Making Customer Battery Storage Work for a Cleaner, Less Expensive Grid

This briefing by RMI argues that current commercial electricity rate designs, specifically noncoincident demand charges, encourage inefficient battery storage use that can conflict with the needs of renewable-heavy power grids. The document advocates for a transition to time-varying rates and compensation for grid services to better align customer incentives with system-wide operational requirements.

• Falling battery costs have made storage economically viable for millions of U.S. commercial customers to manage demand charges. Estimates on the threshold for economic viability vary: NREL and Clean Energy Group identify over five million customers with demand charges above $15/kW, GTM Research suggests a threshold of $11/kW by 2021 across 19 states, and McKinsey suggests viability at charges as low as $9/kW.
• Most commercial demand charges are noncoincident, meaning they are based on a customer's maximum monthly power draw regardless of when the broader grid experiences peak costs. This encourages customers to flatten their load profiles, which can be detrimental in regions with high solar penetration where the grid actually needs increased midday demand to integrate low-cost solar energy.
• To better support the integration of renewable energy, the document proposes replacing noncoincident demand charges with time-varying rates. These include peak-coincident demand charges (billing based on demand during highest marginal system cost periods), time-of-use rates (predetermined schedules aligned with system costs), and real-time pricing (hourly variation based on actual conditions).
• The economic value of battery storage is maximized when customers can 'stack' multiple services. Beyond energy arbitrage, the document suggests implementing critical-peak pricing and providing compensation for grid support services such as contingency reserves, regulation, and fast frequency response.

APA

RMI (2018). Making Customer Battery Storage Work for a Cleaner, Less Expensive Grid. https://rmi.org/resources/making-customer-battery-storage-work-cleaner-less-expensive-grid/

Chicago

RMI. Making Customer Battery Storage Work for a Cleaner, Less Expensive Grid. 2018. https://rmi.org/resources/making-customer-battery-storage-work-cleaner-less-expensive-grid/.

Wikipedia

{{cite report |author=RMI |title=Making Customer Battery Storage Work for a Cleaner, Less Expensive Grid |date=4 January 2018 |url=https://rmi.org/resources/making-customer-battery-storage-work-cleaner-less-expensive-grid/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2018making, author = {{RMI}}, title = {{Making Customer Battery Storage Work for a Cleaner, Less Expensive Grid}}, institution = {RMI}, year = {2018}, month = jan, url = {https://rmi.org/resources/making-customer-battery-storage-work-cleaner-less-expensive-grid/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }