> Batteries are an expensive solution that doesn't scale well at the grid level.

I'd like to see the reasoning behind why they don't pan out. LoFePO4 have dropped to $60/kWh in China. At 3,000 cycles that means they add about 2¢ to every kWh they store.

We don't get that cheap price where I live of course, but they being installed at a rapid pace now. I think most are being installed "behind the meter", which means they are being installed by people who pay retail. That's happening because paired with solar, they've dropped below the break even point at retail prices. Grid scale needs roughly another factor of 3 price drop to hit the same point. If CATL's $10/kWh sodium batteries that get 10,0000 cycles pan out, it will drive the price down by another factor of 10.

Your "demand" side response arises naturally with batteries. Those who can do without the power simply won't buy one. Or if they can get by with only a little emergency power, they buy a small one.

I experienced that first hand. I owned a 4.8kWh battery a while ago. That is by any definition is small. It costs about the same as a generator at today's prices (it didn't back then). A flood caused power to be cut off for a week. We only fired up the generator once, before discovering we could reduce our usage to what a small battery and a 6.6 kW solar array could cope with, even in the very overcast conditions that accompany a heavy rain event.