Cold Storage Facilities can Transform Energy from Cost Center to Strategic Asset by installing a Renewable Energy Microgrid- using the Scale-A-Grid Platform
Have you considered “going long” on energy?
Investing in a microgrid for cold storage facilities enhances energy efficiency and operational resilience, delivering significant financial and environmental benefits. With careful planning and execution, the return on investment can be compelling, making it a smart choice for modern cold storage operations.
Optimizing multiple on-site resources like solar and battery storage to lock in lower energy costs protects businesses from “macrogrid” turbulence, maintaining flexibility to adapt to future rate shocks and regulatory changes.
Climate risks are now affecting rates in an unprecedented manner, and Microgrids are one of the few controls left against shock that are in Cold Storage warehouse owners' control.
While basic solar and solar-and-storage and possibly fuel cell installations can offer some insulation from price surges, the most robust insurance is a microgrid designed and operated by third-party experts, offered through Zam Energy, and paid on a monthly flat service fee- offering no capital expense down. Microgrids combine the advantages of each DER to provide a single integrated, optimized energy resource. Zam ensures that cold storage operations maximize the protection of the stored assets, balancing cost savings based on specific utility rate structures and a given facility’s energy use.
Using custom controls, we can minimize demand and capacity tag charges – which can account for over 40% of electricity bills (and likely more in the coming years) – by relying on the microgrid instead of the utility grid during times when these charges are calculated, thus reducing bills without impacting facility operations. They can also keep the power supply going when the grid goes down, providing incredibly valuable resilience in the face of the rising climate risks that helped cause this capacity price spike in the first place.
If your cold storage warehouse is in PJM territory, your balance sheet can use a review on your energy costs. Energy price spikes are in store. Morgan Stanley estimates that market prices for the next auction—which PJM has proposed delaying in response to complaints from environmental groups—could be as high as or even higher, potentially nearing the market cap of $700/MW-day. Thus, customers in PJM territory should be prepared for a second double-digit rate increase in the years ahead.
At the end of July, the latest annual capacity auction for PJM resulted in a clearing price of nearly $270/MW-day, a nearly tenfold increase compared to $29/MW-day the previous year – “a mind-boggling, staggeringly incomprehensible number” according to Steve Lieberman, vice president of transmission and regulatory affairs for American Municipal Power as quoted in UtilityDive. This translates into $14.7 billion in capacity costs that will be allocated to customers for 2025-2026, compared to just $2.2 billion in 2024-2025.
After 2022’s Winter Storm Elliott resulted in “unacceptably high” outage rates for natural gas power plants in particular, PJM changed calculations for resource capacity to be more conservative, reducing the amount of capacity available to bid into the market. At the same time, the market has seen 34 GW of aging coal plants close over the past decade because they are no longer competitive (in part due to more stringent emission control requirements), further shrinking the available capacity.
When faced with utility rate increases in the past, business customers in competitive markets could typically turn to competitive retail suppliers to procure lower-cost energy supplies and hedge against future risks. But with this price spike impacting capacity costs, not energy costs, and thus likely translating into higher demand charges and capacity tags, most retail suppliers will also see their costs increasing. As a result, businesses in competitive markets won’t be able to rely on these suppliers to escape the fast-rising costs of the coming years. Customers in vertically integrated markets like Virginia and Tennessee will have even fewer options in the face of this unprecedented market volatility and uncertainty.
Here are the 4 key benefits your CFO should consider. If this makes sense, let’s book a free consultation with our team of engineers and financial analysts to give your team a review of the process of our Flat Fee Rate to run your microgrid for you. We can also build and deliver a microgrid if you would rather own and operate it.
Payback in 4 years or less is possible for a 250,000 sq ft Facility.
Financial Benefits
1. Energy Cost Reduction
Cold storage facilities can see significant savings through effective energy management:
Peak Load Management: Facilities can achieve a 15-25% reduction in peak load costs, typically ranging from $15-20/kW. A 250,000 sq ft facility translates to annual savings of $45,000-75,000. Load shifting to off-peak hours can also yield $0.05-0.08/kWh savings.
Demand Response Revenue: Participating in demand response programs can provide additional revenue, with program payments ranging from $25,000-50,000/year. Capacity payments can go as high as $30-70/kW-year, and energy payments can range from $0.25-1.00/kWh during peak events.
2. Product Loss Prevention
Preventing product loss is crucial for cold storage facilities:
With an average product value of $2.00-4.00/cubic foot and typical capacities between 2-3 million cubic feet, even a 1% inventory protection can save $40,000-120,000/year. Additional benefits include 5-15% insurance premium reductions and reduced spoilage claims, estimated at $25,000-50,000/year.
3. Operational Benefits
Operational efficiency can also lead to considerable savings:
Maintenance Cost Reduction: Implementing a microgrid can lower maintenance costs by 10-15%, leading to equipment life extensions worth $15,000-30,000/year. Preventive maintenance can save $10,000-20,000/year, while system optimization can yield an additional $20,000-40,000/year.
Grid Service Revenue: Cold storage facilities can engage in grid services, earning between $100-200/MW-hourfor frequency regulation and up to $100,000/year in capacity market revenues. Energy arbitrage can provide another $20,000-40,000/year.
4. Environmental Benefits
Investing in a microgrid can also offer substantial environmental advantages:
Facilities can earn carbon credits worth $20-40/metric ton and benefit from utility incentives of $0.50-1.50/watt. Tax benefits include the Investment Tax Credit (30%), accelerated depreciation, and various state incentives.
For more details, contact Zam Energy- Erin Sharp, Principal, Cold Storage Microgrid Developer erin@zamenergy.com
ZAM's Scale a Grid platform includes the design and build-out, and a third party covers the upfront capital costs and operations management.
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