Under the existing commercial framework of electricity in Malaysia, commercial and industrial customers are required to pay for the peak power demand charge every month. Usually, the peak demand charge can contribute up to 30% to their electricity bills due to the use of open-cycle gas power plants that deliver expensive electricity to the customers. Therefore, alternative means are sought after in order to reduce the peak demand for the customers. Distributed small-scaled energy storage can offer a good option to reduce the peak. This paper aims to identify the financial benefits of the energy storage system for utility companies and customers. An energy dispatch model is developed in HOMER to determine the cost of electricity. The model considers the heat rates of power plants in calculating the costs of electricity under different regulatory frameworks of natural gas with various prices of battery components. Apart from that, the cost-benefit for the customers under various electric tariff structures is evaluated. Four battery storage technologies, namely lead acid, vanadium redox flow, zinc-bromine, and lithium-ion are considered. The simulation results show that the storage system with lead acid batteries is more cost-effective than other battery technologies. The customers can reduce their electricity bills with the payback period of 2.8 years. The generation cost for the power system with energy storage is lower than that without energy storage. Besides, the system with energy storage has lower greenhouse gas emissions than that without energy storage. The deferral of the reinforcement of transmission and distribution infrastructure can be achieved with the installation of energy storage at distribution network. (C) 2015 Elsevier Ltd. All rights reserved.