NIST Technical Note 1892 

Impact of Electricity Tariff 

Parameters on Net Zero Home 

Cost of Energy 

Andrew Kuo 

David G. Holmberg 

Steven T. Bushby 

This publication is available free of charge from:

http://dx.doi.org/10.6028/NIST.TN.1892
NIST Technical Note 1892 

Impact of Electricity Tariff 

Parameters on Net Zero Home 

Cost of Energy 

Andrew Kuo 

Dakota Consulting

Silver Spring, MD

David G. Holmberg 

Steven T. Bushby 

Energy and Environment Division 

Engineering Laboratory 

This publication is available free of charge from: 

http://dx.doi.org/10.6028/NIST.TN.1892 

September 2015 

U.S. Department of Commerce 

Penny Pritzker, Secretary 

National Institute of Standards and Technology 

Willie May, Under Secretary of Commerce for Standards and Technology and Director 
Disclaimer

Certain commercial entities, equipment, or materials may be identified in this document in order 

to describe an experimental procedure or concept adequately. Such identification is not intended 

to imply recommendation or endorsement by the National Institute of Standards and Technology, 

nor is it intended to imply that the entities, materials, or equipment are necessarily the best 

available for the purpose. 

National Institute of Standards and Technology Technical Note 1892

Natl. Inst. Stand. Technol. Tech. Note 1892, 22 pages (September 2015) 

CODEN: NTNOEF 

This publication is available free of charge from: 

http://dx.doi.org/10.6028/NIST.TN.1892
ABSTRACT 

Time-varying electricity rates impact the costs of operation and the value of renewable 

generation and storage resources. This study investigates the economic impact of electricity tariff 

parameters on the value of solar photovoltaic (PV) systems in the National Institute of Standards 

and Technology’s Net-Zero Energy Residential Test Facility (NZERTF) and the potential 

benefits of adding batteries for electrical storage. The NZERTF is a highly energy-efficient 

house designed to generate as much electrical energy from the PV array as the house consumes 

in a year. 

The Hybrid Optimization Model for Electric Renewables (HOMER) was used to determine the 

homeowner’s cost of energy (COE) for three different electricity tariff types (flat rate, time-ofuse, and real-time-pricing) and three independent variables (energy storage size, energy sellback 

rate, and demand charges). The analysis was based on the installed cost of the PV system, 

measured house electricity consumption, commercially available battery storage system cost data, 

and published electricity tariffs with cost corrections for the sellback rate and demand charges. 

The batteries are used to store energy from the PV array or the grid when prices are low and 

discharge energy when prices are high. This work does not consider the value of batteries to 

serve various other use cases (e.g., back-up power or voltage regulation). There is no simulation 

of energy management (load shifting or shedding) in the house.

Results show that for three of the four tariffs the addition of PV and batteries increased COE. 

The exception was a tariff with the highest prices and most significant difference between peak 

and off-peak prices. When Maryland renewable energy credits were accounted for, the use of PV 

became economically viable for all tariffs; however, adding batteries was still not justified (based 

on arbitrage alone) for three of the four tariffs. The COE with and without batteries was not 

influenced by demand charges; this was attributed to a HOMER battery charging algorithm 

which accounted for real-time energy prices but did not account for demand charges. Finally, 

results showed that the amount of power from the PV system that was actually consumed 

directly by loads in the house was 58 %. 

Keywords: cost of energy, distributed energy resources, demand charge, electricity tariff, 

HOMER, net-zero energy, renewable fraction, residential, sellback rate, solar photovoltaics

Acknowledgment 

The work presented here was supported by the NZERTF researchers at National Institute of 

Standards and Technology. Thanks to Brian Dougherty, Joshua Kneifel, Farhad Omar, and Mark 

Davis for providing essential NZERTF energy consumption data and PV performance data. 
Contents 

Abbreviations .................................................................................................................................. 1

1. INTRODUCTION ................................................................................................................. 2

1.1. Background ........................................................................................................................... 2

1.2. Tariff Design ......................................................................................................................... 3

1.3. HOMER Simulation .............................................................................................................. 4

1.4. Net Zero Energy Residential Test Facility ............................................................................ 4

2. EXPERIMENT DESIGN ...................................................................................................... 5

2.1. Electricity Flow Patterns in the NZERTF ............................................................................. 5

2.2. HOMER Simulation .............................................................................................................. 8

2.3. Validation of PV Output Simulation ..................................................................................... 9

2.4. Tariffs .................................................................................................................................. 10

2.4.1. Flat Rate Tariff .................................................................................................................... 10

2.4.2.Time-of-Use Tariff .............................................................................................................. 10

2.4.3.Real-Time Pricing Tariff ..................................................................................................... 11

2.5. Purchase/Sellback Price ...................................................................................................... 11

2.6. Demand Charge ................................................................................................................... 12

2.7. Energy Storage Model ......................................................................................................... 12

2.7.1. Optimum Sizing of energy storage ...................................................................................... 12

2.7.2. Dispatch Strategy ................................................................................................................ 13

