In this paper, a hybrid energy storage system (HESS), combining a battery and a supercapacitor (SC), is studied for dispatching solar power at one hour increments for an entire day for 1 MW grid connected photovoltaic (PV) arrays. HESS relies on PV for charging and not the grid, and hence is immune to fluctuating electricity prices. The battery and SC are intended to supply predetermined constant power, but not to provide ancillary services for the grid operation. To develop a cost-effective energy storage system, a low pass filter (LPF) is used to allocate the power between a battery and a SC. The best cost of the energy storage is calculated based on the time constant of the LPF through extensive simulations. Several rule-based algorithms based on the battery state of charge (SOC) are developed to estimate the grid reference power for each one-hour dispatching period. An economic comparison of using different kinds of the algorithms for estimating the grid reference power are also presented in this study. The objective is to better understand the annual energy storage cost for hourly dispatching solar power. The actual solar data of four different days as a representative of each season recorded at Oak Ridge National Laboratory are used in the simulations. The relationship between the actual PV cell temperature and the ambient temperature in power output calculations are also considered and their effects on energy storage price calculations are presented in this paper.