Battery Arbitrage Strategy: Buy at Off-Peak, Sell at Peak

Battery arbitrage is a timing strategy. You charge the battery when electricity is cheap, then use or export that stored energy when its value is higher.

That can mean two different outcomes:

• avoid expensive imports later
• force a discharge to the grid when export prices are strong

The real question is not "is this off-peak?" It is "is the later value high enough to beat the full cost of a cycle?" That full cost includes charging losses, inverter and export limits, tariff rules, and battery wear.

Three simple examples

We will use £ to demonstrate the examples; however, the concept applies to any currency.

Assume the battery is charged with 5 kWh at £0.10/kWh, and combined round-trip charging and discharging efficiency is 90%. That means the later usable energy is 90% of 5 kWh = 4.5 kWh.

To factor in battery degradation, divide the battery's replacement cost by its total rated cycles. For example, a battery costing £4,000 rated for 8,000 cycles carries a wear cost of roughly £4,000 / 8,000 cycles = £0.50 per full cycle. For a 5 kWh cycle that is about £0.10/kWh of battery capacity cycled, or £0.50 per cycle. This is the floor the arbitrage spread must clear just to break even on wear.

1. Self-consumption example. Charging cost £0.10/kWh * 5 kWh is £0.50. Degradation penalty is £0.50 per cycle. Total cost of the cycle: £1.00. If the later import price is £0.30/kWh, using 4.5 kWh avoids £1.35 of grid purchase. Net result: £1.35 minus £1.00 = £0.35. The spread is too thin - the saving does not cover the cycle cost. The trade is worthwhile after wear.
2. Export example. Total cost of the cycle: £1.00 like before including degradation and charging costs. If the export price in a peak window is £0.20/kWh, exporting 4.5 kWh earns £0.90. Net result: £0.90 minus £1.00 = -£0.10. The spread is too thin - the saving does not cover the cycle cost.
3. Export with a stronger spread. Same setup, but the export price rises to £0.40/kWh. Exporting 4.5 kWh earns £1.80. Net result: £1.80 minus £1.00 = +£0.80. Now the trade is worthwhile after wear.

The degradation penalty is the invisible hurdle most back-of-the-envelope calculations skip. A trade that looks profitable on gross arbitrage value alone can easily turn negative once cycle cost is included.

The exact thresholds vary by market, but the structure is the same. Retailers and utilities in different regions already offer versions of the tariff needed for this, including Octopus Energy, Hydro-Quebec, and Puget Sound Energy.¹

Import arbitrage

Import arbitrage is the simpler version. You buy low and consume later at home instead of buying electricity during a higher-priced window. This works best when a large share of your demand lands in those expensive periods, such as the evening after solar output has dropped.

Export arbitrage

Export arbitrage uses the same stored energy differently. Instead of holding it only for self-consumption, you discharge to the grid when export value is high enough to justify the trade. In practice, that usually requires an export-aware tariff, a compatible meter, and controls that let your battery discharge on schedule. Usually import prices increase with export prices, and often a practical scheduling solution would produce a hybrid of import and export arbitrage scenarios.

When it works well

Battery arbitrage is usually strongest when:

• import prices have a clear low-price charging window
• export prices also vary by time, or event-based export payments exist
• your inverter supports controlled charging and discharge
• the spread is wide enough to cover losses and wear, not just look good on paper

When it is weak

It is usually weak when:

• export is paid at one flat low rate all day
• price spreads are narrow or unpredictable
• export caps or tariff rules limit what the battery can do
• the battery is already more valuable covering your own later demand

How to judge the trade

Think in usable kWh:

1. What does it cost to put that energy into the battery?
2. What is that energy worth later if you use it at home?
3. What is it worth later if you export it instead?
4. After losses and wear, which option is best?

If using it at home wins, the battery should hold energy for self-consumption. If exporting wins, the battery should discharge into the export window. If there is opportunity for both, the battery should hold energy for self-consumption while exporting any leftovers. If neither wins, the best move may be to keep the battery available for solar capture, backup reserve, or later demand.

What BatteryWiz does

BatteryWiz compares import prices, export opportunities, forecast demand, solar production, and system limits in one schedule. The goal is not to force extra cycling. It is to cycle only when the spread is genuinely worth it. As the problem of determining optimal battery scheduling is multi-factorial, BatteryWiz combines all of these factors to create a mathematical optimization problem that it solves. The eventual scheduling produced by BatteryWiz is optimal subject to what is known at the time of each solve. If set to do so, BatteryWiz automatically re-solves every 30 minutes and updates the schedule throughout the day to track changing conditions.

Footnotes

1. Examples of official TOU or dynamic pricing pages: Octopus Energy's Octopus Flux, Hydro-Quebec Dynamic Pricing, and Puget Sound Energy Time-of-Use. ↩