How Tariff Arbitrage can help you make the most of your battery
Solar power systems are already saving homes all over Australia money on their power bills, and those adding batteries to their systems can enjoy even further savings. Using ‘Tariff arbitrage’ with your solar and battery system is a great way to help you save even more money with your solar system by making the most of your battery.
What is tariff arbitrage and how does it work?
Tariff arbitrage is the practice of purchasing electricity from the electricity grid when it is cheap and storing it to use later when grid electricity is expensive. It is basically the same idea as storing solar energy for later use but charging with energy from the grid rather than from your solar panels.
To be able to take advantage of tariff arbitrage to save on your electricity costs, you need to be on a time-of-use (TOU) billing arrangement with your electricity retailer.
How Time of Use (TOU) billing arrangements work
TOU billing arrangements charge households different rates depending on the time of day that they use their electricity. ‘Peak’ rates are the most expensive, ‘shoulder’ rates are slightly less expensive, and ‘off-peak’ rates are the cheapest and are generally lower than flat-rate tariffs from the same retailer. So, if you were practising tariff arbitrage, you would purchase your power from the grid during off-peak times (normally during the day or the middle of the night) to use during peak times (normally in the afternoon and evening).
For most homes with a standard solar PV system, a flat-rate tariff is usually more economical than a TOU tariff; but once you add a battery into the mix, switching to TOU begins to make a lot more sense.
TOU billing arrangements are available in all states across Australia, but the rates and peak time periods vary by state and retailer. Not all electricity retailers offer TOU billing, so make sure you get in touch with your provider to find out if they offer this billing arrangement.
How to use tariff arbitrage and TOU arrangements with your battery
Batteries are already a great idea to help you make the most of the energy your solar panels generate, by storing the excess power you generate during the day to use at night, which can save you money versus feeding the excess back into the power grid. But they can save you even more through tariff arbitrage by storing the off-peak energy you purchase from the grid when it’s cheap and storing it in batteries for later use, to supplement the power you generate yourself. Tariff arbitrage with grid charging should really only be used in situations when you have a partially or completely empty battery and no solar energy available to fill it up; for example during winter, or on very overcast days when there isn’t a lot of sunlight to charge up your battery through your solar panels.
Is the tariff arbitrage method right for me and my home?
More than two million, or 21%, of Australian households have invested in a rooftop solar PV system according to ARENA and Australia’s residential solar PV system prices are some of the lowest in the world, making going solar a great investment for most homes. Unfortunately, as they are a relatively new technology, battery prices remain high, and with only a few states offering rebates or financial assistance for batteries, it means that solar and battery systems have longer payback periods than standard solar-only systems. Even though the annual power bill savings may be higher, the initial financial outlay can make it hard for people to justify the cost. But the opportunity to use your batteries for grid-charging and tariff arbitrage, in addition to regular solar charging is a great way to get the most bang for your buck, and potentially reduce your payback time significantly.
If you are planning to take advantage of the benefits you can gain by using tariff arbitrage, make sure you discuss this with your solar consultant as they will be able to match you with the best battery to meet your needs.
To find out more about how using tariff arbitrage can help to make the most of you solar system and your battery or to get an obligation-free quote, contact us today, or call us on 1300 074 669.