Battery storage systems for peak load shaving

applications
Part 1: Operating strategy and modification of the power diagram

Enrico Telaretti, Luigi Dusonchet

DEIM
Università di Palermo
Palermo, Italy
telaretti@dieet.unipa.it; dusonchet@dieet.unipa.it

Abstract— Battery Energy Storage Systems (BESSs) are
gaining more and more attention in the current global energy
landscape, thanks to some peculiar characteristics such as the
versatility, modularity, scalability, fast response time, etc.. BESSs
can advantageously be used in the ancillary services market, in
order to provide all the services necessary to ensure the stability
and the reliability of the power system. Among other
applications, BESS can also be used to shift electricity demand
from on-peak to off-peak periods, also contributing to relieve
peak demand charges, thus ensuring a saving for the customers.
The BESS is charged when the electricity prices are the lowest
(during the night) and discharged when the prices are the
highest (during the daily hours), contemporary achieving a
leveling of the daily usage pattern. This paper is the first of a two-
part series, aiming to evaluate the economic feasibility of
electrochemical storage systems in peak load shaving
applications. The sizing and the operating strategy of the BESS
are defined, so as to obtain, at the same time, the flattest daily
usage pattern and the maximum benefit for the customer. A case
study is analyzed, showing the modification of the power diagram
when the BESS is added. The simulation results show a customer
daily power profile perfectly leveled in shoulder seasons and a
peak shaving effect in all other days.
Keywords— battery energy storage; peak load shaving; TOU
tariffs; peak demand charges; case study
I. INTRODUCTION
The deployment of renewable energies in the power grid
has seen a strong uptake in the last decades, mainly driven by
advantageous support policies implemented around the world
[1-4]. Especially photovoltaic (PV) and wind energy
experienced the strongest growth among all renewable energy
sources (RESs) and this expansion is expected to continue in
the future [5]. However, the integration of increasing shares of
RES energy into the power system creates challenges to the
stability and reliability of the electricity system [6]. Indeed,
production and consumption of electricity need to be in balance
at all times, and the fluctuating nature of the energy produced
by RESs makes this task difficult, creating stability issues to
the power system. Stationary energy storage systems (ESSs)
can advantageously be used in the modern electricity networks,
providing the necessary flexibility to the power system. Among
ESSs, battery energy storage systems (BESSs) are gaining
more and more attention in the current global energy
landscape, thanks to some peculiar characteristics such as the
versatility, modularity, scalability, fast response time, etc..
BESSs can advantageously be used in the ancillary services
market, in order to provide all the services necessary to ensure
the stability and the reliability of the power system.
Furthermore, battery costs are coming down and performance
are improving, although several problems remain to be solved,
such as safety issues, regulatory barriers and utility acceptance
[7]. Although their significant advantages, BESSs are still too
expensive, and their deployment in different countries is
mainly driven by favorable policies and supporting measures,
especially at the household level [8, 9]. As a consequence of
their favorable performances and decreasing costs, battery
projects are being deployed across countries, for different
applications [10]. Custom devices need always to be used to
ensure a proper interconnection and a reliable control system,
according to national technical specifications [11-14].
The excess of electricity consumption during peak periods
turns out to be expensive for transmission system operators
(TSO) and distribution system operators (DSO), affecting the
stability and the reliability of the electricity grid. Among other
applications, BESS can also be used to shift electricity demand
from on-peak to off-peak periods (energy arbitrage), also
contributing to relieve peak demand charges, thus ensuring a
saving for the customers. The customer electricity bill is
normally composed by two main components, an energy
charge component (€/kWh), proportional to the consumed
energy, and a capacity charge component (€/kW), proportional
to the maximum power draw. Peak demand charges are
typically calculated based on the maximum demand during a
given month. Thus, if the BESS is operated so as to smooth the
customer load diagram (peak shaving effect), peak demand
charges will be reduced.
Energy arbitrage consists in buying inexpensive energy at
off-peak hours, through battery charging, and reselling it back
to the grid a few hours later, at a higher price, through battery
discharging. If the difference between on-peak and off-peak
prices, added to the saving from the reduction of peak demand
charges is enough to compensate for the BESS losses and for
the cost of the storage system (initial investment cost, O&M
cost, replacement cost), the use of the battery will be profitable

