Battery storage for business

A battery lets a business store electricity and use it later, rather than using or exporting it the moment it’s generated or bought. For premises with solar panels, a variable tariff, or spiky demand, that flexibility can be worth real money. This guide sets out what battery storage does, the grid connection and safety rules to check, and how it’s taxed.

What does battery storage actually do for a business?

A business battery stores electricity so it can be released when it’s more useful, cutting waste and giving you more control over when you draw power from the grid. The main uses are:

• Storing your own solar output. Without a battery, solar power you don’t use immediately is exported (often at a much lower rate than you pay to import). A battery lets you use more of it later in the day. See our commercial solar panels and Smart Export Guarantee guides for how export payments work.
• Peak shaving. Discharging the battery during your highest-demand periods can reduce your peak demand, which matters if your network charges or capacity charges are based on that peak.
• Time-of-use arbitrage. Charging the battery when your electricity is cheap (typically overnight on a time-of-use tariff) and using that stored power during more expensive periods. Our time-of-use tariffs guide explains how these tariffs work.
• Backup power. Some systems can keep essential equipment running through a short grid outage, though this depends on how the system is designed and installed.

Which of these matters most to your business depends on your load profile, whether you already generate your own electricity, and what tariff you’re on.

How much does commercial battery storage cost?

There’s no official government cost data for non-domestic battery installations, unlike the DESNZ figures published for solar PV and the MCS data collected for heat pumps. Cost depends heavily on the battery’s usable capacity (kWh), its power rating (kW, which determines how fast it can charge and discharge), whether it’s paired with existing solar, and any work needed on your electrical supply or the grid connection.

To compare quotes fairly:

1. Ask for the usable capacity in kWh and the continuous power rating in kW, not just a headline “size.”
2. Check the warranty, expected cycle life, and any guaranteed capacity retention over time (batteries degrade with use).
3. Ask what’s included: the battery, inverter, installation, any switchgear or grid connection work, and monitoring software.
4. Get a clear statement of what the system is being sized to do, whether that’s storing solar output, peak shaving, or both, since undersizing or oversizing for your actual goal wastes money either way.
5. Ask for the round-trip efficiency (how much of the electricity you put in comes back out), since this affects how much you actually save over the battery’s life.

Worked example: storing solar output instead of exporting it

This is an illustration, not a quote, using rounded example inputs. Replace them with your own figures and a real installer quote.

Input	Value
Solar output that would otherwise be exported	2,000 kWh a year
Your electricity unit rate	25p per kWh
An example SEG export rate	4.47p per kWh (Ofgem’s SEG Year 5 average untied rate)
Battery round-trip efficiency	90%

Without a battery, that 2,000 kWh exported earns about £89 a year at the example export rate. Stored and used on site instead, after accounting for the 90% round-trip efficiency, it delivers about 1,800 kWh of usable electricity, saving about £450 a year at your unit rate. The difference, in this example, comes from replacing electricity you’d otherwise buy at your full rate rather than being paid the much lower export rate. The example ignores the battery’s own cost, so weigh it against a real quote and your own numbers, including how the battery performs once it starts to degrade. 5. Ask how the installer models your savings, and check the assumptions (your tariff rates, your usage pattern) rather than accepting a single headline figure.

Can a battery reduce your network and demand charges?

It depends which charge you mean, and one popular strategy from a few years ago no longer works the way it used to. Business electricity bills include several charges that a battery can potentially help with, and some it can’t:

Charge	Does a battery help?
Distribution (DUoS) time-banded charges	Often yes. If your DUoS Red band rates are higher at certain hours, discharging the battery during those hours instead of drawing from the grid reduces that cost.
Transmission (TNUoS) residual charge	No longer avoidable by demand timing. Since 1 April 2023, this has been a fixed daily charge based on your authorised supply capacity band, not your demand at specific “triad” periods.
Capacity or agreed supply capacity charges	Potentially. If a battery reduces your peak import, it may let you agree a lower capacity with your network operator, though changing this needs agreement with your DNO.
Standing charges	No. These don’t vary with when or how much you use.

Our time-of-use tariffs guide explains DUoS time bands and the 2023 TNUoS reform in more detail. Ask your energy manager or supplier to confirm which charges actually apply to your connection before assuming a battery will reduce a specific line on your bill.