3. SIMULATION RESULTS .................................................................................................. 13

3.1. Sizing of Energy Storage ..................................................................................................... 13

3.2. Effects of Dynamic Tariffs .................................................................................................. 15

3.3. Renewable Fraction ............................................................................................................. 16

3.4. Effects of Electricity Sellback Price .................................................................................... 17

3.5. Effects of Demand Charge .................................................................................................. 18

3.6. Impacts of tax credits on COE in Maryland ........................................................................ 19

4. CONCLUSION ................................................................................................................... 20

5. REFERENCES .................................................................................................................... 21
Abbreviations 

 COE cost of energy 

 ComEd Commonwealth Edison (Chicago)

 ConEd Consolidated Edison (New York) 

 DLC direct load control 

 DR demand response 

 DOE Department of Energy 

 DER distributed energy resource 

 HOMER Hybrid Optimization Model for Electric Renewables

 NASA National Aeronautics and Space Administration 

 NIST National Institute of Standards and Technology 

 NOAA National Oceanic and Atmospheric Administration

 NZERTF Net-Zero Energy Residential Test Facility

 OG+E Oklahoma Gas and Electric 

 PEPCO Potomac Electric Power Company

 PJM PJM Interconnection LLC, a regional transmission organization 

 PV photovoltaic 

 RRTP residential real-time pricing 

 TOU time-of-use 

 TMY typical meteorological year 
1

1. INTRODUCTION

1.1. Background

The U.S. electric grid utilization rate is low, with on average only 47 % of U.S. generation

capacity being used on an annual basis [1]. In the northeast U.S., 20 % of the generation capacity

is used only 3 % of the time to manage peak loads [2]. These peaks typically occur in the

summer on hot afternoons when air conditioning loads peak, while some utilities in colder

climates experience peak loads for heating on winter mornings.

In addition to a low-utilization rate for grid generation capacity, the generation mix itself is 

changing with the growing amount of intermittent wind and solar photovoltaic (PV) generation. 

Intermittent generation requires responsive load or storage to use generated power at the time the 

wind is blowing or sun is shining. 

The results of many utility pilots [3] have shown that residential, commercial, and industrial 

customers will respond to varying electricity prices by reducing load when prices are high and 

shifting load to low-price periods. Therefore, varying electricity prices can help utilities manage 

the low generation capacity utilization problem as well as motivate customers to shift load to 

follow generation. 

For these reasons and more, there is a gradual move toward tariffs that have dynamic prices that 

more closely reflect actual wholesale market electricity prices, all day and every day of the year. 

Customers pay higher prices on-peak and lower prices off-peak. This encourages customers to 

manage energy use to save money and incentivizes customers to invest in automation and storage 

technologies. 

The goal of this present work is to examine the impact of several existing dynamic tariffs on the 

value of PV systems in the National Institute of Standards and Technology’s Net-Zero Energy 

Residential Test Facility (NZERTF) and the potential benefits of adding batteries for electrical 

storage. The NZERTF is a highly energy-efficient house designed to generate as much electrical 

energy from the PV array as the house consumes over an entire year. 

The NZERTF serves as a use case for a highly energy-efficient modern house (the NZERTF uses 

40 % of the energy of a typical energy code-compliant home [4]) ready to participate in a smart 

grid environment. The current research asks how much impact different tariff structures would 

have on the electric bill assuming the occupant comfort and load use schedule are not adjusted. 

While some published research examines the impact of different forms of demand response 

programs and tariffs in eliciting customer response, e.g., [3], this report is not looking at 

customer response to dynamic tariffs. Rather it takes the consumption data from the NZERTF 

and examines the impact of several tariff parameters on the electric bill to evaluate the costeffectiveness of PV and battery systems. 
2

1.2. Tariff Design 

Tariff design is a complicated process in the U.S., involving over 3,000 utilities, 50 state 

regulatory bodies, and consumer advocates. Figure 1 shows four example tariffs. In a flat rate 

tariff the cost of electricity is constant. A time-of-use (TOU) tariff has prices that vary based on a 

set schedule that may have seasonal variations. There may be very large price differences that 

encourage customers to invest in automation for load management as well as storage technology 

to allow shifting energy use from peak periods to off-peak periods. 

Figure 1. Example tariffs: flat rate, time-of-use, and real-time pricing. 

TOU tariffs do not require active communication of prices on a day-to-day and hour-by-hour 

basis since the schedule is published within the tariff. However, a TOU tariff does not provide a 

signal that would allow customer loads to respond to real-time variation of grid supply and 

transmission congestion due to weather, outage, or other variability. Normally, TOU prices are 

higher in the afternoon from 2 p.m. to 5 p.m., lower at night from 10 p.m. to 10 a.m. and higher 

during the week than weekends. The TOU rate reflects average generation costs during those 

time periods. 

Some dynamic tariffs have been implemented that track real-time wholesale market prices more 

closely. The customer pays for electricity based on the real-time or day-ahead market prices or 
3

some function of these prices. One possible benefit of a real-time price is that it enables a 

customer to manage loads in a way that is more responsive to real-time supply and transmission 

constraints. 

