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Energy storage units (ESU) can reduce the cost of purchased electricity under time-of-use (TOU) pricing. To maximize the cost reduction, the chemistries, capacities, and charge/discharge schedules of the batteries used in the ESU must be selected appropriately. The batteries must have sufficient capacities to supply the energy demanded by the charge/discharge profiles and to meet the project lifetime. The ESU responds to a TOU price structure. The ESU output power is limited by the rating of the power electronic interface. The cost of the ESU is assumed to increase linearly with battery capacity. A method using linear optimization is developed that determines the battery chemistries, capacities, and charge/discharge schedules simultaneously. The method shows that the Li-Ion battery chemistry is the most cost effective technology due to its high efficiency and that an 11-year project lifetime is most profitable.