978-1-5090-2320-2/16/$31.00 ©2016 IEEE

for the storage owner [15]. The ability to shift energy
consumption obviously depends on the variability of the
electricity prices during the day. Electricity prices show short
term fluctuations for two main reasons:
• the electricity demand varies significantly during the
day and the generation is not always able to follow load
variations;
• recent moves toward competitive and deregulated
electricity markets have increased the volatility of
electricity prices, due to the increased competition
among actors [16].
In the last years, electric utilities are starting to offer
variable tariffs to their customers, in order to better reflect the
costs associated with electricity production throughout the day,
also contributing to increase the demand flexibility of the
power system. Time-of-use (TOU) pricing is a rate structure,
particularly convenient for residential sector, typically
involving two or three billing periods (on-peak, mid-peak and
off-peak periods), reflecting the different costs associated to the
electricity production throughout the day. Electricity customers
can take advantages of the rate structure, shifting their
consumption from on-peak to off-peak hours or by using
energy storages.
This paper is the first of a two-part series, aiming to
evaluate the economic feasibility of electrochemical storage
systems in peak load shaving applications. The analysis refers
to a lithium-ion (li-ion), an advanced lead-acid, a sodium-
sulphur (NaS) and a flow battery. In this first paper, the sizing
and the operating strategy of the BESS are defined, so as to
obtain, at the same time, the flattest daily usage pattern and the
maximum benefit for the customer. A case study is analyzed,
showing the modification of the power diagram when the
BESS is added. The simulation results show the variation of
the daily power diagram as a consequence of the storage
operation. The customer power profile is perfectly flattened in
shoulder seasons, while in all other days a peak shaving effect
is obtained.
The remainder of the paper is organized as follows. Section
II reviews the current literature in battery operation
optimization and load leveling. Section III describes the case
study, showing the rate structure and the hourly power profile
of the electricity user. Section IV defines the sizing, the
operating assumptions of the BESS and the selected
operational parameters. Section V shows the modification of
the power diagram as a result of the BESS operation. Finally,
Section VI summarizes the conclusion of the work.
II. CURRENT LITERATURE
The optimal operation of storage systems is traditionally
studied by linear programming [17-19], nonlinear
programming [20] and dynamic programming [21-24]. Other
charge/discharge strategies are described in [25-34]. In [17], a
linear programming technique is used to study the optimal
operation of an ESS installed in a small power producing
facility. The algorithm can be solved using a standard
technique without much computational effort. A linear
optimization model of a storage system is proposed in [18], for
arbitrage accommodation. The algorithm calculates the
economic benefits of distributed ESSs at the end consumer
level by determining the cost optimal charge-discharge-
schedule. The authors conclude that the most important factors
affecting simulation results are the cost and the efficiency of
the ESS. A linear optimization model is used in [19] to find the
storage power and energy capacities that maximize the internal
rate of return (IRR) in arbitrage applications, considering 14
different storage technologies. The authors find that the optimal
sizing of a storage device depends mainly from the
technological characteristics of the BESS, while the volatility
of the electricity prices mostly influences the IRR. In [20] the
authors propose an optimal operating strategy to maximize the
storage profit, in presence of real-time electricity prices. The
algorithm is based on a sequential quadratic programming
method. The authors consider two electrochemical
technologies, vanadium redox battery (VRB) and polysulfide-
bromine battery (PSB), concluding that PSB is the better
investment choice. Unlike linear programming techniques,
unable to take into account the stochastic nature of loads and
the variability of electricity prices, dynamic programming
methods are employed to overcome this limit. In [21], Oudalov
et al. present a sizing methodology and an optimal operating
strategy for a BESS used in peak load shaving applications.
The operating strategy, based on dynamic programming, is
aimed to maximize the customer’s economic benefit, while
satisfying the BESS physical constraints. In [22] Riffonneau et
al. present an optimal power management mechanism for grid
connected PV systems with BESS. The objective is to help
intensive penetration of PV energy by proposing a peak
shaving service at the lowest cost, using a dynamic
programming algorithm. In [23] the authors address the
problem of organizing home energy storage purchases to