Some utility tariffs include a demand charge. The customer pays for monthly energy use (kWh) 

as well as a portion based on peak power consumption (kW). If a customer can manage loads or 

utilize batteries to reduce peak demand, then they can reduce the monthly demand charge portion 

of their electric bill. 

Many tariffs provide some form of net-metering for residential customers with PV generation. 

This provides payment for conditions when the PV panels produce more power than is consumed 

at that instant in the home, during which the power flows out through the meter to the grid. 

However, the “sellback rate” varies among utilities and in different states. 

1.3. HOMER Simulation 

The intermittent and non-dispatchable nature of 

renewable power sources like PV increases the 

complexity of power output estimation. The 

simulation software “Hybrid Optimization Model 

for Electric Renewables” (HOMER) [5] was used 

to conduct the analysis in this report. HOMER 

models the hourly performance of a renewable 

energy microgrid system configuration and 

calculates life-cycle cost. It enables parametric 

testing of system configuration details and tariffs. 

Figure 2 shows the HOMER simulation design 

scheme for the NZERTF with additional battery storage. The model includes the hourly energy 

consumption for a one year period, various electricity pricing options, a PV panel that produces 

hourly simulated solar output based on designated location, an inverter for AC/DC and DC/AC

power conversion, and a battery for energy storage. More details of the model are given later in 

this paper. 

1.4. Net Zero Energy Residential Test Facility 

The NZERTF, at the National Institute of Standards and Technology (NIST) in Gaithersburg, 

Maryland, is a single family residence built in a style and size that would be typical for singlefamily homes in the Washington DC area. A photo of the home is shown in Figure 3. The 

NZERTF is designed to operate as a net-zero energy home, with a simulated family of four 

living virtually in the house. The simulated occupants use the stove, take showers, watch TV, 

and perform other normal family activities. The virtual family’s energy consumption pattern is 

programmed according to published behavior surveys of an American family lifestyle [6]. 

Figure 2. HOMER simulation model.
4

This home has a smart meter that accounts separately for electricity flow into and out of the 

house. In addition, a separate meter records PV generation, and each circuit in the house is 

independently metered. The NZERTF was operated continuously for a one year period (July 

2013 – June 2014) to demonstrate net zero energy capability [7]. Electrical energy production 

and consumption measurements taken during this test were used in the HOMER simulations. 

Figure 3. NIST Net-Zero Energy Residential Test Facility (NZERTF). 

2. EXPERIMENT DESIGN

2.1. Electricity Flow Patterns in the NZERTF

Experimental measurements of electricity flows during the one-year net-zero energy test period

for the NZERTF were used to characterize the load and to validate the PV output modeled using

HOMER. Figure 4 shows schematically the flow of electricity during times when PV generation

is available and when it is not. When PV generation is available, electricity flows to NZERTF

loads and any excess generation capacity is fed into the grid. Any shortfall in capacity is made up

with electricity from the grid. When no PV generation is available, such as at night, the grid

supplies the entire load.

Figure 4. Electricity flow patterns when PV is and is not available.

The months of July and December 2013 were selected as representative months for electricity 

consumption and production for summer and winter respectively. Figure 5(a) and Figure 5(b) 

show the monthly average July and December daily NZERTF meter data. In Figure 5(a), there is 

only one-way electricity flow during the nighttime (9 p.m. to 5 a.m.) where purchased energy 

NZERTF

Meter

Energy 

Sold

Energy 

Purchased

PV Production

Consumption

PV is Available PV is Not Available

NZERTF

Meter 

Energy 

Purchased Consumption
5

(purple dotted line) is equal to aggregated load consumption (blue line). Electricity flow becomes

more complicated during the day (6 a.m. to 8 p.m.), when PV production plus purchased energy 

is equal to aggregated load consumption plus energy sold back to the grid. In Figures 5(a) and 

5(b) there are times when the data indicates selling and purchasing energy at the same time. This 

is the result of averaging over the month. On some days at a particular time, energy was being 

bought and on others at the same time it was being sold. The weekly occupancy schedule for the 

virtual family is fixed. Seasonal variations in energy consumption are the result of changes in 

HVAC loads required to meet thermal comfort conditions. 

Figure 5(a). Monthly average NZERTF meter data for July 2013 indicating energy 

consumption, PV production, energy purchased, and energy sold. 

Figure 5(b). Monthly average NZERTF meter data for December 2013 indicating energy 

consumption, PV production, energy purchased, and energy sold. 

(b) December

(a) July
6

Figure 6 presents the hourly average meter data for July 1, 2, and 3, which illustrate the daily 

variation in PV production and HVAC load due to outdoor temperature and cloud cover. The 

periods of simultaneous buying and selling of energy are the result of PV output fluctuations 

during the hour. 

Figure 6. Hourly average NZERTF meter data in (a) July 1, 2013, (b) July 

2, 2013, and (c) July 3, 2013.

