How California Hotels Can Lower Electricity Costs Without Buying or Leasing Equipment
A plain-language guide for hotel owners and asset managers in PG&E, SCE, SDG&E, SMUD and LADWP territory
Most hotel owners don’t think, “I need a battery.” They think, “Our electric bill is too high.” This guide starts with that problem, and with the California rate rules that make it worse.
Below is what drives a California hotel’s electric bill, what a battery energy storage system (BESS) changes at the property, what stays the same, and what you actually have to do. The short answer to that last part: very little. For the financial side in more depth, including how savings flow to NOI, read our Q&A with Chris Nguyen on battery storage and hotel financials.
Why California hotel electric bills run high
A hotel never really closes. ENERGY STAR estimates that U.S. hotels spend about 6% of their operating costs on energy.[1] The loads that keep guests comfortable run around the clock, and many of them run at the same time:
- HVAC for guest rooms, lobbies and meeting space
- Domestic hot water
- Laundry
- Kitchens and refrigeration
- Pools and spas
- Elevators
- EV charging, at a growing number of properties
California utility rates turn that load profile into two separate costs. Most of the opportunity sits in understanding both.
Demand charges: one spike sets the price for the month
Most larger California hotels are on demand-metered commercial rates. Besides charging for the energy you use (kilowatt-hours), these rates charge for the highest rate of power the property draws (kilowatts), usually measured over a 15-minute interval. When several loads peak together, say a hot afternoon with laundry running and a full conference room, that one 15-minute spike can set the demand charge for the whole billing period.
The numbers are large. On PG&E’s B-19 rate, summer demand charges at secondary voltage are $46.16 per kilowatt for the highest demand during the 4–9 p.m. peak period, plus $37.37 per kilowatt for the highest demand at any time of the month.[2] A spike that adds 100 kW during the peak window can add about $4,600 to that month’s bill, and about $8,400 if it also sets the month’s overall maximum.
Some charges also look back further than one month. SDG&E bills its non-coincident demand charge on the higher of the current month’s maximum demand or 50% of the highest demand over the past year,[3] so one bad afternoon in August can still show up on a bill in the spring.
Time-of-use pricing: the most expensive hours are your busiest
California’s major utilities price commercial electricity by time of day, and the on-peak window generally runs from 4 to 9 p.m. That is check-in, evening dining, pool and fitness use, and guest rooms cooling down after a warm day. It is exactly when hotels are busiest.
| Utility and rate | On-peak window | Summer demand charges |
|---|---|---|
| PG&E B-19 (large commercial) | 4–9 p.m., every day; summer June–September | $46.16/kW peak-period maximum, plus $37.37/kW monthly maximum[2] |
| SDG&E AL-TOU-M (20 kW to under 200 kW) | 4–9 p.m.; summer June–October | $38.83/kW on-peak maximum, plus $30.21/kW non-coincident[3] |
| SMUD commercial, 21–299 kW | 4–9 p.m., weekdays; summer June–September | $9.96/kW summer peak, plus $6.454/kW site infrastructure[4] |
Energy prices follow the same window. On PG&E B-19, summer peak energy costs $0.18648 per kWh against $0.12037 off-peak.[2] SMUD’s 2026 commercial rate charges $0.2341 per kWh at the summer peak against $0.1215 off-peak.[4] SCE’s large commercial TOU-8 rate also bills separate facilities-related and time-related demand charges, with amounts that depend on the rate option and service voltage.[5] Los Angeles (LADWP) and other municipal utilities set their own rates, so each territory is modeled on its own tariff.
Your hotel may be on a different schedule than the ones above, and rates change several times a year. We track those changes on our news page and always model a property on its current tariff.
What the battery does
The battery stores energy when power is cheaper or demand is low, then supplies the building during expensive hours and peak moments. It sits behind the meter, on the hotel’s side, and works alongside the existing electrical system. Your guests and staff don’t notice anything, and nobody changes how they work.
The hotel buys less power during the 4–9 p.m. window, and the spikes that set your demand charges get flattened. Your utility, your meter and your electric service all stay exactly as they are. The How It Works section on our home page walks through the full process from analysis to operation.
Why there’s no capital cost
You don’t buy the battery, and you don’t lease it. SmartGrid Western provides the capital, the equipment, the installation, the monitoring and the ongoing operation. Three things fund the project:
- Investment capital. Investors fund the system at qualifying properties.
- Federal incentives. Battery storage is eligible for the federal clean electricity investment tax credit under Section 48E.[6] The July 2025 federal tax law ended the credit early for many wind and solar projects but kept it for energy storage, with new rules on foreign-sourced components.[7]
- Shared savings. The system lowers your electricity costs. Your hotel keeps an agreed share of those savings, and we make our money by sharing in the value the system creates.
There’s no capital budget request and no ongoing equipment or maintenance expense. The main budget change is planning for lower utility costs. Our benefits overview covers the rest of the model.
Wondering what demand charges cost your hotel? Send one recent bill and we’ll tell you if the property is a candidate. Free, with no obligation.
