Reading a Time-of-Use Rate Schedule Before Sizing a Battery

Before sizing a battery, read the utility tariff as if it were the system’s operating specification. A monthly bill can tell you how much electricity you used, but a time-of-use (TOU) schedule tells you when electricity costs more, how long the battery must discharge, and whether a demand or export rule changes the calculation.

The goal is not to size a battery to your total daily consumption. It is to identify the load that can be shifted out of expensive periods, then size the battery’s usable energy and power around that load.

Start with the tariff, not the battery brochure

Find the utility’s current tariff or rate sheet—not just a comparison chart or a bill summary. Confirm:

• the exact rate name and customer class;
• the effective date and whether the schedule is proposed, temporary, or current;
• seasonal dates and holiday treatment;
• weekday, weekend, and holiday time blocks;
• energy prices in each block, usually shown in dollars per kWh;
• any demand charges, usually shown in dollars per kW;
• fixed customer charges, minimum bills, and non-bypassable charges; and
• rules for solar exports, netting, aggregation, or compensation.

TOU pricing is a form of time-based demand response: the unit price changes by defined periods so customers have a reason to move consumption away from high-price hours. The U.S. Department of Energy describes TOU tariffs as time-varying rates that reflect the cost or value of electricity in different periods. Read the DOE explanation of time-based pricing for the distinction between TOU, real-time pricing, and other rate designs.

Do not assume labels are consistent between utilities. “Peak” may mean an afternoon block at one utility and an evening block at another. Some schedules have peak, partial-peak, off-peak, and super-off-peak periods; others use only two or three prices.

Turn the schedule into a calendar

A tariff is difficult to size from when it is displayed as a dense table. Rewrite it as a calendar with one row for each combination of season and day type.

For each row, record:

Then mark your actual load on the same calendar. Include air-conditioning, heating, cooking, water heating, vehicle charging, pumps, and other large or flexible loads. A battery only creates TOU value when it can reduce grid purchases in a higher-priced period or, under a separate rule, reduce billed demand.

Pay particular attention to the boundary. A “4–9 p.m.” period may include both endpoints according to the tariff’s definitions, and daylight-saving or holiday rules may matter. Use the schedule’s own wording rather than translating it from memory.

Separate four different parts of the bill

1. Energy charges: dollars per kWh

This is the familiar TOU calculation:

energy charge = imported kWh during a period × that period’s price

For battery time shifting, compare the price of charging energy with the price avoided when the battery discharges. Because storage is not perfectly efficient, charging 1 kWh does not usually deliver 1 kWh back to the load. A simple screening calculation is:

usable battery energy needed ≈ load shifted ÷ round-trip efficiency

For example, if you want to serve 8 kWh of evening load and use an assumed 90% round-trip efficiency, the battery must receive about 8.9 kWh of charging energy. That is a planning assumption, not a guarantee of a particular system’s performance. Use the candidate system’s verified usable-capacity and efficiency figures when comparing quotes.

The rough daily arbitrage value is:

(high-period price × discharged kWh) − (low-period price × charging kWh)

This is only a screening estimate. It does not include fixed charges, demand charges, degradation, installation cost, financing, taxes, controls, or changes in the tariff.

2. Demand charges: dollars per kW

A demand charge is not the same as paying a high price for every kWh in a TOU window. It is commonly based on the customer’s highest measured rate of electricity use during a defined interval, sometimes during a defined period or month. The exact meter interval, ratchet, baseline, and qualifying window must come from the tariff.

If demand charges apply, battery sizing becomes a power-and-duration problem. The battery may need to reduce the site’s grid draw below a demand threshold for the whole measurement interval—not merely supply a large amount of energy at some point in the evening.

Look for:

• the demand measurement interval;
• whether the charge is monthly, seasonal, or annualized through a ratchet;
• whether it applies all day or only in a TOU demand window;
• separate charges for on-peak and off-peak demand; and
• minimum demand or contracted-capacity rules.

The DOE notes that storage can manage demand charges, but the required discharge duration depends on the tariff and the customer’s load. Review the DOE storage applications overview for the difference between energy time shifting and demand-charge management.

3. Fixed and minimum charges

A battery usually does not eliminate a customer charge, minimum bill, delivery charge, or other fee simply because it reduces imported energy. List these separately. They may not affect the battery’s physical size, but they affect the savings estimate and can make a claimed payback look too optimistic.

4. Export compensation and netting

If the site has solar, do not treat the export rate as automatically equal to the import rate. The tariff may value exported electricity differently by hour, season, or program. It may also apply non-bypassable charges, a netting interval, a monthly credit process, or a true-up rule.

