Utility program deep dive · Northern and Central California

PG&E C&I battery, demand charge and VPP economics

How B-19 demand charges, the Base Interruptible and Capacity Bidding programs, ELRP and the ending DSGS program stack up for a business battery.

VPP Economics has no affiliation with, sponsorship from, or endorsement by any utility, aggregator, platform, or device maker named here.

The short answer

  • Demand charges make PG&E one of the strongest markets for a business battery. On B-19 secondary service, the summer peak-window demand charge is $46.16 per kW and the maximum-demand charge is $37.37 per kW every month (PG&E B-19). In our central case, a 250 kW / 1,000 kWh battery cuts the bill by about $70k a year and pays back in about 6.3 years with the 30% federal credit.
  • The peak window is 4–9 p.m. every day, and five hours long. A four-hour battery cannot cover the whole window at full power, so the reliable shave is set by energy, not inverter size. We assume 175 kW.
  • Demand response pays less than the bill, and it overlaps. The Base Interruptible Program (BIP) pays up to $15.90 per kW-month in summer (PG&E AL 7738-E), about $153 per kW-year at the smallest tier. Its reduction is measured at the meter against a firm service level, so kW already used to shave the daily peak cannot be counted again.
  • State VPP pay is ending, and rebates are closed. DSGS has no funding after 2026 (CALSSA), and SGIP’s general-market storage budget is closed (PG&E). The business case now rests on the tariff and the federal credit.
$46.16per kW, B-19 summer peak demand
$37.37per kW, B-19 max demand
$15.90per kW-mo, top BIP summer rate
6.3 yrscentral-case payback

What each PG&E program is

Rate design

B-19 demand charges

Three demand charges on one bill: maximum demand at any time, the peak during 4–9 p.m., and the part-peak during 2–4 and 9–11 p.m. Summer is June–September (PG&E B-19). Smaller sites on B-10 pay a single $20.50 per kW maximum-demand charge (PG&E B-10).

Rate option

B-19 Option S for storage

Replaces most of the monthly peak charge with daily charges of $1.60 per kW in summer and $1.22 in winter, with a lower maximum-demand charge (PG&E B-19). It rewards shaving every day rather than avoiding one bad 15-minute interval a month.

Interruptible demand response

Base Interruptible Program (BIP)

Monthly pay on potential load reduction, whether or not events are called; 15- or 30-minute notice; up to 180 event hours a year; $6 per kWh charge for usage above the firm service level; 100 kW minimum (PG&E, PG&E AL 7738-E).

Aggregator demand response

Capacity Bidding Program (CBP)

Aggregator-managed, day-ahead, May–October, events of up to four hours (PG&E). The aggregator’s contract, not the tariff, sets what the site receives (Symmetric Energy).

Market-based VPP and emergency DR

DSGS Option 3 and ELRP

DSGS pays $107.64 per kW-season for four-hour storage in 2025–26 but takes no new entrants and ends after 2026 (CEC, CALSSA). ELRP pays $2 per kWh in emergencies through October 2027 (CPUC). DSGS cannot be combined with other demand response.

Upfront incentive

SGIP

The general-market budget is closed (PG&E). The non-residential equity budget, at $0.85 per Wh, is limited to eligible equity customers (SGIP).

Value per kW of flexible capacity

Value per kW-year by source

What one kW of reliable reduction is worth a year, bundled B-19 secondary service.

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$0$100$200$300$400$500B-19 maximum demand$37.37 per kW, any time, every month$448B-19 peak-window demand$46.16 summer · $2.31 winter$203Base Interruptible Program15-minute option, up to 500 kW$153DSGS Option 3, 4-hour2025–26 incl. 30% bonus; ends$108ELRP at 30 event hours$2 per kWh$60B-19 part-peak demand$10.52 per kW, summer$42
Demand charges from the March 2026 B-19 tariff (PG&E): maximum demand $37.37 × 12 months; peak-window $46.16 × 4 summer months plus $2.31 × 8 winter months; part-peak $10.52 × 4. BIP at $14.96 May–October and $10.60 November–April (PG&E AL 7738-E). DSGS four-hour rate (CEC). ELRP event hours are an assumption.

