Most times I get people asking for private commissions they end up wanting it refunded after a while so I understand the idea of the fee

It's an insurance policy as what  JadeMoontail has said if they want a refund andit's private and also it's a compensation for not being allowed to post up your work.

You're not blackmailing, and it is fair. The main reason for this is that by having a piece requested by the commissioner to not be placed in your gallery, it means that the work will not get any exposure, and thus not serve as a visible advertisement or display of your abilities, especially if the commission shows notable growth in your abilities since the last piece you put in. As such, loss of a potential "advertisement" is also potential loss of revenue/income.

Uh no. They're just being cheap. I think it's completely fair to add an additional price to create something you aren't going to be able to use as self-promotion. It's effectively the same thing as selling someone the copyright to your work. In either case you're never going to gain additional income from the sale of that piece. It's also the same as a traditional artist selling a unique piece for a higher dollar amount than a print.

If they don't like it they don't have to commission you.