Residential buildings are responsible for a substantial and steadily growing share of the global electricity consumption, approximately 30%. The ability to control the timing and magnitude of the aggregate electricity consumption of buildings is acquiring critical relevance. Buildings play a pivotal role in defining the shape and composition of the final electricity demand, and have an impact on the existing and projected electrical system infrastructure. This paper proposes distributed electrical storage using electrical batteries at the residential level, as an economical and technically feasible way to introduce a degree of responsiveness with the demand of residential buildings without compromising the comfort of users. The objective of the paper is to devise the operative principles governing the relation between the grid operator and a community of low exergy (lowEx) buildings, under the assumption that the grid operator is interested in controlling the form of the aggregate electricity consumption in that community. This paper presents a pricing policy aimed to stimulate a power-aware consumption, and consequently peak-shave the total electricity profile. The introduced pricing scheme separately addresses energy and power, and provides an incentive for buildings to invest in decentralized generation and storage technologies. The paper presents a methodology to determine the optimal amount of decentralized electrical storage and PV necessary to meet the objectives of the grid operator and allowing users to obtain a profit from the dynamic electricity tariff. A model is used to determine the optimal battery and PV investment from the perspective of the user. The analyses show that the introduced electricity tariff triggers an equilibrium, in which users invest between 20% and 25% of the total incurred cost in battery and PV. The PV and the battery input power were found to be mainly related to the objective of reducing the energy cost. On the other hand, the battery capacity and output power were found to be associated with the peak reduction objective. Users invest less than 10% of the total battery investment share in the battery input power. This fact indicates that contrary to a battery usage driven by the price volatility, which is proposed in many models, the battery is mainly used as power-to-energy buffer. Energy is slowly stored in the battery and rapidly released at critical peak hours. (C) 2016 Elsevier Ltd. All rights reserved.