Energy arbitrage: selling electricity back to the National Grid for a profit, Tesla Powerwall batteries, time-of-use tariffs and more

We look at the practice of ‘energy arbitrage’ – a little-known way to make money by selling electricity to the National Grid.

For many of us, finding the money for our energy bills every month can be enough of a challenge and the idea of actually being paid by our provider never enters our minds.

However, the little-known practice of ‘energy arbitrage’ may help you do just that by selling surplus energy you generate in your home back to the National Grid.

Unsurprisingly, there is a catch – you’ll need the right tech, and that doesn’t come cheap.

In this article, we look at how energy arbitrage works and ask whether it can help you save – or even make – money.

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What is a home battery?

If you’d like to take part in energy arbitrage, you’ll need a rechargeable home battery – with Tesla’s Powerwall being the most popular example.

The device attaches to the wall of your home and lets you store energy for later use.

You can store energy in the battery either by using energy generated through solar panels or by taking advantage of time-of-use tariffs, which charge a cheaper rate during periods of low demand on the grid.

The theory being that you can charge the battery during off-peak times when prices are low and then use this stored power when energy from the grid is more expensive.

If you install a Powerwall, it will need to be fitted by a Tesla-certified engineer and you’ll need permission from the National Grid.

With a price tag of more than £6,000, the Powerwall 3 is the latest version available in the UK.

How to generate and store your own energy

What is energy arbitrage?

Through the use of energy arbitrage, you can charge the battery and store this energy when prices from the grid are low and then sell it back during peak times.

As with the stock market, it relies on the principle of ‘buy low, sell high’.

According to Tesla, the Powerwall can store up to 13.5kWh of electricity, which is far higher than the typical household’s daily usage of 7.94kWh.

In theory, this means that it’s also possible to make a profit from selling the excess energy that you generate.

Maximising profit during peak time

Discharging energy back into the grid through a Powerwall requires you to use the battery’s time-based user controls.

The system will learn the patterns in your energy usage and solar production to ensure that you don’t draw on the grid during expensive peak times.

Peak energy times tend to be between 8am and 10pm and off-peak times are between 10pm and 8am.

For example, the battery may charge early in the morning or at sunrise (when energy prices are lower).

During mid-peak times or when you may be using energy in your home, the battery will discharge into your property, so that you aren’t using higher-priced power from the grid.

At peak times, the Powerwall will discharge power to your home where needed and then sell the excess to the grid.

This way, you can sell your surplus energy for the best possible price.

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The Smart Export Guarantee (SEG)

If you’re considering exporting energy back into the grid, it’s crucial to understand the Smart Export Guarantee scheme.

This is a Government initiative to ensure that homes and businesses are paid for every unit of renewable energy they feed back into the grid.

All energy suppliers with more than 150,000 customers in England, Scotland and Wales must provide at least one SEG tariff.

SEG tariffs can be fixed or variable, with a variable tariff adjusting unit price according to market demand.

The SEG scheme replaced feed-in-tariffs in 2020. The key difference is that SEG tariffs require you to have a smart meter, which will allow your provider to see how much energy you are sending back to the grid.

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Can I really make a profit?

Hypothetically yes – although it seems that many households are currently using the practice to offset the cost of their energy usage, rather than to actively ‘make’ money.

When we contacted Tesla to ask about the potential profit of energy arbitrage, the company told us that the average household can save £1,450 per year through the installation of the Powerwall 3 – although this would need to be paired with solar panels.

When we approached Powerwall users to ask about the practice of energy arbitrage, several people told us they’d been able to reduce their household bills.

One user told us that they had saved almost £1,000 on their annual bills since installing the Powerwall and another said their energy bills are now less than a third of what they had been previously. However, we were unable to find an example of anyone who had actually made a profit.

Remember, you may need to combine your rechargeable battery use with extremely careful planning to ensure that you aren’t running appliances during peak times or when there is insufficient power stored in the battery.

If you are considering installing solar panels in your home, you can use the Energy Saving Trust’s calculator to work out how much you can make from selling energy back to the grid.

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Choose your tariff carefully

As with all energy tariffs, it’s important to shop around when you’re selecting an SEG as there can be significant differences between providers.

At present, the Intelligent Octopus Flux is among the market leaders, which is a variable rate tariff. It currently pays an export rate of 25.46p/kWh during peak times. Note that rates will vary by region.

Eon Next’s Export Premium Plus will pay you 40p/kWh on a 12-month fixed tariff.

Factor in the set-up costs

One of the biggest factors to consider if you’d like to take part in energy arbitrage is the initial cost of the battery – which currently stands at £5,500.

On top of that, you’ll need to install a Gateway Grid in your home priced at £800 – this will manage your system and control your connection to the National Grid.

Furthermore, you’ll need to shell out for the battery’s installation. Although the cost will vary depending on your home’s specifications, this could be between £1,000 and £2,000.

Bear in mind, you’ll need to have solar panels in your property to benefit from the maximum savings of £1,450 cited by Tesla.

The final verdict

So, is energy arbitrage worth it? The jury is still out. It is theoretically possible to generate more energy than you use and sell this back into the grid when prices are high.

However, this will require a huge initial outlay and some extremely careful planning over how you use your appliances.

From our research, it seems that not enough people are doing this yet to say with great certainty if it is a real money-spinner.

What we do know, however, is that this is an area to watch. With concerns around climate change escalating and the energy market increasingly volatile, self-generated energy may soon be a necessity and savvy money savers will likely make a profit if they can.

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