(a) July 1

(b) July 2

(c) July 3
7

2.2. HOMER Simulation 

The input parameters used for the HOMER simulations are shown in Figure 7. The control 

parameters were varied to explore the impact of various electricity costs and battery storage 

options. The measured load and actual size and characteristics of the NZERTF PV array were 

used. Historical average monthly insolation measurements (from July 1983 to June 2005) [8] 

were used to calculate PV output. 

Installation costs, replacement costs, and operations and maintenance (O&M) costs of NIST’s 

net-zero energy residential test facility are also included in the HOMER simulation: 

 10.2 kW PV array: $28,608 installation, $6,000 replacement, $160/year for O&M;

 10 kW inverter: $2,200 installation, $2,000 replacement, $50/year for O&M; and

 9.8 kWh battery storage module: $4,460 installation, $800 replacement, $0/year O&M.

Figure 7. Simulation design diagram for evaluating customer distributed energy 

resources in NZERTF. 

The HOMER simulation is based on the microgrid model shown in Figure 2. The weather data 

and PV system parameters are used to estimate PV generation. Electricity flows through the 

house meter and to/from the battery are calculated, and the appropriate costs or credits assigned 

based on the applicable tariff. The life cycle system costs for an assumed 25 year period are 

factored in to determine a normalized cost of energy (COE) defined in Equation 1 [5]. 

System

Costs

Tariff data

Purchase/Sellback Rate

Demand Charge

Solar Radiance

Battery Parameters

Clearness Index

NZERTF Building Load and PV system 

parameters

Inverter Storage PV Array 

Weather 

Input 

Control 

Parameters

Economic 

Value: 

Cost of 

Energy

Monthly Average Horizontal Insolation
8

COE = Cann,tot / Eann,serv (1)

where, 

Cann,tot = total annualized net present cost of system ($/year) 

Eann,serv = total electrical load served (consumed + sold to grid) (kWh/year)

In order to understand the economic value of customer distributed energy resources, three 

configurations of the NZERTF are examined in this report: 

 No Customer Distributed Energy Resource (No DER) – NZERTF residential load

with the grid interconnection only (no PV system);

 PV – NZERTF Residential load connected with rooftop PV array, inverters, and the

grid interconnection; and

 PV + Storage – NZERTF residential load connected with rooftop PV array, inverters,

energy storage, and the grid interconnection.

2.3. Validation of PV Output Simulation 

To validate HOMER’s solar production relative to NZERTF measurements, the HOMER PV 

output was compared to NZERTF data. Figure 8 shows NZERTF PV production versus HOMER 

estimated solar energy, in kWh. Both results included inverter losses. The total annual NZERTF 

metered solar production[1] (14,045 kWh) is 1.6 % below the HOMER PV output (14,273 kWh).

A smaller measured amount can be explained in part by an unusual number of days with snow 

cover on the PV array in Dec - Mar. This agreement demonstrates that, on average, the HOMER 

estimates are reasonable. 

Figure 8. Comparison of HOMER solar energy estimates to measured NZERTF meter data for 

period of July 2013 – June 2014 (data is transposed starting with Jan 2014, then Jul 2013). 

[1] During the first testing year (Jul. 2013- Jun. 2014), the NZERTF data set contained only 359 days of solar output.

It does not include data from Aug. 2nd to Aug. 6th, and Dec. 26th due to instrumentation issues. Therefore, NZERTF

totaled annual solar production is scaled to 365 days by adding the average apportioned monthly output.
9

2.4. Tariffs 

In order to determine how different tariff structures impact DER economics, simulations were 

conducted using four tariffs representing three major types of tariff structures. The tariffs below 

are also shown graphically in Figure 1. 

 Flat Rate – D.C. Potomac Electric Power Company (Pepco) residential tariff;

 Time-of-Use (TOU) Tariff – New York Consolidated Edison (ConEd) tariff and

Oklahoma Gas and Electric (OG+E) tariff; and

 Real-time Pricing Tariff – Chicago Commonwealth Edison (ComEd) Residential Realtime Pricing (RRTP) tariff, based on PJM hourly market clearing price.

2.4.1. Flat Rate Tariff 

A flat rate tariff is one where the electricity price does not change over time. This is the most 

commonly used residential tariff today. The flat rate tariff used in this study is based on the D.C. 

Pepco flat rate, which was $0.11/kWh in 2014. The flat rate tariff model includes generation, 

transmission, and distribution costs, but excludes taxes and fees. 

2.4.2. Time-of-Use Tariff

Time-of-use (TOU) tariffs are characterized by having different rates during specified blocks of 

time. Higher rates apply during time blocks where higher demand is expected and lower rates 

apply during time blocks where lower demand is expected. For example, there might be one rate 

for Monday – Friday daytime and a lower rate for evenings and weekends. There may also be 

seasonal variations in time blocks or rates. 