minimize long term energy costs under variable demands and
prices. The problem is modeled as a Markov decision process
showing that the optimal policy has a threshold structure. In
[24] the authors develop an adaptive dynamic programming
able to achieve the minimum electricity cost for residential
customers. The algorithm is able to improve the performance
as it learns and gains more experience in real-time operations.
In [25] a multipass iteration particle swarm optimization (PSO)
algorithm is used to solve the optimal operating schedule of a
BESS for an industrial TOU rate user, with wind turbine
generators. The algorithm can be used for real-time
evaluations, under the assumption of wind speed and load
uncertainty. In [26] the authors evaluate the economic
feasibility of electricity storages using a simple operation
strategy of the BESS in the spot market, subject to simple
constraint conditions. In [27] the authors estimate the economic
feasibility of storage systems used for aggregate applications,
such as energy price arbitrage, TOU energy cost reduction,
ancillary services, and transmission upgrade deferral, through
the maximization of an objective function. In [28], the
economic feasibility of a residential BESS for energy arbitrage
is evaluated, in presence of a TOU tariff structure. The
stochastic nature of the household’s hourly electricity demand
is taken into account using a Monte Carlo method. In [29]
Purvins and Summer propose an optimal battery system
management model with the main purpose of maximizing the
utilization of distributed RESs in distribution grids, preventing
situations of reverse power flow. In [30] the authors present an
estimate of the economic benefit from using BESSs for TOU
energy cost management at a consumer level, exploiting a
simple operating strategy. The economic benefit is estimated
performing a parametric analysis, by varying the capital cost of
the batteries and the difference between the maximum and
minimum electricity prices. In [31, 32] The authors describe
the application to a medium-scale public facility of a simple
BESS operating strategy which aims to maximize the arbitrage
customer savings in presence of real-time electricity prices.
The experimental evaluations highlight how the power profile
of the public facility changes as a result of the proposed
charging strategy. The battery operating strategy has been
further expanded and generalized in [33]. Finally, in [34] the
authors evaluate the economic potential for energy arbitrage
using the Hotelling rule, to determine a strategy for
maximizing the value of the BESS. They conclude that the
current BESS costs are too high to generate a sufficient amount
of arbitrage revenue.
III. CASE STUDY
The case study focuses on a tertiary facility, an office
located in climatic zone E [35]. The hourly power profiles of
the facility in winter, summer and shoulder seasons are shown
in Fig. 1 and 2, on weekdays and Saturday respectively. The
customer power profiles on Sunday/holidays have not been
reported, since they are flattened, thus irrelevant from the
viewpoint of the battery operation. The tertiary facility is billed
through a TOU electricity tariff, composed by two billing
periods [9]:
…୊ଵ ൌ ͲǤ͵€ȀŠ ; …୊ଶ ൌ ͲǤͳͷ€ȀŠ
2500 Shoulder seasons
Summer
2000
Winter
Power diagram (kW)
• on-peak hours (F1): Monday–Friday, from 8:00 a.m. to
7:00 p.m.;
• off-peak hours (F2): Monday- Friday, from 7:00 p.m. to
8:00 a.m.; all day Saturday, Sunday and holidays.
The electricity costs, …୊ଵ , …୊ଶ , include all components and
taxes. The demand charges are assumed equal to:
…୩୛ ൌ ͷͲ€Ȁ ή ›‡ƒ” (2)
Weekdays power diagrams show two daily peaks, the first
in the morning, at about 11-12 a.m., the second in the
afternoon, at 3-4 p.m.. Conversely, Saturday only has one peak,
at 11-12 a.m.. Peak demand charges are often applied to
commercial and industrial consumers and are calculated based
on the maximum power draw during the billing period (usually
a month). Demand charges are applied by utilities as a way to
cover the fixed cost of electricity provision, providing an
incentive to commercial and industrial consumers to reduce
their peak consumption.
IV. SIZING AND OPERATING ASSUMPTIONS
The BESS is sized and operated so as to obtain, at the same
time, the flattest daily usage pattern and the maximum load
shifting benefit for the customer. The choice of the BESS
capacity is driven by a trade-off between gaining more
arbitrage savings during days with relatively high peak loads
(summer season days) and wasting idle capacity during days
with low peak loads (shoulder season days). Among all the
possible solutions, the one that ensures the minimum upfront
investment cost for the storage owner has been chosen.
(1) Thereby, the battery has been sized and operated so as to
completely smooth the customer power diagram in the day of
the year corresponding to the flattest power profile (i.e. the
shoulder season day), consistent with the charging/discharging
constraints and with the need to charge during off-peak periods

