By Priya Raman · Updated October 8, 2026 · 6 min read
Short answer
Thermal energy storage makes cooling when power is cheap or plentiful and stores it as ice or cold water for use at peak hours. It can shrink chiller size and cut demand charges, and it suits sites with a sharp daytime peak. In Texas, summer ERCOT peaks and demand-based charges make it worth studying, but economics depend on the local tariff, and federal 179D deductions no longer apply to projects that began construction after June 30, 2026.
Thermal energy storage (TES) is a way to make cooling at one time and use it at another. A chiller runs when electricity is cheaper or the grid is less stressed, usually at night, and stores the cooling as ice or chilled water in a tank. During the afternoon peak, the stored cooling meets part or all of the load, so chillers run less or can be smaller. It is a battery for cooling, and the battery is a tank instead of a chemical cell.
How does thermal energy storage work?
Most commercial TES systems follow the same loop:
- Charge. At night, chillers cool a fluid and either freeze water in the tank (ice storage) or cool a large volume of water (chilled water storage).
- Hold. The tank holds the stored cooling with small losses.
- Discharge. During the day, the building’s loop draws cold from the tank, alone or alongside the chillers.
The cooling energy is counted in ton-hours: one ton-hour is 12,000 BTU of heat removed.
What are the main types of storage?
| Type | How it stores cold | Notes |
|---|---|---|
| Ice storage | Freezes water; stores latent heat (about 144 BTU per pound) | Compact: roughly 83 lb of ice per ton-hour; chillers must run at lower temperatures |
| Chilled water storage | Stores cold water in a large insulated tank, often stratified | Simple and efficient chillers; needs more volume, roughly 80 to 100 gallons per ton-hour at typical temperature differences |
| Phase-change materials | Salt-hydrates or other materials that melt near 40°F to 50°F | Less common; modular |
Ice tanks are smaller because freezing stores much more energy per volume than just cooling water. Chilled water tanks suit large campuses with space, and can double as fire-protection or emergency cooling reserves. Ice systems usually use glycol; see glycol chillers explained.
Full storage or partial storage?
- Full storage: the chillers shut off during the on-peak period, and the tank meets the entire load. It maximizes demand and energy cost savings, and needs the largest tank.
- Partial storage: chillers run all day at a steady rate and the tank covers the peak above that. This is more common because it needs smaller tanks and chillers, and keeps chillers running at full efficiency.
Controls decide when to charge and discharge based on the rate schedule and the weather forecast. A good control strategy matters as much as the hardware.
When does it pay off?
TES saves money in three ways:
- Demand charges. Many commercial tariffs charge for the highest kW in a month. Cutting the afternoon chiller draw lowers that bill.
- Time-of-use rates. Where on-peak energy costs more, shifting energy to off-peak saves money.
- Equipment size. Partial storage can let you install smaller chillers, pumps and electrical service. Chillers also run more at night when it is cooler, so they are more efficient; see air-cooled vs water-cooled chillers.
It makes sense where the load has a sharp peak: office towers, schools, hospitals, campuses, arenas and some data centers. It matters less for flat 24-hour process loads.
Why is TES interesting in Texas?
Texas has long, hot cooling seasons, and the electric grid peaks on summer afternoons. In ERCOT, large customers can face transmission charges tied to their usage during the grid’s highest demand intervals (the “4CP” system, in which the four monthly peaks from June through September set cost allocation). A building that lowers its draw in those intervals can reduce that exposure. Rules and tariffs differ by utility and customer class, and ERCOT’s program details change, so confirm with the utility and ERCOT sources before modeling savings.
Heat also hits air-cooled chillers hard, as outdoor temperature rises at the peak. A system that makes cooling at night, with cooler air, can use less energy per ton. See the ERCOT site for current market and grid information.
Data centers use chilled water storage for another reason: ride-through. A tank of cold water can keep cooling running for minutes while chillers restart after a power event, as discussed in data center cooling explained.
What about incentives?
Incentives change often, so verify current programs.
- Federal 179D deduction: under the 2025 budget law (the One Big Beautiful Bill Act), the energy-efficient commercial building deduction does not apply to property whose construction begins after June 30, 2026. Projects that started on or before that date may still qualify, and the deduction is claimed when the building is placed in service. Talk to a tax advisor.
- Utility programs: some utilities offer rebates or special rates for load shifting. Check your utility’s commercial efficiency and demand-response pages.
- State and local programs vary, and can change quickly.
Run the economics without incentives first; incentives should improve a project that already makes sense.
What are the risks and limits?
- Space and weight. Tanks are big; ice tanks are heavy when full.
- Lower evaporator temperature for ice making reduces chiller efficiency while charging.
- Controls complexity. Poor sequencing wastes the benefit.
- Water treatment and maintenance for open or stratified tanks.
- Tariff risk. If rates change and flatten the peak, savings drop.
A feasibility study should use interval load data, rate schedules and the chiller plant’s real performance; see how a chiller works and industrial chillers: types and selection for sizing basics.
Frequently asked questions
Does thermal energy storage save energy or just money?
Mostly money and grid stress. Chillers can use less energy at night, but ice-making loses some efficiency and tanks have losses, so total kWh may be similar. The savings come from rates and demand charges.
How long do TES tanks last?
Well-built tanks are often rated for decades, but the pumps, heat exchangers and controls need regular service. Check manufacturer warranties and service intervals.
Can TES work with an existing chiller plant?
Often yes, by adding a tank and controls. Chiller capabilities at low temperature and the existing piping determine the details.
If you design or run cooling plants in Central Texas, we would like to meet you. See our open positions or partnership options.