Do you need permission to connect a battery to the grid?

Yes. Like solar panels, a battery must be notified to your local distribution network operator (DNO), and larger systems need approval before you connect. MCS guidance sets out the same two routes used for other small-scale generation and storage:

• G98: for smaller systems, notified to the DNO within 28 days of commissioning.
• G99: for larger systems, which need permission to connect before installation.

Because a battery can both import and export power, your installer needs to size and register the connection correctly, particularly if it’s paired with solar or another generator on the same connection. Build the G99 application timeline into your project plan if your system needs one. Our guide to what a DNO is explains who runs the network in your area.

If you’re considering a larger, grid-scale project intended to export or provide services to the wider network rather than just serve your own site, be aware that Great Britain’s battery connection queue has recently been heavily oversubscribed. Ofgem has been consulting on a financial commitment requirement for projects in that queue to filter out ones that are unlikely to actually be built. This mainly affects large, grid-connected battery developers rather than a business installing a battery to serve its own premises, but it’s a sign of how much larger-scale interest there is in the technology, and it’s worth being aware of if your business is ever approached about hosting a grid-scale battery on spare land.

Are there fire safety rules for commercial battery storage?

All businesses already have general duties to manage fire risk from equipment on their premises, and larger, grid-scale lithium battery systems have specific additional guidance. In England and Wales, the Regulatory Reform (Fire Safety) Order 2005 requires any business to assess and manage the fire risk from its premises and equipment, which includes a battery installation of any size.

For grid-scale battery energy storage systems in open-air settings with a capacity of 1MWh or more using lithium-variant batteries, the National Fire Chiefs Council (NFCC) publishes specific guidance covering risk management, detection and suppression systems, minimum distances from occupied buildings, and early engagement with the local fire and rescue service. This scale of project is well beyond what a typical small or medium-sized business would install behind its own meter, but it’s relevant if you’re hosting, or considering hosting, a larger storage asset on your land. For a smaller on-site system, ask your installer how the equipment is protected and where it should be sited relative to occupied areas, and check this against your existing fire risk assessment.

What tax and business rates rules apply to battery storage?

Capital allowances

Battery storage equipment is plant and machinery for tax purposes, and the Annual Investment Allowance (AIA) lets a business deduct the cost of most qualifying plant and machinery from taxable profits in the year of purchase, up to £1 million a year. HMRC treats solar panels specifically as “special rate” expenditure for capital allowances; whether a battery installed alongside or separately from solar falls into the same category, or the general “main rate” pool, can depend on how it’s installed and used, so ask your accountant to confirm the correct treatment for your specific project rather than assuming one rate applies.

VAT

HMRC’s reduced VAT rate for energy-saving materials, which can include battery storage installed alongside qualifying measures, applies to residential accommodation and buildings used solely for a relevant charitable purpose. A battery installed at an ordinary business premises is standard-rated at 20%. A VAT-registered business can usually reclaim VAT on its purchases in the normal way.

Business rates

In England, eligible plant and machinery used for on-site renewable generation and storage, including battery storage, is exempt from business rates until 31 March 2035. This is the same exemption that covers solar panels and heat pumps. If your premises are in Scotland, Wales or Northern Ireland, check the position with your local authority, since business rates are set separately there.

What should you check before buying a commercial battery?

1. Decide what you actually need it to do. Storing solar, peak shaving and backup power call for different sizing and, sometimes, different equipment.
2. Get your load and, if relevant, your solar generation data, so any proposal can be modelled against your real usage rather than a generic profile.
3. Confirm which of your network charges are genuinely time-varying, since a battery only saves money on the charges that actually change with when you draw power.
4. Check the grid connection process and timeline with your installer, including whether G98 or G99 applies.
5. Ask about fire risk and siting, and update your fire risk assessment to include the new equipment.
6. Compare warranty terms and expected degradation, not just the upfront price.
7. Check the tax and business rates treatment with your accountant before finalising your budget, since this can materially change the net cost.

Battery storage works best alongside other decisions about how you generate and buy electricity. See our guides to commercial solar panels, EV charging for business and time-of-use tariffs for how these fit together, and once your setup is decided, compare business energy quotes for the electricity you still need to buy.

Frequently asked questions