How Distributed Batteries Can Lower Electric Bills

State governors across the PJM grid region are worried — and they should be. Capacity prices, the charges utilities pass through to consumers for ensuring enough power is available during peak demand, have surged to levels that are showing up in a very uncomfortable place: household electric bills. When governors start making noise about energy costs, it's usually a sign that the pain has moved well past industry insiders and landed squarely on voters.

But the response to rising capacity prices doesn't have to come from new gas peakers, expanded transmission lines, or regulatory band-aids. A new report argues that distributed batteries — deployed at scale across homes and businesses — could flip the script entirely, turning consumers from passive ratepayers into the primary source of new energy capacity.

That's not just a talking point. It's a structural argument about how the grid gets built and who bears the cost.

The Capacity Price Problem Is Real, and It's Getting Expensive

PJM Interconnection is the largest grid operator in North America, managing electricity flow across 13 states and the District of Columbia, serving roughly 65 million people. The capacity market it runs is designed to ensure there's always enough generation available to meet future peak demand — think the hottest week of August or a brutal January cold snap.

When capacity prices spike, they don't stay in the wholesale market. They move downstream, embedded in utility rates, and eventually land on the electric bill.

Recent capacity auction results have been jarring. PJM's 2025/2026 delivery year auction cleared at prices dramatically higher than prior years, triggering exactly the kind of governor-level concern the report references. The issue isn't that the market is broken — it's doing what it's designed to do. The problem is that the traditional solution (build more centralized generation) is slow, capital-intensive, and adds costs before it subtracts them.

That's the opening that distributed batteries fit through.

What Distributed Batteries Actually Do

A distributed battery isn't a utility-scale storage project sitting behind a substation fence. It's a battery system installed at the point of consumption — a home, a commercial building, a small business — that can store energy when it's cheap or abundant and discharge it when demand (and prices) peak.

Think of Tesla Powerwalls, Enphase IQ batteries, or the growing fleet of bidirectional electric vehicles that can push power back to the grid. Individually, a 10 kWh home battery is a rounding error. Aggregated across tens of thousands of installations in a single utility territory, that same fleet represents hundreds of megawatts of dispatchable capacity — available precisely when the grid needs it most.

This is the core insight that traditional capacity planning consistently undervalues: small assets coordinated intelligently can outperform large assets deployed slowly.

The difference from conventional resources isn't just technical — it's temporal. A new gas plant takes five to ten years from permitting to operation. A virtual power plant built from distributed batteries can be assembled in months, drawing on assets that customers are already installing for their own reasons (backup power, solar pairing, EV charging optimization).

How This Actually Reduces Electric Bills

The mechanism isn't abstract. Here's how it works in practice.

Capacity costs in PJM are allocated based on load — the more electricity a utility's customers consume during peak periods, the higher that utility's capacity obligation, and the higher the charges passed to consumers. When distributed batteries discharge during those peak windows, they reduce the load attributable to those customers. Lower peak load means lower capacity obligations. Lower capacity obligations mean lower charges on the bill.

At the retail level, programs that compensate battery owners for dispatching their systems during peak events create a direct financial return. Customers offset their own bills while simultaneously reducing the system-wide capacity requirement that drives everyone else's bills up.

This is where retail choice models become structurally important. In competitive retail electricity markets, third-party providers can aggregate distributed batteries, offer customers favorable rates or incentive payments, and sell the resulting capacity into PJM's markets. The value flows back to the consumer rather than being captured entirely by the utility or a large developer. Retail choice, in this framing, isn't just about shopping for a cheaper rate — it's about enabling a fundamentally different architecture for how capacity gets built.

Several aggregators are already operating in this space. Companies like Swell Energy (acquired by Nautilus Solar), AutoGrid, and others have demonstrated that virtual power plants built from residential and commercial batteries can qualify for capacity market participation. The PJM region has made incremental progress on the rules that govern this participation, though the regulatory framework still lags the technology.

Consumers as Capacity: The Model That Changes the Equation

The report's central claim — that consumers can become "the primary source of new capacity" — is worth sitting with, because it inverts the conventional model completely.

Traditional grid planning starts with load forecasts, identifies gaps, and builds generation to fill them. Consumers are the demand variable to be served. The distributed battery model starts with the same load forecasts but fills the gaps by activating assets that consumers already own or are willing to install with the right incentives.

The economics favor this shift for a specific reason: the capital cost of distributed batteries is increasingly being borne by consumers, not utilities or ratepayers as a whole — but the grid services those batteries provide benefit everyone.

Battery prices have dropped roughly 90% over the past decade. Residential storage installations are growing rapidly, accelerated by the federal Investment Tax Credit (ITC) extended and expanded under the Inflation Reduction Act, which now covers standalone storage. A homeowner installing a battery for backup power is also, potentially, a grid asset waiting to be dispatched.

The gap between "waiting to be dispatched" and "actively participating in capacity markets" is where policy and retail choice models matter most. States that have moved aggressively on distributed energy resource (DER) integration — California being the most prominent example — have demonstrated that large-scale aggregation is operationally feasible. The PJM region, with its multi-state complexity and mix of regulated and deregulated markets, presents a harder coordination challenge but also a much larger opportunity.

What Needs to Happen Next

The technology is ready. The economics are increasingly favorable. The constraint is regulatory and structural.

PJM needs to continue refining the rules that allow aggregated distributed resources to participate fully in capacity markets — including clearer performance standards, streamlined interconnection for behind-the-meter assets, and settlement mechanisms that work at the retail level. State utility commissions across the PJM footprint need to enable the retail choice frameworks that let aggregators build and monetize virtual power plants without running into jurisdictional walls.

The governors raising alarms about capacity prices have a lever they may not fully appreciate. Accelerating the deployment of distributed batteries through retail choice programs, state incentives, and DER-friendly regulation is not a long-term fix — it's a near-term one, because the assets can be in place within the capacity commitment window.

That's the non-obvious angle here: the political urgency that's driving concern about electric bills is actually well-matched to the deployment timeline of distributed batteries in a way that it simply isn't matched to new centralized generation. Governors worried about what their constituents pay for electricity in 2026 and 2027 cannot build a gas plant in time. They can, with the right policy moves, aggregate enough distributed batteries to matter.

The consumers sending those electric bills back to their governors as political proof points could, with the right market structure, become the very resource that brings those bills down. That's a rare case where the solution and the constituency are the same group of people.

Call to Action: Explore how distributed batteries can transform your energy costs and contribute to a sustainable future. Visit InfraSale Marketplace for more information.

[INTERNAL LINK: distributed batteries]

[INTERNAL LINK: capacity markets]

[INTERNAL LINK: retail choice models]