Time-of-use, or TOU, pricing has quietly become the default billing model across a growing share of utilities, and it changes the economics of everything in your home that draws power. Instead of one flat rate per kilowatt-hour, a TOU plan charges different prices depending on when you consume: cheap power overnight, moderately priced power through the day, and expensive power during late-afternoon and evening peak windows. For a household without a battery, this means shifting habits: running the dishwasher at midnight, pre-cooling the house before four in the afternoon, and charging the electric car after eleven. Add a home battery, and the strategy becomes far more powerful, because the battery can buy cheap electricity at two in the morning and sell it to your own household at seven in the evening, capturing the price spread automatically and invisibly. This playbook explains how TOU rate structures actually work, how to calculate the spread you can capture, how to size and schedule a battery correctly, and which mistakes quietly destroy the business case. The numbers matter: a well-operated battery on a wide-spread TOU tariff can cover a meaningful share of its own financing cost every year, while a poorly configured one can take a decade to pay back.
A typical TOU tariff defines two to four daily windows: off-peak, super-off-peak in some markets, mid-peak or shoulder, and on-peak. Peak windows usually run from roughly four to nine in the evening, when residential demand collides with the solar ramp-down, though exact hours vary by utility and season, with summer plans often harsher than winter ones. Price ratios vary enormously: in mild markets the peak rate might be one and a half times the off-peak rate, while in aggressive tariffs, especially those with dynamic or real-time components, peak power can cost five to ten times more than overnight power. Some utilities add a fourth layer, demand charges or seasonal Critical Peak Pricing events, where a handful of extreme days carry triple rates with a day of warning. The first homework assignment is simple: pull your current tariff sheet, write down the exact window boundaries and rates for each season, and check whether your plan is mandatory or optional, because households on legacy flat rates can sometimes save immediately just by staying put. Then look at your hourly consumption data, available from most smart meter portals, and shade the hours that fall inside the peak window. For most homes, twenty to forty percent of daily energy lands in peak hours, and that slice is the battery's addressable market.
The core battery economics on a TOU tariff come from daily arbitrage: charge when cheap, discharge when expensive. To estimate it, take your off-peak rate and your peak rate, subtract one from the other, and multiply the spread by the usable kilowatt-hours your battery can cycle through the peak window each day. For example, with an off-peak rate of twelve cents and a peak rate of forty cents, the spread is twenty-eight cents per kilowatt-hour; a nine-kilowatt-hour usable battery discharging fully into peak earns about two dollars and fifty cents a day, or roughly nine hundred dollars a year before accounting for round-trip losses of roughly ten to fifteen percent and cycling degradation. Two caveats keep projections honest. First, you cannot discharge energy you did not store, so savings are capped by your actual peak-window consumption; a home that only uses four kilowatt-hours during peak gets no credit for the remaining five. Second, if you have rooftop solar, the calculus shifts toward self-consumption and export avoidance, because charging from free midday solar beats buying off-peak grid power every time. Model both scenarios before purchase, and stress-test the payback against a narrowing spread, because regulators in several markets are already redesigning TOU windows as solar erodes daytime prices.
Battery sizing is an exercise in matching capacity to your peak-window consumption, not your whole-day usage. Start with your smart meter data and compute average kilowatt-hours consumed during the peak window across the four seasonal months. If that figure is six kilowatt-hours, a battery with six to eight usable kilowatt-hours captures nearly the entire arbitrage opportunity; buying a thirteen-kilowatt-hour unit adds cost without adding daily savings unless you have solar overflow to absorb or want multi-hour backup for outages. Power rating matters too, measured in kilowatts: a five-kilowatt continuous rating covers most homes' simultaneous peak draw minus large loads like EV charging, which usually should not run from the battery at all. If backup power during outages is part of your motivation, and for many buyers it is the primary motivation, add capacity for your essential loads, typically refrigeration, lighting, network equipment, and a heat pump or furnace fan, sized for your longest realistic outage duration. Finally, check chemistry and warranty terms: look for a ten-year warranty with a guaranteed seventy percent end-of-warranty capacity and an unlimited or high cycle count. A cheaper battery with a six-year warranty can be a worse deal than a premium one with a strong throughput guarantee.