In this report, two TOU tariffs are used for the economic value analysis: New York Consolidated 

Edison (ConEd) residential TOU tariff, and Oklahoma Gas & Electric (OG+E) TOU tariff. The 

ConEd tariff has extreme rates compared to other U.S. utilities due to transmission constraints 

around New York City. The OG+E tariff has more moderate price differentials. Table 1 shows 

the ConEd TOU rates for residential customers in New York City with less than 10 kW peak 

demand [9]. Table 2 shows the OG+E TOU residential tariff [10]. Both TOU tariff models 

include generation, transmission, distribution cost, excluding taxes and fees. 

Table 1. New York Consolidated Edison time-of-use rates for residential customers

ConEd SC1-Residential Rate II – Voluntary Time-of-Day (basic service charge excluded)

Total Supply Charge Energy Delivery Charge

Jun-Sep Mon-Fri 10am-10pm 48.78 ¢/kWh 18.03 ¢/kWh 30.75 ¢/kWh

All other hours 5.25 ¢/kWh 4.07 ¢/kWh 1.18 ¢/kWh

Other Mon-Fri 10am-10pm 23.84 ¢/kWh 12.69 ¢/kWh 11.15 ¢/kWh

months All other hours 5.46 ¢/kWh 4.28 ¢/kWh 1.18 ¢/kWh
10

Table 2 Oklahoma Gas & Electric time-of-use rates for residential customers

R-TOU - Residential TOU (basic service charge excluded)

 Energy Charge

Jun-Sep Mon-Fri 2pm-7pm 14.00 ¢/kWh

All other hours 2.70 ¢/kWh

Other months All other hours 5.73 ¢/kWh

2.4.3. Real-Time Pricing Tariff 

A real-time pricing tariff is characterized by a continuously varying price that reflects the cost of 

generation at that time. In this study a Chicago Commonwealth Edison (ComEd) Residential 

Real Time Pricing (RRTP) Tariff was used [11]. The ComEd RRTP tariff has hourly prices that 

are derived from PJM wholesale spot market prices. RRTP pricing data were collected during the 

period from July 2013 – July 2014. Normally RRTP unit pricing remains below the flat rate 

price. However, during the summer season, RRTP price may rise as high as several dollars per 

kWh during extreme peaks. Figure 9 illustrates RRTP price for selected days in January 2014 

and July 2013. Prices in January are around 0.10 $/kWh. Peak prices in July can be nearly 2.00 

$/kWh [12]. The RRTP tariff model includes generation, transmission and distribution costs, 

excluding taxes and fees. 

2.5. Purchase/Sellback Price 

The relationship between purchase price and sellback price varies by location. For some utilities 

the sellback price is lower, accounting for costs that are not related to generation expenses. An 

example of this is the Pepco service area where the sellback price varies seasonally but overall is 

about 70 % of the total purchase price [13]. In some places policies are established to encourage 

PV generation and there is a sellback premium. Minnesota is an example where a determination 

of the “value of solar” results in a sellback price that is 120 % of the purchase price [14]. In 

other places the sellback price is the same as the purchase price. For the analysis in this report,

sellback prices of 70 %, 100 %, and 120 % of the purchase price were considered. 

0.0

0.5

1.0

1.5

2.0 Grid Power Price ($/kWh)

Grid Energy Price

Jan 9 Jan 10 Jan 11

0.0

0.5

1.0

1.5

2.0 Grid Power Price ($/kWh)

Grid Energy Price

Jul 9 Jul 10 Jul 11

Figure 9. Historical ComEd real-time pricing for residential customers. 
11

2.6. Demand Charge 

Utilities must provision the grid infrastructure (e.g., transmission lines, substations, transformers, 

and peaking generators) to meet demand at all times. Utilities may place a demand charge in the 

customer tariff to cover the cost, where the customer is charged per kW for the highest demand 

recorded in a sliding 15, 30 or 60 minute window each month. A demand charge motivates 

customers to take action in order to reduce their peak demand; there is also some potential 

reduction in the utility’s cost [15]. There may also be a penalty for exceeding some agreed upon 

limit. The demand charge may vary at different times of the day. The equation below shows how 

demand charge cost is calculated in HOMER, where Cgrid,demand is the total cost of the demand 

charge [5]. 

Cgrid,demand = ∑ ∑ Pgrid,peak,i,j ∙ cdemand,i

12

j

rates

i

 (2) 

where, 

Pgrid,peak,i,j = peak hourly grid demand in month j during the time that rate i applies [kW]

cdemand,i = grid demand charge for rate i [$/kW/month]

For most residential customers today, there is no separate demand charge included on their 

monthly bills. For ComEd RRTP customers, demand charges are separated from their electricity 

supply charges. Demand charges are calculated based on capacity obligation and capacity charge 

rate (Equation 3). Capacity obligation represents a customer’s expected level of hourly usage in 

the afternoon on a hot summer day (based on previous year’s data). Capacity charge rate is 

updated annually based on the cost of capacity in the PJM wholesale market price [11].