The maximum-demand charge is the most valuable kW on the bill but the hardest to capture: it is set by the single highest 15-minute interval of the month, at any hour, so the battery must be charged and ready whenever the site peaks. The peak-window charge is easier because the hours are known. Our central case counts 175 kW off the peak window and only 40 kW off maximum demand.

Stacking needs care, depending on M&V methodology. BIP measures the whole-site load against a firm service level, so a battery that already discharges every evening shows little extra reduction on event days. BIP fits best with curtailable process load; the battery handles the daily demand charge.

The capital stack

Ten-year capital stack

Federal credit plus 10 years of avoided costs as a share of installed cost plus 10 years of maintenance. Past the dashed line, the package more than covers its cost.

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0%50%100%150%200%B-19 bill, fullpeak + maximum demand + energy138% · $881k vs $638kB-19 bill, peak window onlyno maximum-demand savings110% · $702k vs $638kB-19 bill, $800 per kWhhigher installed cost112% · $941k vs $838kB-19 bill, no federal creditcredit lost110% · $701k vs $638kCovers full costFederal creditPeak-window demandMaximum demandEnergy shift
Illustrative, undiscounted. 250 kW / 1,000 kWh at $600 per kWh, below New York’s 2026 behind-the-meter average of $638 (NY DPS); $15 per kW-year maintenance; 30% federal credit, subject to construction-start and sourcing rules (Sidley). 175 kW off peak-window demand and 40 kW off maximum demand; energy shifted daily from off-peak and spring super off-peak to the 4–9 p.m. peak at B-19 energy rates (PG&E B-19). Bundled rates; CCA generation charges differ.

Every case clears the 10-year line, even without the federal credit. Peak-window savings alone are about $36k a year, about as much as the entire bill-savings case for the same battery at Xcel Energy Colorado. The $17k of energy shifting comes from the same evening discharge, so it stacks without conflict.

Simple payback

Years to repay net cost from avoided costs, net of maintenance.

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0 yr5 yr10 yr15 yrB-19 bill, fullwith 30% credit6.3 yrB-19 bill, peak window onlywith 30% credit8.7 yrB-19 bill, $800 per kWhwith 30% credit8.4 yrB-19 bill, no federal creditfull cost9.0 yr
Same assumptions as the capital stack. Paybacks inside a 10–15 year battery warranty mean the bill savings cover the battery on their own.

Assets and combinations

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Battery only

Shave the 4–9 p.m. window

A four-hour battery covers most of the five-hour window. Longer durations capture more of the peak-window charge; extra power without energy does not help.

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Solar + storage

Solar charges, storage shaves

Solar lowers midday demand but not the 4–9 p.m. peak. Paired with storage, it supplies charging energy in place of grid off-peak power; B-19 has a separate Option R for solar customers (PG&E B-19).

Curtailable load

BIP’s natural fit

Chillers, pumps and process loads that can drop to a firm service level earn BIP pay without using battery capacity (PG&E).

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Fleet chargers

Separate Business EV rates

PG&E’s Business EV rates apply to separately metered charging, and a stationary battery used solely for EV charging qualifies (PG&E).

Financing and ownership

Own, borrow or share savings

A 250 kW / 1,000 kWh battery at a B-19 secondary site, central case.

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OWN IT OUTRIGHTCash−$600k installedday one+$180k federal credit30% §48E, at tax filing+$53k a yeardemand charge savings+$17k a yearenergy shift−$4k a yearmaintenance10-year net cash$244kSite keeps every stream$BORROW THE NET COSTLoan=$0 down; incentives pay principalborrows $420k−$61k a year for 10 years8% interest+$66k a year, netsame savings and pay as cash−$191k of interestover the loan term10-year net cash$52kCash-flow testTHIRD-PARTY OWNERShared savings=$0 capitaldeveloper owns the battery+$5k a year7% of bill savings=Developer keeps the rest of the savingsand the federal credit=Developer pays maintenanceinsurance and performance risk=15-year contractpriced for an 8% return10-year net cash$49kNo capital at riskCumulative cash to the site, years 0–10−$600k−$400k−$200k$0k$200k$400kyr 0yr 2yr 4yr 6yr 8yr 10Cashowns the batteryLoanowns the batteryShared savingsdeveloper owns the batteryCash pays $420k net on day one
Illustrative, undiscounted. Loan at 8% over 10 years on cost after the credit. Shared savings priced so the developer earns 8% after tax over a 15-year contract; the first 10 years are shown. Federal credit subject to construction-start and sourcing rules (Sidley).

