Every summer, hotel operators brace for higher energy bills, and every summer, many treat the increase as weather: unavoidable, the cost of doing business. After years advising hospitality and commercial clients across the country's deregulated markets, we've come to see that as the single most expensive assumption in the building.
Most operators have already done the hard work on consumption. They've upgraded HVAC, switched to LED, installed smart controls. And costs keep climbing anyway. The reason is that the bill was never only about how much energy you use. It's about when you use it, how you buy it, and what exposure you're carrying that no one is actively managing. Across the portfolios we advise, the largest cost increases consistently show up at properties that have already invested heavily in efficiency. The question is no longer whether the building is efficient, it's whether demand, procurement, and market exposure are being managed at all.
Faced with rising costs, most operators are presented with familiar solutions: install solar and storage, enroll in demand response, use a mix of fixed and index pricing structures, or lock in long-term contracts.
Each can create value. But applied in isolation, they often fail to address the underlying cost drivers. The issue isn’t a lack of solutions, it’s applying them before understanding what problem they’re solving.
Why Summer Concentrates the Cost
Summer is the highest-demand season across most of the U.S. As temperatures climb, millions of buildings run cooling at once and the grid hits its annual peak.
Air conditioning alone accounts for roughly 20% of energy usage for hotels. That cooling load doesn't just raise consumption, it concentrates it into a few hours that the grid, and your utility, price very differently from the rest of the day.
Hotels are uniquely exposed. They run around the clock, can't curtail when prices spike, and carry energy-intensive amenities: pools, kitchens, laundry, meeting spaces; all that run hardest in the season when rates are highest. Higher occupancy drives higher revenue and higher energy cost simultaneously. The job is keeping the second from eroding the first.
The Hidden Cost of Peak Demand
Most bills break into two very different things. Consumption, the kilowatt-hours you burn, is the part everyone watches. Demand, the highest rate of draw, in kilowatts, over a short interval, is the part that quietly drives the cost.
A hotel that peaks at 1,200 kW can spike to 1,350 kW during a heat wave, and that brief surge can add roughly $1,250 to the monthly bill for the next 12 months.
The mechanism differs by market, and this is where it pays to know your own:
In markets with conventional demand charges (much of PJM, the Northeast, California), that monthly peak sets your demand charge directly, and many tariffs carry a ratchet, meaning a single summer spike can set a floor on billed demand for months afterward, sometimes most of a year
In PJM, your demand during the grid's few annual coincident peaks sets your capacity obligation for the entire delivery year that follows.
In ERCOT, where our Houston clients operate, there's no conventional demand charge from the retailer at all. Instead, your demand during four specific summer intervals (the “4CP”) sets your transmission cost allocation for the next year. Same principle, entirely different lever.
Essentially, a few hours, often across a handful of days, can shape costs long after the heat wave passes. If you don't know which hours matter in your market, you can't manage them.
From Load Shedding to Load Shifting
Once operators understand demand, the instinct is to cut load during the peak, turn things down, turn things off. For a hotel, that runs straight into a wall: the grid's peak is your peak.
The hot afternoon the system strains is the same afternoon every room is occupied and every system is running. You can't shed your way out without touching the guest.
The clearest version pairs on-site solar with storage: solar charges the battery through the day, and the battery discharges through the peak window, so the grid sees a lower demand even though the building's actual load never changed. Other levers shift load, too: pre-cooling before the peak, staging laundry, pool pumps, and EV charging outside the costly hours. The goal isn't a warmer guest or a darker lobby. It's separating when energy is consumed from when it's purchased.
Energy Assets: Where Storage and Solar Fit
This is where storage earns its place, because a battery is the only lever that reliably shaves a hotel's peak without touching a single guest. On-site solar charges the battery through the day; the battery then discharges through the expensive window, cutting the grid-side peak that sets the demand charge, while the building's actual load never changes.
Two cautions worth flagging to any operator before they sign:
The 30% storage credit now carries a sourcing test, projects must clear a minimum non-foreign content threshold, and a project that fails it loses the credit. That's the difference between a two-year and a nine-year payback.
Solar is a different tool for a different job. It reduces daytime consumption; it does not, on its own, shave the evening peak. And its federal credit is on a hard clock, construction must begin by mid-2026 or the project be placed in service by end of 2027. Solar and storage can be powerful together, but they solve different problems and shouldn't be bought as one undifferentiated “green upgrade.”
The honest answer to “should we install storage?” is “it depends on your market, your tariff, and your load”, which is exactly why the asset decision comes last, not first.
Demand Response, Properly Understood
Storage and load-shifting are things you do inside your building. Demand response (DR) is something different: it's a contractual relationship with the grid. Through an ISO program- PJM's capacity and economic DR, ERCOT's Emergency Response Service, comparable programs in NYISO and the other markets, or through an aggregator, you commit to reduce load when the grid operator calls, and you're paid for that commitment.
This distinction gets blurred constantly, and it matters. Adjusting set-points, optimizing HVAC schedules, and trimming non-essential loads are good load-management practices, but on their own they are not demand response. DR is the program that pays you for the capability, with a dispatch signal on one side and a performance obligation, and a non-performance penalty, on the other. An operator should know which one they're being sold.
For a full hotel, the same comfort constraint applies: participating in DR does not mean shutting off the air conditioning on a sold-out August weekend. It means having pre-positioned, flexible load, pre-cooling, building automation, non-essential equipment, backup generation where appropriate, storage where installed, that can answer a dispatch call without a guest noticing.
The hidden cost of summer isn't the utility bill. It's everything underneath it that no one is actively managing, and nearly all of it can be if it’s understood first.
There's a sustainability dimension here that's more than branding. The grid's most stressed hours are also its dirtiest, when the highest-cost, highest-emissions peaker plants come online. Curtailing or shifting load during exactly those hours cuts cost and carbon in the same move, a rare case where the financial and environmental cases point the same direction. The U.S. Department of Energy has identified this demand flexibility as a core tool for grid reliability and system-cost reduction. And like storage, its value depends entirely on how it fits within the broader strategy.
A Framework for Decision-Making
The mistake we see most often isn't doing the wrong things, it's doing them in the wrong order, usually leading with the asset because it's the most tangible. The sequence that actually works runs the other way:
Financial - procurement strategy. How is your contract structured, when do you buy, and how does it treat the capacity and transmission costs your summer peaks drive? This is the cheapest lever and the one most often mispriced.
Operational - load intelligence. When do your peaks actually occur, what drives them, and which hours matter in your market? You can't manage what you haven't measured.
Physical - energy assets. Storage and solar, sized to the load and deployed only where the economics support them.
Start with cost structure, not hardware. The assets come last because they're only as valuable as the understanding underneath them.
Looking Ahead
Summer will always bring heat and higher consumption. What's changing is that energy strategy has become a business function rather than a facilities afterthought. As demand grows and markets get more volatile, the operators who pull ahead won't be the ones who simply use less. They'll be the ones who understand their exposure, manage when and how they buy, and deploy assets only where they earn their keep.
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