1500 and discharge during on-peak times. The simulations are

carried out assuming that the BESS is operated all days except
1000
Sundays and holidays (around 300 days per year). Table I
500 shows the main operational parameters for each BESS
technology, according to the above mentioned sizing condition.
0
1 3 5 7 9 11 13 15 17 19 21 23 V. MODIFICATION OF THE POWER DIAGRAM
Hours (h) Figs. 3a shows the weekdays power diagrams when the
Fig. 1. Hourly power profile of the office, in winter, summer and shoulder BESS is sized and operated according to the procedure
seasons, on weekdays. described in Section IV, for each reference seasonal period.
2500 TABLE I. OPERATIONAL PARAMETERS FOR EACH BESS TECHNOLOGY
Power diagram (kW)

Shoulder seasons
2000 Summer BESS operational parameters
Winter
1500 Capacity (kWh) 3700

1000 Power rating (kW) 800

500 N. of cycles per day 1

0 N. of cycles per year 300

1 3 5 7 9 11 13 15 17 19 21 23
DOD per cycle (%) 80
Hours (h)
Project life (years) 10
Fig. 2. Hourly power profile of the office, in winter, summer and shoulder
seasons, on Saturday.
 Shoulder seasons 2000
2000 Shoulder seasons
Winter (a) (a) Winter

Power diagram (kW)

Summer 1500
Power diagram (kW)

1500 Summer
1000
1000
500
500
0
0 1 3 5 7 9 11 13 15 17 19 21 23
1 3 5 7 9 11 13 15 17 19 21 23 Hours (h)
Hours (h)
700

BESS power profile (kW)

600 Shoulder seasons
BESS power profile (kW)

400 Winter
Summer 200
200
0 Shoulder seasons
-300
-200 (b) Winter
Summer
-400 (b)
-800
-600 1 3 5 7 9 11 13 15 17 19 21 23
1 3 5 7 9 11 13 15 17 19 21 23 Hours (h)
Hours (h)
Fig. 5. (a) Facility power diagram when the storage is operated; (b)
Fig. 3. (a) Facility power diagram when the storage is operated; (b) corresponding BESS power profile, on Saturday.
corresponding BESS power profile, for each of the reference seasonal periods,
on weekdays. 2000 Shoulder seasons
Power diagram (kW) Winter
As can be observed in Fig. 3a, the facility power diagram in 1500 (a) Summer
a shoulder season day is now completely leveled, as a results of 1000
the proposed sizing and operating strategy of the BESS.
Otherwise, a peak shaving effect is produced in all summer and 500
winter season days. The corresponding BESS power profiles
0
are shown in Fig. 3b. Positive values of the BESS power
1 3 5 7 9 11 13 15 17 19 21 23
profile mean energy stored, negative values energy discharged. Hours (h)
Fig. 3b shows that the BESS is operated at variable power,
within its energy and power constraints. 400
BESS power profile (kW)

