What is the business case for emergency power and reserved battery capacity?

An industrial BESS (battery energy storage system) is a limited resource. The same capacity can either be optimised commercially in the market, or it can be reserved to supply critical loads if the grid fails. It cannot do both fully at the same time. That makes the question of emergency power and reserved capacity an economic trade-off, not only a technical or a safety question.

This article brings together the economic threads from the rest of this article series: the standard model's commercial optimisation, the add-on model's reserved capacity, and how to assess when full commercial optimisation or reserved capacity makes most sense for a given production.

Why production security has a price, even when it does not cost anything directly

It is tempting to think of emergency power and backup as something a company either buys or does not buy, as an isolated expense. In practice the relevant price is often another: what the business forgoes by using the capacity for one purpose rather than another. That is the core of what economics calls an opportunity cost. If a company chooses to reserve part of a system's capacity for emergency power, the price is not necessarily an extra amount on an invoice. The price is the commercial value the same capacity could have created if it had instead been used freely in the market.

That logic is not unique to ZynexGroup's model. It appears again in the academic literature on battery systems that must both deliver security and participate in an electricity market. A peer-reviewed study of distributed battery systems in microgrids describes precisely how a battery's need to be able to operate in isolation during a grid outage and its participation in the wider system's energy and reserve markets are two uses of the same limited capacity: the more that is earmarked for one purpose, the less is structurally available for the other. That is exactly the same mechanism that applies when a customer considers reserving part of an industrial BESS system's capacity for emergency power instead of commercial optimisation.

The standard model: full commercial optimisation

In ZynexGroup's standard model, the system's entire flexibility is available for commercial optimisation in the market. We trade the system's capacity in and out of the market when it is economically advantageous, and in return the customer receives a fixed contractual availability payment, calculated as the calculation basis (the contractual figure behind the fixed availability payment) divided by 72, corresponding to repayment of the calculation basis over 72 months if the agreement runs without suspension, reduction, or termination. In that model, no capacity is earmarked to supply the customer's own critical loads during a grid outage. The standard model does not automatically include emergency power, backup, or UPS function for any part of the customer's installation.

That is not a shortcoming of the model. It is the very precondition for the availability payment to be fixed and predictable: the more unrestricted access we have to the system's full capacity, the better we can use price swings and system needs in the market, and the more stable the basis for the payment the customer receives. Danish battery systems in practice operate on several markets at once (the spot market, the intraday market, and the markets for system services) because a durable business can rarely be carried by one market alone, but typically requires that capacity can be moved between markets according to where it creates most value at the moment. The standard model is therefore the natural starting point for any business where the consequence of a power interruption is limited, and where there is no particular reason to give up some of the commercial value in favour of reserved capacity.

The add-on model: reserved capacity for emergency power, STS, or backup

Emergency power, STS integration (a static transfer switch that can move a selected critical load between two power sources), and backup are, as covered elsewhere in this article series, optional add-ons that never automatically come with a standard system. If a customer, after a specific analysis of their critical loads and risk profile, chooses that part of the capacity should be reserved to supply selected functions during a grid outage, that changes the fundamental trade-off in the model: the reserved share of capacity is no longer fully available for commercial optimisation on the same terms as the rest of the system.

The more capacity that is reserved for emergency power, STS, or backup, the less we can optimise commercially in the market. In practice that can mean that the calculation basis and the fixed monthly availability payment are adjusted proportionally in the particular agreement. There is no fixed percentage, no table, and no guaranteed model for how much a given reservation affects the payment. The adjustment depends on the particular agreement and the specific analysis of how much the reserved capacity actually constrains commercial use of the system. Reserved capacity is an option assessed after the analysis, not a standard product with a fixed price.

It becomes clearer when looking at what the capacity physically consists of. A standard module in an industrial BESS typically has a capacity of about 261 kWh and a power rating of about 125 kW, which a project price of about 396,000 DKK excl. VAT covers in total, including battery module, switchboard, contractor work, electrician, IoT, setup, metering, integration, and project coordination, paid with 40 percent on agreement and 60 percent on technical completion or at the latest at start of operation. If part of that capacity is reserved for emergency power, it is not a separate, smaller module purchased for the purpose. It is part of the same physical capacity that must now share its time between two purposes: commercial optimisation and readiness for a selected critical load.

How to actually assess the trade-off

Because there is no fixed formula, the relevant exercise is not to look up a percentage, but to ask the right questions about the company's own production before deciding whether reserved capacity makes sense.

The first question is the value of the full fixed payment under the standard model, compared with the potentially lower payment a reservation may entail. The second is the value of the lower downtime risk reserved capacity can give for precisely the loads it is sized to cover, a value that can only be assessed when the consequence of an interruption for the company's own production is known. The third is the probability that an interruption actually occurs at a time when it hurts. Even in a country with high overall electricity security of supply, local risk is not evenly distributed: the large majority of electricity supply interruptions are caused by the local grid, not by a lack of production capacity at national level, which means that the actual probability of interruption is tied to the company's own grid connection, local grid conditions, and history, not only the national average. The fourth is the consequence of an interruption itself, which can vary widely from company to company even at identical duration, which this article series' review of what one hour of production downtime costs already covers in depth.