 Demand Charge ($) = Capacity Obligation (kWh) × Capacity Charge Rate ($/kWh) (3)

Demand charges could impact the economic value results significantly. This report applies the 

Chicago ComEd demand charge and NY ConEd demand charge on top of the RRTP tariff 

(without demand charge) as a reference. The Chicago ComEd demand charge is constant at all 

times throughout the year (July 2013- Jun 2014) at 22.00 $/kW/month. The NY ConEd demand 

charge rate follows the TOU schedule with a rate of 17.98 $/kW/month on peak (10a.m.-10p.m., 

Mon.-Fri.) and 4.38 $/kW/month off peak (all other hours). This is in addition to the supply and 

energy charges shown in Table 1. 

2.7. Energy Storage Model 

2.7.1. Optimum Sizing of energy storage 

Energy storage can be a valuable resource for residential customers to shed load as well as store 

solar energy. Optimal sizing of energy storage, in order to minimize the COE, depends on many 

factors such as purchase/sellback price, demand charges, size of the PV array, size of the 

inverters, setpoint state of charge, and dispatching strategies. 
12

There are many types of commercially available electrical storage systems that could potentially 

be applied in residential applications. An economic analysis conducted in 2012 [16] concluded 

that most types of electrical storage were not yet cost-effective. To investigate the impact of 

energy tariffs on the economics of energy storage, a commercially available battery technology 

not available in 2012 was selected as an example storage system. This battery has the following 

characteristics: 

 cycle life (defined as retained capacity = 80 % initial capacity) of more than 3000 cycles,

 100 % initial depth of discharge;

 nominal DC voltage 48 V and 51 Ah capacity at 20 hour discharge (one battery unit has

nominal 2.45 kWh capacity);

 15 A maximum charging current; and

 Cost: $1,115 per unit for installation, $200 per unit for replacement, no O&M cost.

2.7.2. Dispatch Strategy 

HOMER supports two dispatch strategies for battery storage, “load following” and “cycle 

charging” [5], with cycle charging chosen for this research. In the cycle charging strategy, 

batteries are charged by both the grid’s power and PV solar production. PV power is applied first 

to serve house load. If excess PV power is available it is either used to charge the batteries or 

sold to the grid depending on the grid sellback price at the time. If the battery charge is below its 

setpoint state of charge, PV power is not available, and the grid purchase price is less than the 

battery energy cost plus battery wear cost, then the battery will charge from the grid until it 

reaches the setpoint state of charge. If the battery is above its minimum allowable state of charge, 

the grid purchase price is higher than the battery energy cost plus battery wear cost, and PV 

power cannot meet the load, then the battery will discharge. For the simulations conducted, the 

following dispatch parameters were used: 

 battery minimum allowable state of charge 20 %

 battery setpoint state of charge 80 %

3. SIMULATION RESULTS

3.1. Sizing of Energy Storage

The value of batteries and optimal number of batteries is shown to increase with both the average

price of electricity, as well as the magnitude of price variation present in tariffs. In this section,

different sizes of the energy storage units (batteries) are analyzed along with COE for different

tariffs. Figure 10 shows COE for PV systems with various battery capacities for different tariffs.

Similar patterns are seen for flat rate, OK TOU, and RRTP tariffs where COE increases with

battery size. Although increasing the battery size does not reduce COE for these tariffs, the

patterns get steeper starting at 9.8 kWh battery size. The 9.8 kWh battery size is used for energy

storage analysis in Sections 3.2 to 3.5.
13

Figure 10. Cost of energy based on different sized energy storage under different tariffs. 

The cost of storage for the NY TOU tariff shows a different pattern. Due to the high NY TOU 

electricity rate, COE drops down as batteries are added up to a size of 19.6 kWh (8 batteries, 

about half of the average daily consumption), but then increases for the 39.2 kWh size. The 19.6 

kWh energy storage delivers a COE of 0.05 $/kWh. This shows that batteries can increase grid 

reliability under the NY TOU tariff while also reducing costs to the homeowner. For the other 

tariffs, use of batteries provides no benefit to the homeowner for arbitrage purposes. 

Figure 11. Impacts of RRTP and NY TOU energy rates to energy storage (batteries) state of 

charge. 

0

0.03

0.06

0.09

0.12

0.15

0.18

0.21

0.24

0 2.5 4.9 9.8 19.6 39.2

COE ($/kWh)

(kWh)

Flat Rate OK TOU NY TOU RRTP Battery Size 
14

Figure 11 shows the charging and discharging pattern for the 19.6 kWh battery option for the 

July and August summer period, demonstrating battery charging strategy performance for the 

ComEd RRTP and NY TOU rates. The battery system is fully depleted across the high price 

RRTP peaks in July and early August, while the TOU rate results in regular charge/discharge 

cycles. 

3.2. Effects of Dynamic Tariffs 

Figure 12 shows the impacts of the selected tariffs on COE for various combinations of DER.

Because the four tariffs come from different states, the baseline COE with No DER ranges from 

0.058 $/kWh (OK) to 0.178 $/kWh (NY). For this reason, it is the trend of each curve that is of 

interest, not the absolute magnitude. 

