The better option is for the government/utility company to build out the required storage for a fraction of the cost.
Ex ante, sure. Right now, the existing batteries are a sunk cost the utility didn’t have to pay capital costs for. The right answer is to do both.
The former should be allowed to make their own decisions. I agree that the latter should probably be kept out of this: government is usually not very good at making these decisions. But alas, in many places they play a huge role in the electricity supply and distribution.
Yes, but that's how we arrive to local economical maxima that are much, much closer to the global minimum that to the global maximum. The personal decisions aggregate, after all.
You say Govt capital which only benefits private utlities and ALSO say govt/utility should to build out the storage. Not sure what you are trying to say. You sound pretty confused.