0 kWh 0 kW

3000 1.0 1.00
0.98
2500 0.8
0.95
2000 0.93
Power (kW)

0.6

SOH(p.u.)
SOC(p.u.)
NO BATTERY 0.90
1500
0.4 0.88
1000
0.85
0.2
500 0.83
0.0 0.80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure 12. Industrial load profile B, C, and D with monthly billing scheme (left), and battery state of
charge and state of health (right).

Table 6. Profile A with yearly billing scheme and duration factor of 4431 h/a. Peak load capping of 5%
which represents 20 capped peaks per annum.

Optimal Recommended Saving Total Internal Rate

Load Operation Payback EoL FEC
Battery Inverter Battery Inverter Investment Grid Savings of Return
(MWh/a) Cost (Years) (Years) (First Year)
Size Size Size Size Charges (EBITDA ) (IRR)
10 0 0 0 0 e0 e0 e0 e0 0% 0.00 0.00 0.00
25 0 0 0 0 e0 e0 e0 e0 0% 0.00 0.00 0.00
50 0 0 0 10 e0 e0 e0 e0 0% 0.00 0.00 0.00
100 0 0 0 10 e0 e0 e0 e0 0% 0.00 0.00 0.00
250 1 3 10 10 e18,370 e170 e425 e254 −15% 72.23 18.00 1.00
500 2 6 10 10 e18,370 e170 e849 e679 −7% 27.06 18.00 1.00
750 3 9 10 10 e18,370 e170 e1274 e1103 −1% 16.65 18.00 2.00
1000 4 13 10 20 e18,370 e230 e1698 e1468 2% 12.51 18.00 3.00
2500 10 31 20 40 e31,901 e431 e4246 e3814 8% 8.36 18.00 4.00
5000 21 63 30 70 e42,351 e674 e8491 e7817 17% 5.42 18.00 5.00
10,000 42 126 50 130 e86,737 e1300 e16,983 e15,682 16% 5.53 18.00 6.00
20,000 84 251 90 260 e175,619 e2614 e33,966 e31,352 16% 5.60 18.00 7.00
30,000 126 377 130 380 e222,974 e3618 e50,948 e47,331 20% 4.71 18.00 7.00
40,000 168 503 170 510 e286,941 e4782 e67,931 e63,150 21% 4.54 18.00 7.00

It is clear that larger load sizes can benefit from BESS-based peak shaving with better economical
results. In addition, it is interesting to analyze the impact of the peak capping variation on the
payback period as well as the battery life time. Refer to Figure 13 and Table 7 for a detailed comparison.
To generate these results, an additional constraint was added to the linear model described in Section 3.1

Ppeak−shave = max( Pload ) · (1 − PC); PC = [0.01, 0.025, 0.05, 0.10, 0.15, 0.20, 0.25, 0.30], (25)

where PC is the fixed amount of the peak that must be shaved. As shown in Table 7, all scenarios are
profitable. However, the best IRR is obtained for peak capping equal to 5% of the total load. Smaller
peak capping values extend the battery lifetime, but also extend the payback time as less savings of
peak power reduction may be attained. In contrast, larger peak capping values increase the payback,
but shorten the battery life.
Energies 2018, 11, 2048 17 of 22

20
ROI
EOL
Diff
15

10
Years

-2
1 2.5 5 10 15 20 25
Peak capping (%)

Figure 13. Profile A-Impacts of peak capping variation. Initial investment Amortization time (ROI),
the number of years before the battery end of life (EOL), and the number of years the BESS will keep
being used and generating savings through peak shaving after ROI being achieved.

As an overall trend, the increase of inverter size has a direct relation to the peak shaved load, i.e.,
2.5% of load shaving needs a 60 kW inverter, and 25% load shaving requires ten times more. It is a
straightforward relation because the inverter is sized according to the load power peak. Interestingly,
the battery sizing does not follow the same trend because it is related to the number of peaks that must
be shaved. In contrast to the optimal result where the battery is charged closer to the load peaks, larger
peak load capping results in a smaller C-rate because the battery is charged slowly to avoid violating
the maximum power peak allowed, and the battery must keep energy content for a longer period.

Table 7. Profile A wich peak load capping variating from 1% to 25%.