The developer’s side

The site’s line above is only half of the deal. The developer pays the full $600k, 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.

What the developer earns

Present value of what the developer receives, as a share of what it spends, by contract terms.

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0%50%100%150%25% to the site, 10 yearsa short contract83% · $538k vs $648k25% to the site, 15 yearssame split, longer term89% · $609k vs $687k25% to the site, 20 yearswith augmentation in year 1195% · $658k vs $696k7% to the site, 15 yearsmost the site can keep at 8%100% · $688k vs $687kCovers full costFederal credit, soldDepreciation tax valueDeveloper share of bill savings
Illustrative. Present value at an 8% after-tax return with a 27% combined tax rate; past the dashed line the developer earns at least 8%. Federal credit sold at 92 cents per dollar; storage still qualifies (Plante Moran). First-year depreciation on cost less upfront incentives and half the credit, which needs tax appetite (Ferrius Energy). Costs include maintenance plus 1% of installed cost a year for insurance and asset management. Savings held flat, with rate increases offsetting battery fade; the 20-year case adds a 10% augmentation in year 11.

PG&E’s large bill savings make a third-party deal possible, but the site’s share is small: about 7% of bill savings over 15 years, or about 17% over 20, for the developer to earn 8%. A 25% split would leave the developer short. A funded DSGS successor or a resource adequacy contract could add revenue, but only for capacity not already committed to daily shaving, and neither is modeled here.

Additional Finance Options and Considerations

Own

Captures the bill and the credit

Net cost about $420k after the 30% credit, repaid from about $66k a year of net savings.

Loan

Positive from year one

Payments of about $61k a year are below the bill savings, so the battery can be debt-financed at 8% and still produce cash every year. Interest totals about $191k over the term.

Shared savings

Capital-free, small share

A developer owns the battery, claims the credit and keeps most of the bill savings: about 7% goes to the site over 15 years. It suits sites without tax appetite or capital budget.

Aggregator contract

For BIP or CBP

If the site also enrolls curtailable load, the aggregator or PG&E contract should state how battery discharge is treated in the baseline.

What ifs

Rate case changes

Demand charges move

B-19 demand charges were reduced in March 2026 (PG&E B-19). A shift from demand to energy charges would shrink the largest layer.

Option S

Daily demand charges

At $1.60 per kW-day in summer, a site that shaves every day saves about $195 per kW over the summer, close to the standard peak-window value, but with far less risk from one missed day (PG&E B-19).

Federal credit

Construction-start deadlines

Losing the 30% credit adds about $180k to net cost and roughly 3 years to payback.

DSGS successor

State VPP pay

A funded successor to DSGS would add a market-based layer, but only for battery capacity not already committed to daily shaving.

Maximum-demand capture

The swing factor

Each additional 10 kW reliably taken off maximum demand is worth about $4k a year.

Community choice

CCA generation rates

Sites served by a CCA pay PG&E delivery charges and CCA generation charges; the generation side of the energy shift will differ.

Compare: PG&E residential for households, and Xcel Energy C&I for a lower-demand-charge contrast.

Method and caveats

An independent, hypothetical analysis for business owners, facility managers, program designers, developers and other readers in PG&E’s service area. Terms checked October 26, 2026.

Assumptions: 250 kW / 1,000 kWh battery at $600 per kWh; $15 per kW-year maintenance; 30% federal credit; bundled B-19 secondary service; 175 kW off peak-window demand and 40 kW off maximum demand; daily discharge of 875 kWh at 90% round trip.

Taxes and surcharges are excluded. Figures are illustrative avoided costs before financing, degradation and augmentation. Gross payments are not net profit.

VPP Economics has no affiliation with, sponsorship from, or endorsement by PG&E, the California Energy Commission, any aggregator or any company named here.

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