Behind-the-meter batteries promise backup power during outages and lower bills through tariff arbitrage. In practice, value depends on how storage is sized, controlled and integrated with rooftop solar, tariffs and critical loads. This report explains where business cases are strongest—and where expectations need to be reset.
At Energy Solutions, we view batteries in commercial buildings as flexibility infrastructure first and cost-saving tools second. Backup value, tariff arbitrage and grid services can all contribute to returns, but not every site can unlock all three.
Batteries entered many boardroom discussions as a way to provide backup power during outages. As markets and tariffs have evolved, the same assets are now being pitched as tools to arbitrage time-of-use prices, shave demand charges and enable participation in grid programmes. The result is a conceptual shift: from "emergency-only" equipment to actively operated flexibility infrastructure.
This shift introduces governance questions. Systems designed purely for backup are rarely optimised for frequent cycling, while assets optimised for arbitrage may not preserve enough state of charge for rare but important outage events. Clear priorities—and the control logic that enforces them—are essential before committing capital.
Batteries make money from tariffs that reward shifting consumption or reducing peaks. Time-of-use energy prices, demand charges and export compensation rules all shape the value of charge–discharge cycles. In markets with flat tariffs and limited demand components, upside from arbitrage alone is modest.
For commercial buildings, demand-charge reduction is often as important as classic energy arbitrage. The battery can be dispatched during short, high-load windows to reduce billed peak demand. Combining this with solar self-consumption strategies requires care to avoid counterproductive interactions between inverter limits, export constraints and storage controls.
| Tariff Type | Key Features | Primary Battery Value | Comments |
|---|---|---|---|
| Flat energy tariff | Single kWh price, low or no demand charge | Low | Limited arbitrage; value mainly in backup and potential grid services. |
| Time-of-use (TOU) | Distinct peak/off-peak prices, modest demand charge | Moderate | Arbitrage depends on spread and number of high-price hours. |
| Demand + TOU | High demand charges plus TOU energy prices | High | Peak shaving and arbitrage together can underpin robust business cases. |
| Critical peak pricing | Occasional very high-price events | Situational | Strong value if events are predictable and control is responsive. |
Qualitative assessment of how attractive different tariff structures are for commercial battery arbitrage.
Source: Energy Solutions interpretation of common commercial tariffs; scores are illustrative only.
Storage sized for full-site backup during multi-hour outages can be significantly larger than that optimised for daily arbitrage or demand-charge reduction. Many commercial projects therefore target a middle ground: batteries sized around critical loads, with additional capacity if economics justify arbitrage.
Right-sizing requires realistic expectations about outage frequency and duration. Overestimating backup needs can lead to underutilised capacity and stretched payback periods; underestimating them can leave key operations exposed during rare but consequential events. Some portfolios adopt a tiered strategy, with flagship sites receiving more robust backup than smaller locations.
Control logic determines whether batteries deliver the value they were designed for. Key design choices include whether to use fixed charge–discharge schedules, dynamic optimisation based on price signals, or hybrid rules that preserve a minimum state of charge for resilience. Integration with building-management systems and solar inverters adds further complexity.
Poorly configured systems can inadvertently increase costs—for example, by charging from the grid during expensive periods or by eroding battery life through unnecessary cycling. Clear operating hierarchies (backup first, then arbitrage) and robust commissioning processes are critical to avoid these pitfalls.
The economics of solar-plus-storage in commercial buildings hinge on several variables: capital cost, tariff structure, cycle life, degradation, and the share of cycles that deliver high-value services rather than marginal savings. Sites with high demand charges, pronounced peak/off-peak spreads and frequent grid constraints are more likely to support investment than those with simple, low tariffs.
For many portfolios, solar alone may deliver strong returns, while batteries provide incremental, more site-specific value. Honest business cases separate resilience benefits—which may be evaluated qualitatively or via risk-reduction frameworks—from strictly financial arbitrage returns.
| Use Case Emphasis | Typical Site Characteristics | Indicative Payback | Key Sensitivities |
|---|---|---|---|
| Backup-first | Critical loads, infrequent but impactful outages | Often long or non-financial | Outage cost assumptions, tolerance for risk, battery oversizing. |
| Arbitrage-first | High TOU spreads, moderate demand charges | Mid-to-high single-digit years in favourable markets | Tariff changes, cycle life, achievable operating performance. |
| Stacked value | High demand charges, demand response options | Can be strongest where operational complexity is managed | Ability to reliably deliver multiple services from the same asset. |
Qualitative breakdown of how backup, arbitrage and grid services contribute to total project value.