Peak Number of Recommended Total

Load Payback End of Life
Load Capped H/A Battery Inverter Investment Savings IRR Cycles
(MWh/a) (Years) (Years)
Capping Peaks Size Size (EBITDA )
1% 1 4246 9351 10 30 e23,595 e2773 8% 8.51 18.19 1
3% 6 4311 9351 20 60 e37,126 e7154 18% 5.19 18.11 2
5% 20 4431 9351 40 120 e72,601 e14,721 19% 4.93 17.87 5
10% 217 4670 9351 250 230 e211,317 e28,300 10% 7.47 17.51 11
15% 1298 4945 9351 610 360 e424,782 e41,714 5% 10.18 16.02 34
20% 4185 5254 9351 1420 480 e560,915 e55,651 5% 10.08 14.27 69
25% 8008 5605 9351 2720 600 e945,282 e68,099 1% 13.88 12.92 101

4. Conclusions and Future Work

This article describes a linear optimization model to size the most cost-effective BESS for a variety
of industrial load profiles and multiple billing schemes. The optimization approach formulated in this
work minimizes the storage degradation cost and the maximum power peak in the billing period.
The optimal BESS size and the number of capped peaks are directly related to the load profile.
As an overall trend, for the exemplary load profiles under investigation, the monthly billing scheme
is more attractive for industrial customers because of the number of peaks that can be capped with
acceptable BESS sizes. For instance, a 51 kWh/152 kW BESS can shave 243 peaks which represents
6% of the maximum load peak and results in a 15,223 e of annual savings. As a general remark,
considering the current cost of storage and retail energy tariff valid in Germany for 2016, most scenarios
favor storage system installation. The expected increases of electricity prices and the reduction of
BESS costs are likely to accelerate this trend. Although this work uses parameters corresponding to
German market conditions and regulations, the described methodology can be easily adapted to other
Energies 2018, 11, 2048 18 of 22

jurisdictions that use or consider peak power penalty, albeit with a different billing period scheme and
retail electricity tariff models.
This work is limited to the optimization of storage systems using historical data on specific
industrial load profile. Load forecast is the key to developing online energy management controllers
for BESS. Such a forecasting task is outside the scope of this paper, but it will be considered in the
future. Future work will also examine the possibility of decreasing the idle time of the battery system
by sharing the same BESS between multiple industrial customers.

Author Contributions: R.M. conceived and designed the optimization model of energy storage system, and
executed the simulation experiments. H.C.H. contributed to the result analysis. J.J. contributed to the legal
framework. T.V. developed the linearization of the aging model. P.M. provided overall guidance for the study and
contributed with many fruitful discussions on the methodology. R.M. and P.M. wrote the paper with contributions
of all co-authors.
Funding: This research received no external funding.
Acknowledgments: The authors acknowledge support provided by the Natural Sciences and Engineering
Research Council (NSERC) of Canada, by the Science Without Border PhD grant (BEX 13301/13-6), the Future
Energy Systems under the Canada First Research Excellence Fund (CFREF), the Technical University Munich
(TUM), and Smart Power GmbH & Co KG.
Conflicts of Interest: The authors declare no conflict of interest.

Abbreviations
The following abbreviations are used in this manuscript:

BESS Battery energy storage system

LP linear programming
C&I commercial and industrial sector
EOL End of life
NMC Lithium-ion battery with graphite anode and nickel-manganese-cobalt cathode
ROI Return on invest
SoH Battery state of health
SoC Battery state of charge
FEC Full equivalent cycles

Appendix A

Profile A: 9350.8 MWh/a ; Storage system: 39 kWh 117 kW

3 1

2
0.95
1
SOH (%)
C-rate

0 0.9

-1
0.85
-2

-3 0.8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure A1. Cont.

Energies 2018, 11, 2048 19 of 22

Profile B: 214.27 MWh/a ; Storage system: 57 kWh 171 kW

3 1

2
0.95
1

SOH (%)
C-rate

0 0.9

-1
0.85
-2

-3 0.8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Profile C: 10538.02 MWh/a ; Storage system: 1109 kWh 3326 kW

3 1

2
0.95
1

SOH (%)
C-rate

0 0.9

-1
0.85
-2

-3 0.8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Profile D: 7790.98 MWh/a ; Storage system: 0 kWh 0 kW

1
2
0.95

SOH (%)
C-rate

NO BATTERY
0 0.9

0.85
-2
0.8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
C-rate SOH (%)

Figure A1. Battery power profile with yearly billing scheme and resulting state of health decline.

Profile A: 9350.8 MWh/a ; Storage system: 51 kWh 152 kW

3 1

2
0.95
1
SOH (%)
C-rate

0 0.9

-1
0.85
-2

-3 0.8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Figure A2. Cont.

Energies 2018, 11, 2048 20 of 22

Profile B: 214.27 MWh/a ; Storage system: 21 kWh 63 kW

3 1

2
0.95
1

SOH (%)
C-rate

0 0.9

-1
0.85
-2

-3 0.8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Profile C: 10538.02 MWh/a ; Storage system: 18 kWh 55 kW

3 1

2
0.95
1

SOH (%)
C-rate

0 0.9

-1
0.85
-2

-3 0.8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Profile D: 7790.98 MWh/a ; Storage system: 0 kWh 0 kW

1
2
0.95

SOH (%)
C-rate

NO BATTERY
0 0.9

0.85
-2
0.8
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
C-rate SOH (%)

Figure A2. Battery power profile with monthly billing scheme and resulting state of health decline.

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