The last two questions concern what actually needs to be protected. Which of the company's loads are critical in the sense that they must not be interrupted, as opposed to what is merely inconvenient to lose temporarily? And what requirement do the critical loads place on runtime, meaning how long must supply be maintained if the grid is gone for more than a few seconds? Both questions are answered through the same type of analysis that Energistyrelsen (the Danish Energy Agency) guidance on emergency power for businesses describes for organisations in general: an assessment of vulnerabilities and consequences in the individual organisation, which can lead to anything from no protection to a high degree of protection, depending on what is actually at stake. There is no fixed checklist for how much a given company should protect. The answer depends on the particular production.

The same systematic weighing of probability and consequence for a disruption appears again in Beredskabsstyrelsen (the Danish Emergency Management Agency) guidance on holistic contingency planning, which recommends that organisations map critical functions, assess the consequences of disruptions to operations, and identify existing solutions and reserves, including emergency power explicitly, as part of the basis for a contingency plan. The point is the same whether it is a general contingency plan or a decision about reserved battery capacity: the better probability and consequence are mapped, the more precisely the investment in resilience can be matched to the actual risk, instead of either over-insuring or under-insuring.

A qualitative decision matrix

The six questions above can be collected into a simple, qualitative rule of thumb for which direction typically makes most sense, without replacing a case-by-case analysis of the individual company.

• Low downtime cost: If the consequence of an interruption is limited, because production has a short restart time, low scrap risk, and no critical loads with low interruption tolerance, the picture points toward the standard model. The full fixed availability payment is here often worth more than the partial reduction in downtime risk from a reservation.
• Medium downtime cost: If there is an identifiable but not extreme consequence of interruption, typically because some but not all functions are time-critical, the picture points toward considering partial reservation of capacity for the most critical functions, after a specific analysis of how large a share of capacity that requires and what it means for the calculation basis.
• High downtime cost: If the consequence of interruption is serious, because critical loads have very low interruption tolerances or because a short outage can cost an entire batch, a production line, or a safety-critical function, the picture points toward examining a proper STS and backup design for the selected critical loads, with the technical and economic analysis that requires.

The categories are deliberately qualitative. Where the boundary between low, medium, and high downtime cost sits for a given company is not a fixed DKK amount that can be looked up in general. It requires the same calculation of what one hour of downtime actually costs that this article series has already covered in detail elsewhere, applied to the company's own processes, restart times, and delivery obligations.

The limits of the trade-off

The decision matrix is a starting point for the conversation, not a definitive answer. It assumes that downtime cost and critical loads have already been mapped reasonably accurately, which in itself requires some work before the matrix makes sense to use. It also says nothing about how much a given reservation will affect the calculation basis for precisely that company, which can only be clarified through a specific analysis and a particular agreement. And it does not replace the technical design an add-on such as STS or backup always requires, regardless of how clearly the economic trade-off points in a particular direction.

When we assess that installation is technically and economically realistic at a grid connection of at least 400A, it also includes that we offer an actual 6-year payback guarantee on BESS systems. That guarantee applies to the payment model in the standard model and does not change the fact that reserved capacity is a separate, case-by-case trade-off made on top of the underlying payment model, not instead of it.

ZynexGroup's approach to system assessment

We do not recommend a particular weighting between commercial optimisation and reserved capacity before we know the underlying production risk. When a customer approaches us wanting to explore emergency power or reserved capacity, we therefore start with the same questions this article has covered: which loads are actually critical, what runtime requirement they place, and what the consequence of an interruption actually costs in DKK for precisely this production.

That picture, together with data on grid connection and consumption profile, is the basis for a data-driven dialogue on whether the standard model's full commercial optimisation is the right choice, or whether there is an actual business case for reserving part of the capacity. If there is a particular reason to proceed, we coordinate the process and work with partners on the technical design and the installation itself on site.

Overall perspective

Emergency power and reserved battery capacity are not free, even when there is no extra amount on an invoice. The price is the commercial value the reserved capacity could otherwise have created in the market, and that value is real whether or not it appears directly on a bill. The right design therefore does not depend primarily on the battery price or on a fixed rule of thumb for how much a reservation costs in percentage terms. It depends on production risk: how likely an interruption is, what it costs if it happens, and how little or how much capacity is actually needed to mitigate precisely that risk. The standard model's full optimisation, partial reservation, and a proper backup design are three points on the same scale, not three unrelated products, and the right point is found through the analysis, not through a table.

Get an assessment of your facility's potential

If you are considering whether reserved capacity or an add-on such as emergency power makes sense for your production, the natural starting point is a mapping of your critical loads, their runtime requirements, and what one hour of downtime actually costs in your most sensitive process. We use that type of data, together with your grid connection and consumption profile, for an initial assessment of whether there is a match between your situation and our model, and whether there is a particular reason to proceed with a technical and economic analysis. You are welcome to contact us here.