The Pepco Flat Rate COE starts from 0.116 $/kWh for no DER and rises to 0.154 $/kWh after 

PV array and energy storage are both applied to the system. The OK TOU COE jumps 

significantly when DER is applied to the system because of the capital cost of the PV array and 

the low base price for electricity. The Chicago RRTP COE increases from 0.131 $/kWh to 0.150 

$/kWh by adding DER. However, the NY TOU tariff leads to a strong benefit from the DER.

COE drops from 0.178 $/kWh to 0.055 $/kWh with the combination of PV array and energy 

storage. 

Figure 12. Cost of energy with various combinations of DER 

for selected tariffs.

These results show that the base price of electricity significantly impacts the economic viability 

of a PV system with or without storage. Only in the case of a high base price and extreme price 

fluctuations is the PV system economically viable. These results do not take into consideration 

renewable energy tax credits, which can have a significant impact and vary widely between 

locations. Section 3.6 will discuss the impact of tax credits, using Maryland renewable tax 

credits as an example. 
15

3.3. Renewable Fraction 

The renewable fraction, defined as the fraction of energy delivered to the load that is sourced 

from the rooftop PV, is shown in Figure 13 for each tariff. Although the NZERTF solar PV 

system produced slightly more power in the test year than was consumed by loads in the house, 

the amount of load served directly by power from the PV array was only 58 %. The remaining 

42 % of house power was sourced from the grid, while the excess power from the PV array when 

available was sold to the grid. 

The figure also shows that the tariff has no impact on the renewable fraction for the PV only case, 

since the consumption data was taken as a constant input. If loads had been shifted in response to 

the different tariffs (as might be expected), then there would be some variation in the renewable 

fraction. Figure 13 also shows that the battery charging algorithm does respond to the different 

tariffs in such a way that there is variation in renewable fraction. It also shows that adding a 

battery system lowers renewable fraction when the battery is used for arbitrage. 

Figure 13. Fraction of energy served by renewable power sources. 

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

 (No DER) (PV) (PV+Storage)

Renewable Fraction

Flat Rate OK TOU NY TOU RRTP
16

Figure 14. The amount of purchased electricity and sold for selected 

tariffs. The flat rate tariff data is covered by the red (OK TOU) lines. 

Figure 14 shows the amount of electricity purchased and sold under the four tariffs. Since the 

NZERTF consumed 13,176 kWh during the test year, the “no DER” system purchased the same 

amount of energy for all tariffs. Adding PV reduces the energy purchased and increases the 

amount sold, with no difference among tariffs. Results diverge when adding storage, since the 

amount sold or purchased is influenced by the tariff. In general, adding a battery system 

increases energy transactions between the system and the grid. 

3.4. Effects of Electricity Sellback Price 

Figure 15 shows how different sellback prices affect the cost of energy for the ComEd RRTP 

tariff. Three different sellback prices are considered: 70 %, 100 %, and 120 % of the purchase 

price. Customers with DER systems will see the most benefit for selling excess power if they get 

the higher (120 %) sellback price. While the 120 % price makes PV and storage more 

economical, the COE for PV + Storage with 120 % sellback price (0.139 $/kWh) is still higher 

than the base case with no DER (0.131 $/kWh). As expected, COE is increased from 0.131 

$/kWh (no DER) up to 0.176 $/kWh (PV + Storage) with the 70 % sellback price. 

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

 (No DER) (PV) (PV+Storage)

kWh

Flat Rate, Energy Purchased Flat Rate, Energy Sold

OK TOU, Energy Purchased OK TOU, Energy Sold

NY TOU, Energy Purchased NY TOU, Energy Sold

RRTP, Energy Purchased RRTP, Energy Sold

Energy Sold

Energy Purchased
17

Figure 15. Impact of sellback price on COE. 

3.5. Effects of Demand Charge 

Figure 16 shows the cost of energy for two different demand charge rates applied to the system. 

Chicago ComEd demand charge rates (22.0 $/kW/month) and NY Con Edison demand charge 

rates (17.98 $/kW/month on peak and 4.38 $/kW/month off peak) are applied on top of ComEd 

RRTP rates. The ComEd RRTP rate without demand charges is also shown for reference. 

Figure 16 shows that the ComEd demand charge approach results in higher costs for no DER, 

but benefits when PV panels are added to generate power. All PV power is produced on peak, 

and thus is paid at a higher rate under the ComEd tariff resulting in the lower COE with DER. 

Results show that demand charges do not impact the value of batteries. This result is likely due 

to a battery control algorithm that is not designed to flatten demand peaks. However, the demand 

charge in two existing tariffs represents half the monthly energy cost. Therefore, a battery with a 

charging algorithm designed to reduce house demand peaks could significantly reduce the 

monthly energy bill. However, this goal may conflict to some degree with shifting energy use to 

off-peak periods. 
18

Figure 16. Impacts of demand charge on COE for the RRTP tariff.

