Energy 101: How Power is Created, How We Use it, And What it Costs

By: Greg Haynes © 2017 Southeast Energy Storage

Did you know that the average Florida home uses 1,100 kWh per month? This figure translates to an average of 1.25kW per hour of energy usage. For residential households, the majority of this usage is concentrated into one to two periods per day depending on the season. In the winter, there are typically two periods per day when energy consumption is the highest, the morning between 7:00am-10:00am and the evening between 5:00-9:00pm. In the summer, the demand for energy grows all day and reaches its peak typically once in the evening between 6:00pm-10:00pm. This is primarily caused by air conditioners working to cool homes from the heat of the summer sun. In the energy industry, these are known as peak demand periods.

Peak demand periods drive the behavior of utilities because it is when the cost to deliver energy to our homes is the highest. The reason energy costs more to produce or acquire at different times of the day has to do with the age-old supply and demand curve as well as the economy of scale. As we know, energy has to be produced and delivered to our homes from power plants or renewable sources. Each source has a different cost associated with producing and delivering energy. Typically, coal fired power plants are large and expensive to manage but since these produce a high volume of energy and the cost of coal is relatively cheap, the cost per unit of energy produced is relatively low. A natural gas fired power plant has a much smaller footprint, has fewer moving parts, and burns cleaner so therefore needs less equipment to meet regulatory standards. In addition, the cost of the fuel it burns has fallen drastically. These factors have made natural gas power plants the resource of choice in recent years for most new power plants built. These plants serve a wide range of uses in supplying our energy needs. Some plants are large and produce a high volume of energy similar to the profile of a coal plant, and while these require less money to operate, the price of natural gas fluctuates broadly so their economy compared to coal can change daily.

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There are a number of ways to describe the differences between lithium-based batteries and traditional lead-acid batteries but, for this article, we will just focus on the primary energy storage usage differences to highlight the advantage that Lithium batteries offer for demand charge reduction.

First, there are many types of lithium-based batteries with each derivative offering its own flavor of attributes. Lithium-ion which uses Cobalt or Manganese as the cathode, has the highest energy density of all lithium-based batteries and is most commonly found in smartphones and household electronics. Lithium-iron which uses Iron Phosphate as the cathode, offers excellent energy density, long-life and possesses superior thermal and chemical stability.

At this point, a chart might be helpful:




Vol Energy Density Wh/l



Grav Energy Density Wh/kg



Cycle Life



Life Span

15 years

3 years

Depth-of-Discharge (DOD)






Charge Return



Maintenance Costs



Cost/kWh Per Cycle



Cost/kWh Per Cycle w DOD





The above table illustrates why over 90% of grid-scale battery storage is lithium-based battery technology. The top two rows above you may not be familiar with, they are measures of how much potential is contained in the battery per stated unit of measure. Whether it be volumetric energy density (Watt-hours/liter) or gravimetric energy density (Watt-hours/kilogram), the contrast emerges with lithium having the greater potential. To capture the value of demand charge reduction, you need a high potential energy battery that can cycle daily for many years without degradation. You also need a battery that can be charged and discharged quickly and can be discharged to the lowest state to reduce unusable capacity costs. This value is reflected in the last row “Cost/kWh per Cycle with respect to Depth-of-Discharge”. This method of calculation levelizes the cost between the two technologies to show that even though lithium-based batteries may have a higher acquisition cost, once you consider the life and usage cycles of the batteries, lithium wins by a wide margin with savings of over $2,800/kWh over 5,000 cycles without the replacement and maintenance costs of lead-acid.

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