Arizona Public Service C&I demand response and battery economics

APS serves businesses under its E-32 family of general service rates, sized by monthly demand, plus specialized schedules (APS rates and adjustors). The Arizona Corporation Commission approves every schedule. APS balances its own area and trades in the Western Energy Imbalance Market, with Markets+ planned around 2027 (Markets+ decision).

Every deep dive on this site has one feature that changes how its economics read. At APS it is how the demand charge is built. Most utilities charge one price per kW. APS charges more for the first 100 kW of demand than for every kW after it. On E-32 TOU M, for sites between 101 and 400 kW, on-peak demand from 3 to 8 p.m. on weekdays costs $19.85 per kW-month for the first 100 kW and $12.689 for the rest, all year, plus about $1.517 per kW of adjustors (E-32 TOU M schedule; OpenEI rate entry). The flat E-32 M rate works the same way at $14.69 and $8.068 (E-32 M schedule).

A battery at a 300 kW site shaves the cheapest kilowatts, the ones above 100. The storage pilot turns the problem around. E-32 L SP, open to sites with storage and summer peaks of at least 401 kW, charges only $6.994 per kW-month of on-peak demand in summer and $5.455 in winter, with a 300 kW floor, but prices summer on-peak energy at 21.763¢ against 7.889¢ off-peak, from 4 to 9 p.m. on weekdays (storage pilot tariff). It is capped at 35,000 kW of systems. On the pilot, a battery earns by cycling every weekday, not by guarding one peak.

Peak Solutions has run since 2010 and through CPower since 2020. It takes sites with at least 10 kW of curtailable load for summer events, June to September, with no penalties for falling short. Participants earned more than $870,000 in 2023 (APS newsroom), and one paper manufacturer, Royal Paper, earned $84,417 (CPower case story). The per-kW rate is not published; we assume $40 per kW-year.

Stacking here means combining a rate, Peak Solutions and the federal credit. There is no wholesale market a business can reach directly.

Stacking needs care, depending on M&V methodology. Peak Solutions measures curtailment against a site baseline, while the pilot rate pays for every kWh the battery moves. A battery that cycles every weekday already lowers the evening baseline, so the curtailment it can add on an event day is only what it holds in reserve.

On E-32 TOU M, almost all of a battery’s value is demand: about $152 per kW-year above the first 100 kW, with only about $1k a year from shifting energy across an on-peak spread of under 1¢ after losses. On the pilot rate, energy is the larger stream, about $8k a year, and demand adds $4k.

The site’s line above is only half of the deal. The developer pays the full $240k, carries maintenance, insurance and performance risk, and prices all of it into the contract to earn a return on its capital (Morgan Lewis). Third-party storage contracts usually run 15 years or more (Peak Power), and lenders treat 15- to 20-year terms as financeable (Illinois Power Agency). The chart below values each deal from the developer’s side.

With 25% of savings left to the site, a 15-year deal covers about 71% of the developer’s cost on our model. At the modeled cost, a developer cannot earn 8% and still leave the site a share of bill savings. Battery-service offers are not priced the other way around, as a fee on top of handing over the savings: shared-savings providers promote a guaranteed share from day one (Gridwealth Electric), and Peak Power’s projects in Westchester, New York, split bill savings and market revenue with the building owner (NYSERDA case study). A deal that cannot fund a share is usually not offered at all. A guaranteed 15% share would need an installed cost about 48% lower, near $125k, or a larger site where cost per kWh falls; providers such as Peak Power focus on facilities with more than 1 MW of load (Peak Power’s overview). The battery-service line above shows that 15% share. The pilot rate’s cap of 35,000 kW limits how many sites can use this case.

Markets+ is the change to watch. A day-ahead market around 2027 (APS RPAC minutes) would give evening energy an hourly price, the same signal the storage pilot already sends by tariff. Whether the pilot grows past its cap, and whether Peak Solutions publishes a rate, will decide how many business batteries APS sees.

The future of VPP to grow at scale will depend on multiple assets in unison at any given site: chillers and thermostats, EV charging, solar and batteries, dispatched together. For Arizona businesses, the next steps are a storage rate open beyond the pilot cap and a demand response program that counts batteries.

Compare: the APS residential deep dive, the Austin Energy C&I deep dive for another sunbelt utility, and the Hawaiian Electric C&I deep dive for a utility with no wholesale market.