Identifying Potential Markets for Behind-the-Meter Battery Energy Storage: a survey of U. S. Demand Charges

Table 3. Top 10 States with the Most Commercial 
Customers Estimated to be Eligible for Utility Rates That 
Include Demand Charges of $20/kW or Higher 
Number of Customers Eligible for 
Demand Charge >$20/kW 
California 
1,081,000 
New York 
648,000 
Georgia 
216,000 
Michigan 
205,000 
Massachusetts 
180,000 
Kentucky 
41,000 
New Mexico 
24,000 
Alabama 
23,000 
Texas 
23,000 
Iowa 
23,000 
While California and New York still dominate the list of 
top state markets at or above the $20 threshold in Table 3, 
there are still some surprises. Georgia and Michigan take 
the spots for the third and fourth largest market rankings, 
with followed by Massachusetts and Kentucky. Again, there 
are pockets of high demand charges in a variety of regions 
across the country. 
FUTURE OPPORTUNITIES AND NEXT STEPS 
As with solar, battery storage costs have experienced a rapid 
decline over the past few years and are projected to prompt 
a reduction in demand charge rates, potentially stagnating, 
or even decreasing, the number of financially 
motivated 
customers. If there is no significant change in 
the structure 
of electricity tariffs, declining battery costs will continue 
to increase the number of customers who can financially 
benefit from behind-the-meter energy storage. On one hand, 
customers with demand charges of no more than $10/kW or 
less may find that battery storage has become a cost-effective 
measure to reduce electricity demand expenses within 
several years (today, that would represent a potential market 
opportunity of more than 6 million customers). On the other 
hand, a world with such low storage costs may alter the bulk 
power system sufficiently to prompt a reduction in demand 
charge rates, potentially keeping the number of financially 
motivated customers constant or even decreasing. 
The analysis presented here offers a snapshot of where 
moderate to high demand charge rates are located and how 
many customers may subscribe to them. This provides 
an indication of where market opportunities may exist 
for battery storage and solar with storage to provide cost 
savings through demand charge reduction. Based on the 
findings, the opportunities may be broad, but further on-
the-ground effort is necessary to identify which specific 
customers have siting and energy consumption patterns that 
make them good candidates for behind-the-meter storage. 
ENDNOTES, REFERENCES, AND RESOURCES 
(1) It is important to note that this is an estimate of the 
number of customers who have the option of subscribing to 
a tariff with the given demand charge level—not an estimate 
of the number of customers who are actually on such tariffs. 
Often, commercial customers have more than one tariff they 
are able to subscribe to. The one with the highest demand 

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7 
charge may not be the most suitable option for a particular 
customer, although the option of low-cost storage may 
prompt some customers to choose high-demand-charge 
tariffs when they otherwise might avoid them. 
(2) A statistical analysis of techno-economic optimization
modeling results conducted at NREL found that, of the
variables studied, peak demand charges were the most
significant predictor of an economically viable battery.
[Long, M.; Simpkins, T; Cutler, D; and Anderson, K. “A
Statistical Analysis of the Economic Drivers of Battery
Energy Storage in Commercial Buildings.” 2016: 
http://
www.nrel.gov/docs/fy17osti/66832.pdf
] In an analysis of
rate structures across 51 utilities, Greentech Media Research
found that implementing 1-hour and 2-hour duration storage
systems for demand charge management begins to make
economic sense at a demand charge rate of at least $15/kW.
[Greentech Media. “Commercial Energy Storage Economics
Will Be Attractive in 19 US State Markets by 2021.” July
13, 2016: 
https://www.greentechmedia.com/articles/read/
commercial-energy-storage-economics-will-be-attractive-
in-19-us-state-marke
] The consulting firm McKinsey &
Company found even more favorable results for energy
storage, determining that some customers could break even
by investing in energy storage at a demand charge rate of
about $9/kW. [D’Aprile, P., Newman, J., and Pinner, D.
“The New Economics of Energy Storage.” August 2016:
http://www.mckinsey.com/business-functions/sustainability-
and-resource-productivity/our-insights/the-new-economics-
of-energy-storage
]
(3) This is a commonly referenced range; for example, see:
http://www.stem.com/resources/learning/
http://www.mosaicenergy.com/2017/06/03/understanding-
utility-demand-charges/
https://www.fs.fed.us/t-d/pubs/htmlpubs/htm00712373/
http://www.poweroptions.org/resources/faqs/
(4) Darghouth, N.; Barbose, G.; Mills, A.; Wiser, R.;
Gagnon, P.; Bird, L. “Exploring Demand Charge Savings
from Commercial Solar.” Lawrence Berkeley National
Laboratory, 2017: 
https://emp.lbl.gov/publications/
exploring-demand-charge-savings-0/
(5) Commercial Reference Buildings: 
https://energy.gov/
eere/buildings/commercial-reference-buildings
(6) ASHRAE Climate Zones: 
https://www1.eere.energy.
gov/buildings/publications/pdfs/building_america/4_3a_ba_
innov_buildingscienceclimatemaps_011713.pdf
(7) Energy Information Administration, 2012 Commercial
Buildings Energy Consumption Survey (CBECS) Data,
Tables B1 and B7: 
https://www.eia.gov/consumption/
commercial/data/2012/
(8) Utility Rate Database:
http://en.openei.org/apps/USURDB/
(9) Energy Information Administration Form 861:
https://www.eia.gov/electricity/data/eia861/
ACKNOWLEDGEMENTS 
The analysis was undertaken by NREL in collaboration with 
Clean Energy Group as part of their Resilient Power Project. 
Learn more at: 
http://resilient-power.org 
This work is supported by the U.S. Department of Energy’s 
SunShot Initiative, a national effort to drive down the cost of 
solar electricity and support solar adoption. The analysis is 
based on projections, estimates, or assumptions made on a 
best-effort basis, based upon present expectations. Learn more 
about the SunShot Initiative at: 
http://energy.gov/sunshot 
CONTACTS 
NREL: 
Joyce McLaren, 
[e-mail] 
Nicholas Laws, 
[e-mail]
Kate Anderson, 
[e-mail]