Energy Storage Program Design for Peak Demand Reduction

Energy storage has become an integral tool for states working to achieve clean energy, grid modernization, and electrification goals. Among other beneficial services, energy storage technologies can help to lower ratepayer costs and reduce pollution by deploying stored clean energy during the peak hours of electricity demand. But energy storage programs must be strategically and intentionally designed to achieve peak demand reduction; otherwise, battery usage may not effectively lower demand peaks and may even increase peaks and/or greenhouse gas emissions in some circumstances.

This issue brief, released by Clean Energy Group and the Clean Energy States Alliance (CESA), outlines best practices and lessons learned for state policymakers and regulators engaged in developing energy storage peak demand reduction programs. The brief explores key elements of program design, such as incentive mechanisms and dispatch methods, as well as considerations for incentivizing load reduction versus power export, and peak demand reduction versus emission reduction. It also includes recommendations for program design and an appendix with additional resources and links to program documentation from the leading states.

This is the second publication in the Energy Storage Issue Brief series. A previous issue brief in this series covered Energy Storage Incentive Rate Setting for States.