Check My HotelWho does what
Your part is mostly at the start: share your data, give us site access, and review the agreement. We handle everything after that, including the California-specific steps.
| Step | Hotel owner | SmartGrid Western and partners |
|---|---|---|
| Screening | Send one recent electric bill | Review the bill and tell you whether the property looks like a good candidate |
| Analysis | Share 12 months of bills or authorize access to your utility data | Model the savings against your tariff and interval data, size the system, prepare the proposal |
| Agreement | Review and sign | Explain how savings are calculated and what each party is responsible for |
| Engineering and permits | Provide site access and an on-site contact | Design, local permitting and fire-code review, and utility interconnection, which runs under Rule 21 at PG&E, SCE and SDG&E[8][9] |
| Installation | Approve the equipment location | Construction and commissioning, with any shutdown planned in advance |
| Operation | Keep running the hotel | Monitoring, optimization, maintenance and reporting for the life of the agreement |
| Cost | $0 capital, $0 maintenance | Funds the equipment, installation and upkeep |
Which California hotels tend to fit
The strongest candidates combine a demand-metered commercial rate with loads that peak together: central HVAC, on-site laundry, full-service kitchens, pools, meeting space and EV charging. Properties with large summer afternoon peaks in PG&E or SDG&E territory are often where the numbers work first.
Hotels are one of several property types we work with. See the full list on our industries page, or read our guide for California grocery stores and cold storage. If you know a business spending $10,000 or more a month on electricity, our referral program makes the introduction simple.
The honest conditions
This program is a strong fit for many hotels, but not all of them. Here are the three conditions to know up front.
- Not every property qualifies. The economics depend on your electricity use, your utility tariff, your load profile and your interconnection requirements. We evaluate each site before recommending anything.
- The equipment needs space. Most of it sits outside the building, so the site needs a suitable spot for the battery and its associated infrastructure.
- Timing matters. Available capital and incentives change over time, so a property that qualifies today may face different terms later.
The property does not own the system. In return for hosting it, your hotel shares in the savings it creates.
Three months of savings, up front
For qualified hotel projects, there is one more reason to look now. Qualified hotel owners may receive an upfront payment equal to three months of projected savings when the project proceeds.
The calculation, qualification requirements and final terms are set out in each property’s proposal and agreement.
Questions California hotel owners ask
Do California hotels pay demand charges?
Most larger hotels do. Hotels on demand-metered commercial rates, such as PG&E B-19 or SDG&E AL-TOU-M, pay a charge per kilowatt based on their highest 15-minute demand, on top of the charge for energy used. Smaller properties on non-demand rates pay mostly for energy and time of use.
When is electricity most expensive for a California hotel?
On most commercial time-of-use rates at PG&E, SCE and SDG&E, the on-peak window runs from 4 to 9 p.m. SMUD’s summer peak is 4 to 9 p.m. on weekdays. Summer peaks cost the most, and summer runs June through September at PG&E and SMUD and June through October at SDG&E.
Our hotel buys power from a community choice aggregator. Does this still work?
Usually, yes. With a community choice aggregator (CCA) such as San Diego Community Power or Clean Power Alliance, the CCA supplies the generation and the utility still delivers the power and bills delivery charges, including demand charges. A battery behind the meter reduces both. Nothing about your CCA or utility account changes.
Will the battery keep the hotel open during a power outage or PSPS shutoff?
Not by default. A system designed for bill savings is not a backup power system. Riding through an outage or a Public Safety Power Shutoff requires extra engineering, including selected critical loads, switching equipment and reserved battery capacity. If resilience matters to your property, we model it as a separate option.
Is a battery safe to install at a hotel?
Systems are designed to meet applicable UL and NFPA standards and the electrical, fire and permitting requirements of the local jurisdiction. Temperature, voltage and current are monitored continuously, and protective controls shut the system down and alert operators if conditions turn abnormal.
What do we need to send to get started?
One recent electric bill is enough for the first screen. If the property passes, we ask for 12 months of billing or authorization to pull your utility data, which lets us model your actual demand peaks against your tariff.
More answers about ownership, leases and property sales are on our questions page.
References
- [1] ENERGY STAR, Energy Savings Tips for Small Businesses: Lodging
- [2] Pacific Gas and Electric Company, Electric Schedule B-19
- [3] San Diego Gas & Electric, Available Rates for Medium Commercial Customers (effective August 1, 2026)
- [4] Sacramento Municipal Utility District, 2026 Commercial Rate Guide
- [5] Southern California Edison, TOU-8 Rate Fact Sheet
- [6] Internal Revenue Service, Clean Electricity Investment Credit
- [7] Energy-Storage.news, The One Big Beautiful Bill Act and US energy storage development
- [8] California Public Utilities Commission, Rule 21 Interconnection
- [9] California Energy Commission, California Energy Storage Permitting Guidebook
Rates are quoted from the utility documents above as of October 2026 and change periodically. Savings, eligibility and timing are site-specific. Program terms are governed by the final proposal and executed agreement.