Net zero energy (NZE) houses purchase zero net metered electricity from the grid over a year. Technical challenges brought forth by NZE homes are related to the intermittent nature of solar generation, and are due to the fact that peak solar generation and load are not coincident. This leads to a large rate of change of load, and in case of high PV penetration communities, often requires the installation of gas power plants to service this variability. This paper proposes a hybrid energy storage system including batteries and a variable power electric water heater which enables the NZE homes to behave like dispatchable generators or loads, thereby reducing the rate of change of the net power flow from the house. A co-simulation framework, INSPIRE+D, which enables the dynamic simulation of electricity usage in a community of NZE homes, and their connection to the grid is enabled. The calculated instantaneous electricity usage is validated through experimental data from a field demonstrator in southern Kentucky. It is demonstrated that when the operation of the proposed hybrid energy storage system is coordinated with solar PV generation, the required size and ratings of the battery would be substantially reduced while still maintaining the same functionality. Methodologies for sizing the battery and solar panels are developed.