Source: Energy Solutions synthesis of storage case studies; percentages are indicative only.
Batteries introduce new technical and operational risks: faster-than-expected degradation from aggressive cycling, warranty limitations, and the possibility of underperforming controls. Fire-safety considerations and regulatory requirements for stationary storage also vary by jurisdiction and building type.
From a portfolio perspective, the main risk is a mismatch between modelled and realised utilisation. Systems may be installed with ambitious assumptions about arbitrage and grid revenues, only to be operated conservatively due to safety concerns or staffing constraints. Governance and training are therefore as important as hardware selection.
In some markets, commercial batteries can participate in demand response or ancillary services, providing frequency support or reserve capacity. These programmes can improve project economics but typically require more sophisticated metering, communications and aggregation structures.
Asset owners should distinguish between theoretical participation and practical readiness. Contractual obligations, penalties for non-delivery and operational complexity can be non-trivial. Many corporates initially treat grid services revenue as upside, only incorporating it into base cases once they have evidence from pilots or trusted aggregators.
Not all commercial buildings are equally suited to solar-plus-storage. Facilities with critical processes (data centres, cold storage, healthcare), high demand charges and regular peak loads often sit near the top of the priority list. Office buildings with modest, relatively flat profiles may see weaker economics unless tariffs are particularly favourable.
Landlord–tenant structures also matter. In multi-tenant properties where tenants hold the utility accounts, aligning incentives for a central battery can be challenging. Single-tenant or owner-occupied sites tend to offer clearer pathways to capturing both backup and arbitrage value.
| Building Type | Typical Drivers | Qualitative Suitability |
|---|---|---|
| Data centres | High criticality, high demand charges, 24/7 loads | High, subject to stringent reliability and integration requirements. |
| Cold storage / logistics | Temperature-sensitive loads, peaks aligned with operations | High where tariffs support peak shaving and resilience. |
| Standard offices | Daytime loads, moderate demand charges | Moderate; cases improve with strong TOU spreads or local incentives. |
Illustrative ranking of how attractive solar-plus-storage is for selected commercial building types.
Source: Energy Solutions judgement based on observed project pipelines; scores are qualitative.
For portfolios considering dozens of battery projects, a phased roadmap helps avoid scattered pilots that are hard to compare. Early steps typically include standardising data collection (load profiles, outage history, tariff data), defining target use cases and establishing minimum technical and contractual standards.
Subsequent phases can focus on clusters of sites with similar characteristics, refining business cases as real performance data arrives. Over time, portfolios may evolve from simple backup-plus-arbitrage systems towards more integrated flexibility platforms that coordinate multiple assets across regions.
The questions below address themes that frequently arise when corporate energy teams and facility managers evaluate solar-plus-storage propositions for commercial buildings.
In some high-tariff markets with strong time-of-use spreads or demand charges, arbitrage alone can underpin a business case. In many others, arbitrage is a useful contribution but not sufficient on its own, so projects rely on combined value from resilience, bill savings and occasionally grid services.
There is no universal split. Some owners reserve a minimum state of charge for critical loads and allow the remainder to cycle for arbitrage. The appropriate reserve depends on outage expectations, criticality of loads and how quickly the system can recharge.
No. Batteries can be installed without on-site generation, but pairing with solar often improves economics by increasing self-consumption and reducing exposure to export rules. In some markets, solar-plus-storage also simplifies interconnection approvals compared with standalone storage.
Payback periods vary widely by market and use case. In favourable conditions with strong tariffs and well-utilised batteries, mid-to-high single-digit years are achievable. In more marginal contexts, storage may be justified primarily as a resilience measure rather than on simple-payback terms.
Higher cycling and deeper discharges can accelerate degradation, gradually reducing usable capacity. Sensible operating limits and realistic assumptions about cycle life should be embedded in both contracts and financial models to avoid overestimating long-term value.
Technically it is possible, but in practice many organisations separate critical IT backup (often UPS-based) from building-level storage used for arbitrage and resilience. Segregation simplifies compliance and ensures that experiments with tariffs do not compromise core digital operations.
In many cases, maximising cost-effective solar capacity is the first step, as it usually delivers clearer returns with lower complexity. Batteries typically follow once loads, tariffs and solar potential are well understood and governance structures for active asset operation are in place.