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Battery ROI depends on stacking multiple value streams: peak shaving (avoiding demand charges), TOU arbitrage (charge cheap/discharge expensive), backup power insurance value, and potentially grid services (frequency regulation, demand response).
Annual Value = Peak_Shaving_Savings + TOU_Arbitrage + Backup_Value + Grid_ServicesLCOS accounts for total system cost, cycle life, degradation, and round-trip efficiency over the battery lifetime. Compares $/kWh delivered against alternative peak power costs.
LCOS = Total_Lifetime_Cost / (Usable_kWh × Cycles × Round_Trip_Efficiency)Updated: July 2026
Tesla Powerwall-class system in California with significant TOU rate differential.
→ Annual savings: ~$1,230; Payback: ~9.7 years
Commercial building using battery to reduce demand charges of $15/kW.
→ Annual demand savings: $9,000 + TOU: $5,500 = $14,500; Payback: 8.6 years
Lithium-ion batteries degrade 2-3% capacity per year. By year 10, usable capacity is 70-80% of original. Model decreasing annual savings over the battery lifetime, not flat projections.
Most residential batteries operate at 80-90% DoD to preserve cycle life. A '13.5 kWh' battery delivers 10.8-12.2 kWh usable per cycle. Use usable capacity, not nameplate.
Evaluate battery energy storage system (BESS) economics by modeling revenue streams from peak demand shaving, time-of-use rate arbitrage, backup power value, and grid services. Determines payback period based on system cost, degradation, and stacked value streams.