A home battery on a time-of-use rate: the price gap matters more than the price.

What a time-of-use rate actually pays a battery to do

A time-of-use (TOU) rate charges different prices for electricity depending on when you use it. Most utilities now set a "peak" window of three to five hours in the late afternoon and evening, when the grid is stressed and power is expensive, and charge less the rest of the day. Some add a "super off-peak" window, overnight or at midday when solar output floods the grid, that is cheaper still.

A battery on a TOU rate does one simple job: it fills up when power is cheap and runs the house during the peak window, so the home buys less expensive peak electricity. This is called energy arbitrage, or load shifting. The battery doesn't make electricity; it only moves it in time. And it loses some energy every trip: Tesla's Powerwall 3 is rated at 89% round-trip efficiency, meaning roughly 11 of every 100 kWh bought to charge it never come back out (Tesla Powerwall 3 datasheet).

That gives a simple formula for what each kWh (kilowatt-hour) shifted is worth:

Savings per kWh = peak price − (charging price ÷ 0.89)

Multiply that by how many kWh the battery can actually push into the peak window, and by how many days a year the peak applies, and you have the annual savings. Every one of those three factors varies enormously by utility, and that's why the same battery produces results that differ by a factor of 30 across the country.

The test house and the battery

To isolate the effect of the rate itself, we hold everything else constant. The same house, same battery, and same installed cost go into every utility territory. Only the tariff changes.

Where and when the peak hits

The single most overlooked detail in a TOU rate is the shape of the peak window. A battery can only save money during the hours the peak is actually in effect. A three-hour window means a 13.5 kWh battery often can't empty itself into the house before the peak ends, and a peak that applies only on summer weekdays leaves the battery idle most of the year.

Twelve rates, one battery: the results

The table lists each rate's peak window, the peak price, the cheapest price the battery can charge at, and what the battery saves. Where two prices are shown, the first is summer and the second is the rest of the year.

Four things most battery shoppers don't know

1. A high electricity price doesn't mean a battery saves a lot

California has some of the highest electricity prices in the country, yet PG&E's E-TOU-C, one of the most common residential plans in Northern California, ranks second to last. Its summer peak (44¢) is only 12¢ above off-peak (32¢), and in winter the gap shrinks to 3¢ (PG&E). After round-trip losses, cycling the battery on a winter day would actually cost money, so the battery only earns during four summer months.

Con Edison is the opposite. Its delivery charge alone runs 27.9¢ at peak in summer versus 5.2¢ overnight, and its peak lasts from 8 a.m. to midnight (Con Edison). The house uses far more than 13.5 kWh in a 16-hour window, so the battery empties completely every single day of the year. A modest price, applied to a full battery every day, beats a high price applied to part of a battery for part of the year.

2. Short peak windows leave most of the battery unused

NV Energy's southern Nevada TOU plan has the widest price gap in this study: 47.4¢ at peak versus 7.6¢ off-peak, a 40¢ difference (NV Energy). But the peak lasts only three hours, from 6 to 9 p.m., and only June through September; winter is priced flat. In three hours our test house draws about 6 kWh, less than half of what the battery holds. Result: NV Energy earns the most per kWh shifted but still saves only $284 a year. APS in Arizona shows the same pattern with its 4-to-7 p.m. weekday window (APS).

Exporting the leftover charge to the grid doesn't fix this on most rates, because exported power is typically credited at a much lower rate than the peak price a household avoids.

3. Round-trip losses quietly erase small price gaps

Because roughly 11% of the energy is lost on each trip, the peak price has to be at least about 12% higher than the charging price before cycling breaks even. DTE's default 3-to-7 p.m. rate in Michigan charges 24.1¢ at peak in summer and 18.4¢ off-peak; in winter the peak is 20.1¢ (DTE). The summer gap clears the loss hurdle by a hair; the winter gap doesn't clear it at all. The battery earns $23 a year.

4. The rate plan you pick can matter as much as the battery you buy

Several utilities offer plans with bigger price gaps for customers who own a battery, heat pump, or electric vehicle. SCE's TOU-D-PRIME is open to households with residential batteries (SCE), and PG&E says its EV2-A plan is best for customers with battery storage who can charge off-peak (PG&E). Switching plans costs nothing and doesn't change the hardware.

What it would take to break even

Every rate lands somewhere on a simple trade-off: how much each shifted kWh is worth, and how many kWh the battery can shift in a year. Multiply the two and you get annual savings. The dashed curves show the combinations that would repay a $15,650 battery in 10 and 20 years.

Seen this way, the rates split into two groups. Con Edison, Georgia Power, and the California plans use the whole battery almost every day but earn a moderate amount per kWh. NV Energy and APS earn a lot per kWh but use only a fraction of the battery. To reach 10-year payback, a rate would need both: a wide price gap and a peak window long enough, on enough days, to empty the battery. None of the 12 rates we tested offers that combination today.

Flip the question around: what installed cost would pay back within 10 years on today's best rate? Using SCE's TOU-D-PRIME, the battery would need to cost about $7,800, or roughly $580 per kWh, about half of today's average installed price.

The federal credit changed the math in 2026

Through 2025, homeowners could claim a 30% federal tax credit on a battery through the Residential Clean Energy Credit (Section 25D). The 2025 budget reconciliation law, Public Law 119-21, ended that credit for expenditures made after December 31, 2025 (Congressional Research Service; IRS). On a $15,650 battery, that's about $4,700 in support that 2026 buyers can no longer claim.

Had the credit still applied, the best case in this study (SCE TOU-D-PRIME) would recover about 70% of its net cost in 10 years instead of 50%. That's better, but still short of payback on rate savings alone. The credit mattered, but it was never enough to make arbitrage-only batteries pay off everywhere.

What actually tips the economics

None of this means a home battery is a poor decision. It means a TOU rate, by itself, is rarely the reason a battery pays off. The value stacks that change the answer are:

• Charging from rooftop solar. When a battery stores solar power that would otherwise be exported for a low credit, the "charging price" in the formula falls toward the export credit value, which widens the gap significantly under export rules like California's net billing.
• Virtual power plant (VPP) payments. Programs that pay battery owners to discharge during grid emergencies can add a separate revenue stream on top of arbitrage.
• State and utility incentives. State and utility rebates, where available, can replace part of the lost federal credit.
• Backup power. For a household that loses power often, or can't afford to, avoided outage costs can outweigh bill savings. That value is real but personal, so we keep it separate from the bill math.
• Heavier evening loads. A home with evening EV charging or electric heat can discharge more into a short window, which helps most on three-hour peak plans.

The upcoming case studies in this series test each of these on top of the TOU baseline established here.

How to use this if you're considering a battery

• Find your gap, not your rate. Subtract your off-peak price (divided by 0.89) from your peak price. If the result is under about 10¢, arbitrage will contribute little.
• Count your peak hours and days. Hours per day × your household's evening draw tells you how much of the battery you'll actually use. Weekday-only and summer-only peaks cut annual savings sharply.
• Ask about battery-eligible rate plans. Where they exist, they're often the single biggest lever you control.
• Price the other value streams separately. Solar self-consumption, VPP enrollment, state rebates, and backup needs should each be justified on their own numbers, not folded into an optimistic "savings" figure.