Time-of-use (TOU) arbitrage — charging a battery during cheap off-peak electricity hours and discharging it during expensive peak hours — is one of the most accessible revenue streams for commercial battery storage. Whether your site pays demand charges, has a TOU electricity tariff, or participates in wholesale market price signals, the principle is the same: buy low, sell (or use) high. This guide covers the economics, the scheduling logic, and when the numbers actually work.
The basic arbitrage economics
The revenue from one TOU arbitrage cycle is:
Revenue = (Discharge energy × Peak rate) – (Charge energy × Off-peak rate)
Where charge energy = discharge energy ÷ round-trip efficiency. For a Sungrow ST255CS-2H with 92% round-trip efficiency, 100 kWh discharged requires 108.7 kWh charged.
Example with typical UK commercial TOU tariffs:
- Off-peak rate (23:00–07:00): £0.08/kWh
- Peak rate (16:00–19:00): £0.28/kWh
- Charge: 108.7 kWh × £0.08 = £8.70
- Discharge value: 100 kWh × £0.28 = £28.00
- Net revenue per cycle: £19.30
At 1 cycle per day, 365 days/year: £7,045/year per 100 kWh of discharge capacity. A 500 kWh system generates ~£35,000/year from TOU arbitrage alone, before accounting for peak demand charge reduction.
Minimum tariff spread for viability
The minimum peak/off-peak tariff spread to make TOU arbitrage viable depends on battery cost and cycle count:
| BESS capital cost ($/kWh) | Target payback (years) | Cycles/year | Minimum spread ($/kWh) |
|---|---|---|---|
| $200/kWh (utility scale) | 7 years | 365 | $0.10/kWh spread |
| $300/kWh (C&I packaged) | 7 years | 365 | $0.15/kWh spread |
| $400/kWh (C&I installed) | 7 years | 365 | $0.20/kWh spread |
| $400/kWh (C&I installed) | 5 years | 365 | $0.28/kWh spread |
Markets with high TOU spreads: UK, Australia, California, parts of Germany, South Korea, and markets with significant renewable penetration that creates large price divergence between midday surplus and evening peak. Markets where TOU arbitrage barely pencils: China (small TOU spread in most provinces), Russia (mostly flat tariffs), most of CIS.
Stacking arbitrage with peak shaving
The most compelling C&I BESS business case combines TOU arbitrage with demand charge reduction — these two uses are often compatible because:
- Demand charges typically peak in the afternoon/evening — the same time as TOU peak rates
- A battery that discharges during peak hours for TOU arbitrage also reduces the site's peak demand measurement
- The combined value of TOU arbitrage + peak shaving often doubles or triples the payback from either application alone
The scheduling algorithm must be set up correctly: the battery should not be exhausted on TOU arbitrage before the demand peak occurs. A good Energy Management System (EMS) predicts the daily load profile and reserves sufficient capacity for peak demand shaving, using the remainder for arbitrage.
Sungrow BESS and EMS for TOU arbitrage
Sungrow's ST255CS-2H and MBL160 BESS include an integrated EMS with TOU scheduling capability:
- Configurable time-of-use rate schedules (up to 8 time bands per day)
- Self-learning mode that adapts to historical load profiles
- Integration with iSolarCloud for remote schedule management and override
- Demand limit mode: sets a maximum import power threshold, automatically discharging the battery if import approaches the limit
- Solar self-consumption priority: can be set to prioritise PV self-consumption over TOU arbitrage — relevant when solar exports earn a lower rate than the off-peak charge cost
Cycle life impact on TOU arbitrage economics
One full cycle per day = 365 cycles/year. The Sungrow MBL160 is rated for 8,000 cycles — at 365 cycles/year, the battery lasts 21.9 years, well beyond the 10-year warranty. Cycle degradation is the other factor: battery capacity fades approximately 20% over the warranty period (80% capacity retention guaranteed at end of warranty). Model this by reducing year 1 revenue by 0.8% per year for capacity fade — the impact on IRR is typically 1–2 percentage points over a 10-year analysis.