VFDs, Battery Storage Turn Buildings Into Revenue Generators

There is great potential for facilities to reduce energy costs through frequency regulation, regardless of the demand response market.

There is great potential for facilities to reduce energy costs through frequency regulation, regardless of the demand response market.

Facilities Generate Revenue With Frequency Regulation

VFDs, Battery Storage Turn Buildings Into Revenue Generators

By Kyle Hendricks, LEED AP and H.G. Chissell

Facility owners and operators invest in high-performance building systems like building automation systems and variable frequency drives (VFDs) to increase system efficiency and reduce energy consumption. These efficient systems feature the natural benefit of increased occupant comfort and control over sustained building operations with lower electric costs. But, what most owners and operators don’t know is that these systems can also turn their building into a revenue-generating asset.variable frequency drives

How does it work?
The flow of electricity fluctuates throughout each day, and yet grid operators need to maintain a constant frequency of 60 Hertz. In order to better manage these constant load fluctuations, grid operators are willing to compensate individual building owners who can reliably help ensure that power generation and demand are in sync. To receive revenue from frequency regulation services, facility managers can invest in fast responding battery systems and/or special VFDs, or by participating in demand response programs.

frequency regulation
Power that is stored in batteries during peak load times reduces a electric demand on the grid.

Demand response leverages on-site power generation, HVAC strategies (like temperature set point adjustment), and possibly battery storage solutions to reduce energy consumption on demand during peak times of demand and congestion. With storage, buildings can charge batteries or make ice during off hours in the evening and weekends when power is cheap—and then use this stored power during peak load times, thus reducing electric demand on the grid.

Buildings with multiple VFDs are able to react to continuous requests from the grid operator to increase or decrease the building’s power usage by modulating VFD speeds. The fast response of a facility to a grid operator’s signal (sent out every two seconds) can help balance the supply/demand at the grid in a matter of seconds. Because of the short time frame the VFD is modulated, there is typically no impact on the building’s temperature control or occupant comfort, nor is there adverse impact to the VFDs or motors.

frequency regulation
Buildings with multiple VFDs are able to react to continuous requests from the grid operator to increase or decrease power usage by modulating VFD speeds.

There is great potential for significant savings through frequency regulation regardless of the demand response market. For example, a 100 kW combined VFD load that can participate in the frequency regulation market year round and successfully follow the PJM signal can net roughly $10,000 per year figuring about 4,000 hours of run time. This value is roughly two to three times the financial value of demand response in the Midwest’s largest market—Chicago. Values for both demand response and frequency regulation are dependent on geographic location.

Is demand response or frequency regulation a fit for your facility?
Buildings outfitted with either large VFDs and/or batteries that can afford some load fluctuation are in the best position to take advantage of this opportunity. But, just because an facility has these efficient features doesn’t mean it is an ideal candidate for frequency regulation.

Here are some chief requirements:

Location. Location. Location. Buildings in a climate where electricity is expensive and in high demand (congested, coastal areas like New York and California, for example) stand to gain the most from this type of peak shaving.

Building Size. Controllable load is always a function and percentage of total load—aka, the larger the total load, the more controllable load will be available. Larger buildings are generally better equipped to bring in more revenue and savings from the grid, as they typically have fewer but larger VFDs as opposed to many small motors.

Extra Space. Most energy conscious buildings are employing VFDs these days. Using VFDs to offset grid demand and modulate consumption can accelerate ROI without the need for additional space. Conversely battery storage systems do require conditioned space. The opportunity cost and installation requirement must be considered.

Intelligent Systems. Revenue generation and additional cost savings can only occur where there is a robust building automation system that’s capable of serving as an reliable, responsive interface between the building’s assets and the needs of the grid operator and distribution utility. Buildings must have the right automation and equipment components to make frequency modulation a possibility due to the quick response required.

One aging Chicago high-rise engaged Environmental Systems Design, Inc. (ESD) to develop a strategy for base building renovations that led to the design and installation of VFDs on their large 200 kW motors. Replacing legacy constant volume fans with high-performance VFDs would permanently reduce the building’s fan speed by 90%, resulting in significant operational savings while increasing comfort and much needed ventilation.

ESD identified this base building renovation as an opportunity to get into the frequency regulation market and accelerate the ROI of the VFDs. The building agreed to modulate VFD fan speed as needed based on requests from the grid and therefore is positioned to earn as much as $20,000 annually.

A golden opportunity
In today’s economy, the ability to leverage existing equipment to generate additional revenue can be a game changer for owner-occupied buildings. For those facilities whose current infrastructure includes robust VFDs and or batteries, or for those who have been considering an infrastructure upgrade, there has never been a better time to turn base building systems into a dual-money generating opportunity.K_Hendricks_headshot

Hendricks, a senior associate at Environmental Systems Design, Inc. in Chicago, is a mechanical engineer specializing in energy audits, retro-commissioning, green building rating system consulting, mechanical design, ENERGY STAR certification. and project management. 

Chissell, chief commercial officer and co-founder of GridMarket, a New York City-based firm. He is accountable for the integrated commercial success of GridMarket in conjunction with property owners, solution providers, utilities, and other key stakeholders.  

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