THE ECONOMICS OF BATTERY ENERGY STORAGE

The report analyzes how battery energy storage can provide thirteen different services across three grid levels: transmission, distribution, and behind-the-meter. It argues that while single-use batteries are often underutilized and economically unviable, 'stacking' multiple services—such as combining demand charge reduction with wholesale grid services—can make storage a cash-positive investment. Through four U.S. case studies, the report demonstrates that behind-the-meter systems are technically capable of providing the widest array of services, though significant regulatory barriers currently hinder this potential.

• Battery energy storage can provide thirteen fundamental services categorized by the stakeholder that primarily benefits: ISO/RTOs (energy arbitrage, frequency regulation, spin/non-spin reserves, voltage support, black start), utilities (resource adequacy, distribution deferral, transmission congestion relief, transmission deferral), and customers (time-of-use bill management, increased PV self-consumption, demand charge reduction, backup power).
• The location of battery deployment determines the number of services it can offer; behind-the-meter systems can technically provide all thirteen services, whereas distribution and transmission-level systems are limited in their ability to provide customer bill management and backup power.
• Single-application business models lead to significant underutilization of battery assets, with systems dispatched solely for demand charge reduction utilized for only 5–50% of their useful life.
• Stacking multiple services—combining a primary use with secondary grid or customer services—can shift the economics of behind-the-meter storage from a net loss to a positive investment under prevailing cost structures.
• In a San Francisco commercial case study, combining demand charge reduction with frequency regulation, resource adequacy, and energy arbitrage created a cash-positive investment without subsidies.
• A New York case study on distribution upgrade deferral showed that focusing exclusively on utility and ISO/RTO services without including customer-facing benefits failed to produce a net economic benefit.
• In Phoenix, pairing multi-use storage with rooftop PV under specific tariffs can reduce residential electricity bills by nearly 20% per year while leaving the battery available for other revenue 90% of its life.
• Under hypothetical non-net energy metering (NEM) tariffs in San Francisco, maximizing solar self-consumption becomes economically attractive if the system is also allowed to earn revenue from ISO/RTO and utility services.
• Significant regulatory barriers prevent the scaling of stacked-service models, including the misclassification of storage as either 'load' or 'generation' and a lack of standardized mechanisms for behind-the-meter assets to collect revenue for distribution deferral.

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} }