3.6. Impacts of tax credits on COE in Maryland 

Maryland has a variety of incentives that encourage investment in renewable and energy efficient 

technologies. Table 3 summarizes monetary incentives that apply to residential solar PV systems. 

Table 3 Maryland financial incentives for residential solar systems 

Financial incentive/payment Value

Upfront MD state tax rebate $1000

Federal tax credit 30 % of system cost

State Renewable Energy Credits (SREC). SRECs are 

tradable credits that represent the clean energy benefits of 

electricity generated from a solar energy system. When a 

solar system generates 1 MWh of electricity, an SREC is 

issued which can then be sold or traded separately from the 

power.

In the last several years, the MD market 

value of SRECs has stayed at 

approximately $150/MWh. The house 

PV system produced 13.7 MWh in the 

demo year, valued at approximately 

$2000.

Tax credits and financial incentives were not included in the analysis up to this point. However, 

the tax credits and incentives could have significant COE impact on a homeowners purchase 

decision. The homeowner receives the PV energy and any sellback credits for energy provided to 

the grid. In Maryland, the incentives and tax credits are provided upfront to the homeowner who 

purchases a solar system. To illustrate the impact of the Maryland incentives, the initial credits 
19

were applied to the system cost and a yearly payment of $2,000 (SRECs1) was assumed. Figure

17 shows the revised COE when including these Maryland incentives. Results show that the cost 

of PV is significantly reduced when these tax rebates/credits and SRECs are included. 

Figure 17. Cost of energy including Table 3 renewable rebates and credits. 

Comparing Figure 17 with Figure 12, it is clear that addition of a PV system is economically 

viable for any of the four tariffs, with COE ≤ 0.05 $/kWh, including for the existing Maryland 

flat rate tariff. The addition of storage does not lower the cost unless there are significant price 

differentials. However, a homeowner may want to purchase a battery system for backup power. 

4. CONCLUSION

The impact of four different electricity tariffs on the economics of customer distributed energy

resources was evaluated for the NIST Net-Zero Energy Residential Test Facility (NZERTF). The

analysis was conducted using Hybrid Optimization Model for Electric Renewables (HOMER)

simulations that were validated using performance data from the NZERTF. The tariffs

investigated represent published information for tariffs in use in various locations in the United

States. A flat-rate tariff from the D.C. Potomac Electric Power Company (the electricity provider

for the NZERTF) was used as a base case. The other tariffs were a time-of-use (TOU) tariff from

Oklahoma Gas and Electric, a TOU tariff from New York Consolidated Edison (ConEd), and a

real-time pricing tariff from Chicago Commonwealth Edison (ComEd).

The total cost of energy (COE) was used as the economic performance metric. This includes the 

cost of electricity purchased, credit for energy sold, capital equipment costs, and operation and 

1

 In reality, the SREC market value will likely fluctuate, and may change considerably, over the life of the system. 

This is therefore only a rough estimate of SREC value. 
20

maintenance cost. For each tariff, three cases were considered: no DER, PV generation, and PV 

generation with battery storage. The impact of renewable energy incentives based on current 

policies in the state of Maryland was also presented. The energy consumption pattern was 

constant for all the simulations; there was no attempt to shift or reduce loads based on price of 

electricity. 

The results show that for three of the four tariffs the use of customer DER without incentives 

increased COE. The exception was for the New York TOU tariff. In this case the significant 

difference between peak and off-peak prices made both PV and battery storage economically 

viable. Applying Maryland renewable energy incentives made the PV array economically viable 

for all tariffs. 

Results show that the COE initially increases slightly for three of the tariffs as battery storage is 

added and eventually rises more steeply. For the ConEd TOU tariff, adding storage is initially 

beneficial and then begins to increase COE. Applying the Maryland incentives did not 

significantly affect this pattern, but did reduce COE significantly. For the ConEd TOU tariff, the 

addition of PV plus batteries lowered the COE from 0.18 $/kWh to 0.05 $/kWh over the life of 

the PV + battery system (before applying incentives). In this study the benefit of standby power 

during an outage was not considered. 

The COE is reduced in all cases with DER for all tariffs when the sellback rate is higher. Lower 

sellback rates make selling PV power to the grid less profitable and make it more profitable to 

store excess PV generation for use during peaks. However, the DER system may not be 

economically justified for lower sellback rates. 

The impact of demand charges was investigated and the results showed no impact on the value of 

batteries. This may be a result of the HOMER battery control algorithm, which was not designed 

to flatten demand peaks. The demand charges in two existing residential tariffs (ComEd and 

ConEd) represent approximately half the monthly electric bill cost. Therefore, a battery charging 

algorithm designed to reduce demand peaks could potentially reduce the monthly energy bill 

significantly. 

While the NZERTF solar PV system produced slightly more power in the test year than was 

consumed by loads in the house, the amount of power from the PV system that was actually 

consumed directly by loads in the house (the local renewable energy fraction) was only 58 %. 

The remaining power from the PV panels was sold to the grid. Adding battery storage reduced 

the renewable energy fraction because power from batteries was sometimes sold to the grid 

during high price periods. 

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21

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