Physical vs. virtual batteries in industry: which one is best and when

Basic concepts without jargon

• Physical battery (hardware): storage equipment -usually lithium-ion- that accumulates kilowatt-hours (kWh) for later use. It is used for time-shifting (moving kWh from midday to afternoon/evening) and peak-shaving (cutting demand peaks and lowering contracted power). Typical cycle efficiency: 90-96%.
• Virtual battery (service): your supplier converts the surpluses you feed into the grid into a balance in euros (€) that discounts future bills (sometimes from other supplies in the group). It does not provide energy in the event of a grid outage.

The idea that rules: physical battery = kWh storage = virtual battery = € storage.

Need a recommendation for your case? Consult our battery service for photovoltaic installations .

In which scenarios each option wins

When the physical battery usually wins

• expensive power peaks or penalties for exceeding the contracted power: peak-shaving cuts these peaks.
• relevant evening/night consumption with surplus at noon.
• continuity of service: processes sensitive to micro outages; possibility of backup with the storage system.
• low surplus compensation: big difference between what you pay per kWh and what you get paid for dumping (high spread).

When the virtual battery usually wins

• zero capex or limited budget: you want to save money now without any work or space.
• stable daytime consumption, with no relevant peaks.
• multiple sites (CUPS): the balance may be applied to other supplies (subject to conditions).

Physical vs. virtual: investment, efficiency and risk

Although both reduce bills, they work with opposite logics.
The physical one requires investment (equipment + integration), but gives you operational control (kW and kWh) and can reduce the contracted power. The virtual one does not require investment or maintenance; its result depends on the compensation price and the letter of the contract.

Quick comparison table

criteria	physical battery	virtual drum kit
initial investment	high (€/kWh, €/kW)	null
maintenance/space	yes	no
efficiency/value	90-96% round-trip	clearing price (usually < purchase price)
network outages	yes (backup)	no
power reduction	yes (peak-shaving)	no
deployment speed	work and permits	immediate
main risk	degradation/warranties	contract conditions/prices

How to decide in 3 steps (with the load curve as arbiter)

1. Analyze your “when“
   Use 12 months of hourly consumption (or 15 min). Segment by rate periods and shifts. Calculate 95-99 percentiles of demand to locate peaks.
2. Models savings
   • physics: kWh shifted to expensive hours + power reduction – losses – OPEX → calculate NPV and IRR with lifetime and degradation.
   • virtual: surplus × compensation price – costs/service limits.
3. Rule of thumb
   If the spread (buy – offset) is high or there are overnight peaks/demand → physics usually wins in the long run in NPV.
   If there are no peaks, consumption is daytime and CAPEX is brake → start with virtual.

Simple numerical example (to see magnitudes)

• PV 600 kWp → ~960MWh/year. Probable surplus: 25% → 240 MWh.
• Average purchase: 0.12 €/kWh | Compensation: 0.06 €/kWh.

virtual only → 240,000 kWh × 0.06 € = 14,400 €/year.

physical (500 kWh / 250 kW, 300 cycles/year, 92%):
useful kWh/year ≈ 500×300×0.92 = 138 MWh.
Displacement value (from 0.06 to 0.12 €) = 8.280 €/year
+ peak-shaving (-150 kW in P1/P2): 8-15 k€/year depending on prices.
Estimated total: 16-23 k€/year (minus OPEX).
moral: peak-shaving can tip the balance towards physics.

Physical battery technologies (what really matters)

• lithium-ion (LFP/NMC): industry standard; good cycling and density; critical BMS and controlled thermal environment.
• lead-acid (AGM/gel): low cost, low density; today residual in industry.
• flux (vanadium…): large scale and long life; high space and CAPEX.

More than chemistry, the use case decides: power (kW), energy (kWh), cycles/year, depth of discharge and room (safety, ventilation, regulations).

Risks and fine print

• virtual: does it compensate 100%? does it balance? does it apply to other CUPS? does it apply to other CUPS? monthly cap? Contractual/regulatory risk.
• physical: annual degradation, warranties per year or throughput, installation requirements (fire protection, ventilation), integration with inverter and SCADA.

Hybrid strategy (often the winning option)

Sizes the physical battery to cover the peaks and the profitable evening stretch (paying cycles). The residual surpluses that remain, to virtual battery.
Result: more useful self-consumption, less contracted power and 0 kWh wasted.

Checklist to close the decision

• load curve 12 months segmented by periods/shifts
• validated hourly PV profile per kWp (PR and losses)
• estimation of surpluses and coincident peaks
• NPV/IRR of physics (kWh displaced + power)
• virtual conditions (compensation, limits, expiration, multi-CUPS)
• space/work/security (if physical)
• decision: physical / virtual / hybrid with KPI and target payback

Frequently asked questions about different types of batteries

Do you want us to do a physical vs. virtual study with your real curve and tell you which option gives more NPV and how much you can lower the contracted power? Ask us for the analysis and we will send you back a recommendation, figures and technical report ready for decision.