Out-of-the-box battery settings are notoriously suboptimal. The default mode on many systems prioritizes self-consumption of solar, which is right for some homes but leaves money on the table for others; the second default, scheduled TOU mode, charges and discharges at fixed times you set once and never revise. The highest-value approach is a hybrid: hold a reserve through cheap hours, force charging in the final off-peak hours so the battery enters the peak window full, and let the system discharge through peak with a floor reserve for outage protection. If your tariff includes critical peak events with day-ahead warnings, the strategy changes on event days: charge to one hundred percent, pre-cool or pre-heat the home before the event window, and discharge hard through it, since event hours can pay several times the normal spread. For solar owners, season matters; in high-export months, let midday solar charge the battery before it ever touches the grid, while in low-solar winter months rely more on scheduled overnight charging. Review settings quarterly against your meter data, because tariffs change, windows shift with the seasons, and a battery that keeps executing last summer's schedule in winter is quietly leaking value every single evening.
Households with both an electric vehicle and a home battery face a sequencing puzzle every evening, since both want energy and the grid wants to sell it to you at the worst possible price. The solution is a charging hierarchy. Overnight off-peak power should go first to the EV, because an EV battery is many times larger than a home battery and its charging is deferrable; the home battery should charge in the same off-peak window but finish before the EV session ends, guaranteeing both are full before the morning ramp. During the evening peak, the home battery discharges to serve the house while the EV sits idle, and bidirectional-capable vehicles can even reverse the flow on extreme event days, exporting from the car battery at critical peak rates. If your utility offers a dedicated EV time-of-use meter or an EV-specific sub-tariff with a super-cheap midnight window, compare it against bundling EV charging into the whole-home TOU plan, because the cheapest overnight rate sometimes comes with a punitive peak rate that punishes the rest of the household. Every hour of EV charging you can nudge out of peak is money saved at the spread rate, and for a typical driver that alone can be worth hundreds of dollars a year before the home battery contributes anything.
Several recurring errors turn a promising battery investment into a disappointment. The first is buying capacity before measuring load, ending up with a battery that is empty every peak because the home actually consumes more than it stores, or one that is half-full every night because the home consumes less. The second is never revisiting schedules after a tariff change; utilities adjust TOU windows with regulatory filings that most customers never read, and a window that moved from four-to-nine to three-to-seven silently invalidates your discharge timing. The third is ignoring round-trip efficiency in projections, overstating annual savings by more than ten percent. The fourth is discharging the battery into flexible loads instead of shifting those loads, which wastes stored energy on a dishwasher that could simply have run at midnight. The fifth is letting backup reserve sit at one hundred percent for months, which means the battery never cycles and never earns; keep a realistic outage reserve, not a fear-driven one. Avoid these five and the arithmetic of your original business plan has a fighting chance of surviving contact with reality.
The path from reading this article to actually capturing savings is short. Step one: download a year of hourly data from your utility portal and separate consumption into tariff windows. Step two: write down your seasonal rates and compute your current peak-window spend, which is the maximum prize. Step three: run a simple daily-spread calculation for a six, ten, and thirteen-kilowatt-hour battery to see where diminishing returns begin for your specific load. Step four: get two or three installer quotes with itemized hardware, labor, and permitting, and compare warranties on capacity and cycles, not just years. Step five: after commissioning, review performance monthly for the first quarter and tune charge windows, reserve levels, and EV scheduling against actual data. Households that operate this loop deliberately routinely beat installer estimates by twenty percent or more, purely through configuration. EnergyIQ automates this entire analysis, from tariff spreads to battery scheduling; see our pricing plans to start with your own meter data.