That changes the battery’s job. Using solar to serve a later expensive load may be more valuable than exporting at a lower compensation rate—but only after the actual import and export rules are modeled. The California Public Utilities Commission’s tariff decision illustrates why import rates, export compensation, netting intervals, and billing rules must be read together; its details are specific to California and are not a universal schedule. See the CPUC discussion of those tariff elements.

Size energy capacity from the shiftable load

Once the calendar is mapped, calculate the load you want the battery to cover in each expensive period. Use interval data if possible: a utility download with 15-minute or hourly usage is much more useful than a monthly kWh total.

For each candidate day, estimate:

1. grid load during the target discharge window;
2. the portion that the battery is allowed and able to serve;
3. the battery energy required after accounting for losses;
4. the battery’s usable capacity, not its nameplate capacity; and
5. any reserve that must remain for backup or operating limits.

A practical sizing expression is:

installed nameplate capacity ≈ target delivered energy ÷ (usable fraction × reserve adjustment)

The exact reserve adjustment depends on how the system defines backup reserve. Do not fill in these values from a generic rule of thumb; obtain them from the proposed system’s documentation.

Use the worst relevant season only if it is actually the economic design target. A summer peak may dominate bill savings, while winter may have longer heating loads. If a single battery cannot cover every target, compare the incremental value of more capacity with its incremental cost rather than automatically sizing for the largest daily total.

Size power from the load shape

Energy capacity answers “how much electricity can it deliver?” Power answers “how fast can it deliver it?” A battery can have enough kWh for an evening but still fail to cover several appliances starting at once if its inverter output is too small.

Estimate the simultaneous load during the discharge window and compare it with the system’s continuous and surge power ratings. For demand-charge management, model the site’s net grid draw at the tariff’s measurement interval. The relevant question is often:

Can the battery keep grid demand below the target for the entire billed interval?

That may call for more power, more energy, or controls that prevent charging loads from creating a new peak. Charging the battery during an off-peak period can also matter if the tariff includes an off-peak or facility demand charge.

Test the schedule against real operating constraints

Before treating the result as a final size, check the dispatch rules:

• Can the battery charge from the grid, or only from solar?
• Can it export to the grid, and under what compensation rule?
• Is backup reserve locked or adjustable?
• Can it discharge during every expensive period, or does it have a daily cycle limit?
• Will weather, temperature, outages, or controls reduce available capacity?
• Does the system need to charge before the expensive window, and is that charging allowed?
• Could charging, solar export, or backup behavior create a new demand peak?

Run at least three cases: a typical day, a high-load day, and a low-solar or winter day if those conditions apply. Compare imported kWh in each TOU period, maximum grid kW, exported kWh, and the resulting bill components. A spreadsheet with one row per interval is enough for an initial screen.

A worked example with deliberately generic numbers

Suppose an illustrative home has a weekday expensive period from 4 to 9 p.m. and a lower-priced charging period earlier in the day. Interval data shows 7 kWh of load that could be served during that five-hour window. The owner wants to retain 20% of the battery for backup, and the planning efficiency assumption is 90%.

The first-pass delivered-energy target is 7 kWh. The approximate stored energy needed before reserve is:

7 ÷ 0.90 = 7.8 kWh

If only 80% of nameplate capacity is intended for routine economic cycling because of the backup reserve, the rough nameplate estimate becomes:

7.8 ÷ 0.80 = 9.8 kWh

That does not settle the purchase decision. The owner must still check whether the inverter can supply the home’s simultaneous load, whether the tariff’s export rules change the dispatch, and whether the 4–9 p.m. window is actually the same in every season and day type. If the home’s target load is only 2 kW at a time, a 5-hour discharge needs about 10 kWh delivered; if it spikes to 6 kW, power capability may be the limiting factor even when average energy is modest.

The pre-quote checklist

Ask the utility or installer to confirm these items in writing:

• current tariff name, version, and effective date;
• exact TOU periods, seasons, weekends, and holidays;
• energy prices and all applicable demand prices;
• demand interval, ratchet, and minimum rules;
• solar export compensation and netting interval;
• fixed charges and minimum bills;
• battery usable capacity, continuous power, surge power, and efficiency;
• backup-reserve settings and whether they reduce economic capacity;
• permitted charging and exporting behavior; and
• the interval data and assumptions used in the savings model.

If the quote uses “peak shaving” or “TOU savings” without showing the tariff periods, load data, losses, reserve, and bill components, it is not yet a sizing analysis. Request the model and test it against the utility’s current tariff.

Bottom line

Read the rate schedule in two passes: first as a calendar of prices and billing windows, then as a set of constraints on power, duration, charging, and exports. Size usable battery energy from the load you can shift, size inverter power from the load’s highest simultaneous demand, and model demand charges separately from kWh charges. Only after those steps should a battery quote be compared on capacity, cost, or projected savings.