THE ECONOMICS OF BATTERY ENERGY STORAGE

This report by the Rocky Mountain Institute (RMI) analyzes the economic value of battery energy storage in the U.S. electricity grid, arguing that 'behind-the-meter' (customer-sited) deployment offers the highest potential value because it can provide the widest array of services. The authors identify thirteen fundamental services across three stakeholder groups—ISO/RTOs, utilities, and customers—and demonstrate through four case studies that 'stacking' multiple services (using a battery for several different purposes over its lifetime) is essential for achieving positive net economic benefits under current cost structures.

• Battery energy storage can provide thirteen fundamental services categorized by the primary stakeholder that benefits: ISO/RTO services (energy arbitrage, frequency regulation, spin/non-spin reserves, voltage support, and black start), utility services (resource adequacy, distribution deferral, transmission congestion relief, and transmission deferral), and customer services (time-of-use bill management, increased PV self-consumption, demand charge reduction, and backup power).
• The location of battery deployment significantly impacts the number of services it can provide; the further downstream a system is located, the more services it can offer. Behind-the-meter storage can technically provide all thirteen services, whereas distribution-level storage cannot provide customer bill management or backup power (with some exceptions), and transmission-level storage further loses the ability to provide distribution upgrade deferral.
• Single-use battery applications often lead to significant underutilization of the asset. For instance, batteries used solely for demand charge reduction are utilized for only 5–50% of their useful life, and those used for distribution deferral may only be used for 1% of their useful life.
• Under prevailing cost structures, batteries deployed for a single primary service generally do not provide a net economic benefit. However, 'stacking' a primary service with secondary services can shift the economics to make storage a viable investment.
• A case study of commercial demand-charge management in San Francisco indicates that combining demand charge reduction with secondary services like frequency regulation, resource adequacy, and energy arbitrage can make a system a cash-positive investment without subsidies.
• A case study on distribution upgrade deferral in New York found that a fleet providing only utility and ISO/RTO services did not produce a net economic benefit. The report suggests that including customer-facing services, such as backup power or demand charge reduction, would likely make the economics positive.
• In Phoenix, pairing multi-use energy storage with rooftop PV under a tariff with residential demand charges can reduce customer electricity bills by nearly 20% per year while keeping the battery available for other revenue-generating services for 90% of its life.
• In a hypothetical non-Net Energy Metering (NEM) scenario in San Francisco, using batteries to maximize solar self-consumption is economically attractive if the system is also allowed to provide a suite of ISO/RTO and utility services.
• Significant regulatory barriers prevent the widespread adoption of stacked-service models. These include the slow implementation of FERC order 755, the lack of requirements for utilities to consider distributed energy resources as alternatives to traditional 'wires' investments, and the absence of standard market mechanisms for behind-the-meter assets to collect revenue for load management.

APA

Fitzgerald, G., Mandel, J., Morris, J., & Touati, H. (2015). THE ECONOMICS OF BATTERY ENERGY STORAGE. RMI. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_RMI-TheEconomicsOfBatteryEnergyStorage-FullReport.pdf

Chicago

Fitzgerald, Garrett, James Mandel, Jesse Morris, and Hervé Touati. THE ECONOMICS OF BATTERY ENERGY STORAGE. RMI, 2015. https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_RMI-TheEconomicsOfBatteryEnergyStorage-FullReport.pdf.

Wikipedia

{{cite report |last1=Fitzgerald |first1=Garrett |last2=Mandel |first2=James |last3=Morris |first3=Jesse |last4=Touati |first4=Hervé |title=THE ECONOMICS OF BATTERY ENERGY STORAGE |publisher=RMI |date=October 2015 |url=https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_RMI-TheEconomicsOfBatteryEnergyStorage-FullReport.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fitzgerald2015economics, author = {Fitzgerald, Garrett and Mandel, James and Morris, Jesse and Touati, Hervé}, title = {{THE ECONOMICS OF BATTERY ENERGY STORAGE}}, institution = {RMI}, year = {2015}, month = oct, url = {https://rmi.org/app/uploads/2017/05/RMI_Document_Repository_Public-Reprts_RMI-TheEconomicsOfBatteryEnergyStorage-FullReport.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }