Time-of-use optimization with a battery is a price arbitrage problem wearing an energy costume. The battery earns by moving a kilowatt-hour from a cheap hour to an expensive one, and what it earns is the difference between those two prices, reduced by the round-trip loss and by whatever share of the battery’s warranted life that cycle consumed. Sunshine determines how much energy is available, not how much the shifting is worth.
The arithmetic that decides everything
Take the price in the expensive window, subtract the price in the cheap window, and you have the gross spread. Now divide by the round-trip efficiency, because you have to put in more than you take out. Then subtract the wear cost, which is the capital cost of the battery divided by the total energy throughput its warranty covers. What remains is the margin on each stored kilowatt-hour. If a tariff has a narrow spread between peak and off-peak, that margin can be close to zero or negative, and the battery is doing work for nothing. If the spread is wide, the margin can be substantial. The same battery, the same house, the same array, and two different tariffs produce completely different answers.
Demand charges are a different game
Some tariffs, particularly commercial ones, bill not only for energy consumed but for the highest power drawn in any short interval during the billing period. That is a demand charge, and a battery attacks it differently: it does not need to move much energy, it needs to be available to cover brief peaks. A modest battery can shave a demand peak that a much larger one would be needed to arbitrage energy. Demand charge management therefore depends on accurate load forecasting and fast response rather than on capacity, and the value can dwarf the energy arbitrage on the same bill. If your tariff has a demand component, the sizing logic changes completely.
Where solar fits into the schedule
An array produces on the sun’s schedule, which may or may not align with the price schedule. Many time-of-use tariffs place their expensive window in the late afternoon and evening, after solar output has dropped. That misalignment is the main argument for storage under such a tariff: the array fills the battery during the cheap, sunny middle of the day, and the battery covers the expensive evening. But the same effect means the control strategy has to decide, during the day, whether to send solar energy to the house, to the battery, or to export, and that decision depends on the export rate, the retail rate in each window, and the forecast for the rest of the day. Good control software does this with a forecast; simple rule-based control does not.
Why the settings need revisiting
Tariffs change. Utilities move peak windows, restructure rates, add seasonal variations and adjust export compensation, sometimes annually. A control strategy configured at commissioning against a tariff that no longer exists will keep executing faithfully and earning less than it should. Seasonal shifts matter too, because a summer peak window and a winter one are often at different times of day, and winter solar production is smaller and later. Put a calendar reminder to check the battery schedule against the current published tariff at least once a year, and after any notice from the utility. This is one of the very few homeowner-adjustable settings that genuinely moves money.
The conflict with backup readiness
Aggressive time-of-use cycling and outage readiness pull in opposite directions. A battery that discharges fully into the evening peak every day is empty exactly when a storm-related outage is most likely. Most systems handle this with a reserve floor that daily cycling will not cross, but the higher you set it the less capacity is available to earn. Households in areas with frequent outages often find that the backup value dominates and the arbitrage is a bonus; households with a reliable grid and a wide tariff spread find the opposite. Decide which one you are, set the reserve accordingly, and change it seasonally if your outage risk is seasonal.
What to check before you act
- Calculate the spread against round-trip loss and wear cost before assuming value.
- Check whether your tariff includes a demand charge component.
- Review the battery schedule against the current published tariff annually.
- Set the backup reserve deliberately rather than leaving the default.
Common questions
Should I charge the battery from the grid at night?
Only if the off-peak import price plus the round-trip loss and wear is still below the peak price, and only if your interconnection agreement and incentive terms permit grid charging. Some do not.
Does a bigger battery always earn more under time-of-use?
No. It earns more only if there is enough cheap energy to fill it and enough expensive hours to empty it. Beyond that point the extra capacity sits idle and still cost money.
The practical takeaway
Work out the spread, the round-trip loss and the wear cost before believing a time-of-use payback figure, and check whether a demand charge changes the whole calculation. Revisit your schedule whenever the tariff changes, and choose the backup reserve as an explicit trade against earnings.
References and further reading
- Department of Energy: understanding what household electricity actually costs
- Department of Energy: consumer energy resources and savings guidance
- NREL: research on photovoltaics and grid-integrated storage
Numerical scenarios are illustrative unless identified otherwise. Follow the exact product instructions; component ratings and local installation requirements can differ.