200
Fig. 4 shows the customer hourly power diagrams with and
0
without BESS and the BESS power profile, in a weekday
-200
summer day, under the above mentioned sizing conditions. As
-400
Fig. 4 clearly shows, the BESS is charged from 7:00 p.m. to Shoulder seasons
-600
6:00 a.m. and discharged from 8:00 a.m. to 6:00 p.m.. The (b) Winter
-800
BESS operates at variable charging and discharging power. Summer
-1000
The energy absorbed from the BESS during the charging phase 1 3 5 7 9 11 13 15 17 19 21 23
is greater than that supplied to the grid during the discharging, Hours (h)
because of the roundtrip losses. The BESS parameters and cost
components for each electrochemical technology are reported Fig. 6. (a) Facility power diagram when storage is added and the billing
in the part 2 of the two-part series. period is chosen according to the hourly facility power profile; (b)
corresponding BESS power profile.
The daily power profiles on Saturday and the corresponding
BESS power profiles are reported in Fig. 5a, b, respectively. As it is clearly shown in Fig. 5a, the power profile is not
perfectly flattened on Saturday shoulder seasons. This is
4000 Facility power diagram without BESS because the billing periods are not correlated to the customer
3500
3000
BESS power profile daily consumption, on Saturday. Indeed, the BESS would need
Power profile (kW)

Facility power diagram with BESS

2500 to be charged after 2:00 p.m., so as to result in a load profile
2000 perfectly flattened in a shoulder season day, according to the
1500 billing periods described in Section III. But the BESS can only
1000 discharge from 2:00 to 7:00 p.m., since these are on-peak hours
500 (F1). As a result, the BESS will remain idle and the customer
0 power diagram will follow the shape shown in Fig. 2, from
-500 2:00 to 7:00 p.m.. It is worth noting that the power peaks could
-1000
have been further reduced if the billing period had been chosen
1 3 5 7 9 11 13 15 17 19 21 23
according to the hourly facility power profile (for equal BESS
Fig. 4. Facility power diagram with and without BESS and BESS power sizing). Such a result would be obtained if on-peak hours
profile in a weekday summer day.
intervals, on Saturday, were restricted from 7:00 a.m. to 2:00
p.m., as shown in Fig. 6. As it is clearly shown in Fig. 6a, the
power profile in shoulder seasons (on Saturday) is now
perfectly flattened. Besides, the maximum power absorption in
summer is now 1546 kW, around 100 kW below the previous
value (shown in Fig. 5a), and the BESS is now discharged also
from 2:00 to 7:00 p.m., as shown in Fig. 6b.
VI. CONCLUSION
This paper is the first of a two-part series, aiming to
evaluate the economic feasibility of electrochemical storage
systems in peak load shaving applications. The analysis refers
to a li-ion, an advanced lead-acid, a NaS and a flow battery.
The sizing and the operating strategy of the BESS have been
defined, so as to obtain, at the same time, the flattest daily
usage pattern and the maximum benefit for the customer. The
BESS is charged when the electricity prices are the lowest
(during the night) and discharged when the prices are the
highest (during the daily hours), contemporary achieving a
leveling of the daily usage pattern. A case study is analyzed,
showing the modification of the power diagram when the
BESS is added. The simulation results show a customer daily
power profile perfectly leveled in shoulder seasons and a peak
shaving effect in all other days. The results also show that a
power profile perfectly flattened in shoulder seasons can be
obtained only if the billing periods are correlated to the
customer daily consumption.
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