I would expect city-wide storage to be cheaper. The electricity I use on a day-to-day basis changes (ex: Dishwasher, Cooking, Laundry). Average it out across a neighborhood, or city, and things become far more consistent.

A typical electric dryer is 3000 Watts. If you do 2-hours of laundry one night, you'll need 6kWhr storage JUST for drying (not even laundry) !! You might typically need 15 kW of storage per day, but you'll need 20kW or maybe even 30kW of storage to be comfortable and cover all possible use cases.

A city can take advantage of this in several ways. City-scale can allocate the average 15kW-hrs of storage needed for a typical night, and then maybe 2.5kW-hrs of "non-typical" storage that's shared between the whole neighborhood. Across 100-households, this +2.5kWhr "excess" can be allocated to ~40 households... and each of those 40 households can go +6kW-hrs above typical (ie: decide to do laundry that night).

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Some things will scale better on a per-house level. Air conditioning is almost certainly better per-house, because its somethings the whole neighborhood needs at the same time. But there are better technologies out there than Li-Ion batteries, such as Ice-Bear's thermal energy storage. (https://www.ice-energy.com/)

Store 50F water during the night inside of a highly insulated tank. Blow cold-air (from the 50F tank) to cool the house during the day. Modern insulation can keep a tank of water cold for many, many days, and water is about as cheap of a "energy storage" mechanism as you can get.

This "demand-shift" technology is best served by a smart-grid: if the city can provide a floating-cost of electricity, and also inform appliances that the cost of electricity is changing... then those appliances (ie: Air Conditioners) can turn on when the price of electricity is cheapest.

I agree with your analysis, but I'm going to take the opposite view because of one factor that you didn't consider: power outages. People want to have some standby storage at their house anyway, and once they have it they may as well use it to keep rates down.

(I think the real answer is somewhere in the middle, but disagreeing is more fun)

This is also a density problem. If you've got enough people living nearby it becomes easier just to make sure the power never goes out.

Nobody outside of datacenters and emergency services cares for power outages if they are sufficiently rare.

An outage-ridden grid propped up with uncoordinated batteries is a recipe for staying outage-ridden forever because everybody will charge at the same time.

I was talking with someone who runs a large wind power company. I'd assumed that the best place for storage was close to the consumers, but what I'd missed is that the grid itself is often the limiting factor. If you put batteries near the consumer and charge them when wind is cheap, you need twice the grid capacity. If you put batteries close to or inside the wind turbines, you can charge them when you've excess wind, and discharge when wind is lower, but you can get by with a lot less grid capacity because you don't need to tranmit the generation peaks over it.

I'm certainly no expert but I think tiers of battery storage will be necessary. Some collocated with generation sites, some at distribution sites in cities, and probably local batteries in commercial real estate and neighborhoods if not households.

There are both local and global shifts in demand. If it were the case that only local storage options existed the system would be extremely inefficient during abnormally high peak demand that was localized to one area. Think of a heat spell in Central Valley of California. Storage would need to move from tiny batteries scattered throughout The Bay Area to be routed to the Central Valley to power AC units. It would be more efficient if there were larger local storage sites in Sacramento and Fresno.

On the other hand if we only had huge storage sites that are collocated with generation sites then as an individual you might be able to game the market through arbitrage with one big highly efficient battery. Take in power at night when its cheap and sell it when it's expensive during the day. Of course everyone will catch on to this and want a battery of their own. This depends on battery efficiency, but if you can get near the efficiency of the battery at the generation site then you can undercut their profit margin. You could at the very least use the local battery when possible to power your own home/business to save some money on your power bill.

batteries help with supply and demand, more transmission lines also help to get power to places that need it. To fully utilize small batteries need smart meters and smart grid. your Tesla could be used to run the dishwasher at 6 pm peak usage and get recharged at 2m when there is abundant hydropower.

Australia uses Tesla large scale battery system to infill gaps like the time between when demand spikes and a generator comes online. very profitable.

supply - makes sense to have large batteries to store excess energy produced for power (I like the combo of wind turbines and flywheels allowing more uniform power to be distributed)

demand - makes sense for every house to have its own battery to arbitrage on the price difference with real-time pricing. putting a floating price on consumption will hopefully lead to a more efficient market and less coal.