What's the Difference Between a Backup and an Arbitrage Battery? Uses, Pros, and Cons

As solar panel installations increase around the country, so do home battery installations. The ways you can use energy storage are growing, too. 

Arbitrage or consumption-only batteries are a new option for some home solar panel owners. They let you store your own solar electricity and save money by using it or discharging it to the grid when energy is more expensive. However, an arbitrage battery is not a backup battery and won’t work during a power outage. 

When does it make sense to use a backup battery system, or an arbitrage battery system for your home power and to maximize your savings?

What Is an Arbitrage, or Consumption-Only, Battery?

An arbitrage battery — also known as a consumption-only, no-backup, or grid-tied battery — is designed to store and discharge energy to your home or the grid, but will not provide backup power in an outage. When the grid goes down, the battery does, too. However, consumption-only batteries are more affordable than backup batteries.

Whether you have one or many batteries in a system, the basic idea is you charge the battery with inexpensive power, from your home solar panels or during off-peak periods when electricity is cheaper. Then, you use the stored energy to avoid expensive peak rate electricity from the grid. Individuals, especially in California with its current NEM 3.0 plan, save more money storing and consuming solar power than exporting it to the grid for NEM credits, except in a few rare cases. 

While arbitrage batteries are cheaper to install, they won’t save you more than they cost in most places. For that to happen, electricity needs to be expensive and export rates need to be low. That means arbitrage batteries are typically installed in California.

Arbitrage vs. Backup Battery

Both arbitrage and backup batteries let you store your own power and use it. Arbitrage batteries have a lower upfront cost and a shorter payback period.

Which Battery Is Right for Your Home?

Solar panel systems without a battery, with a backup battery, or with an arbitrage battery can be the best choice for different people. Sometimes a standalone battery is right for a home. 

Going solar without a battery system is better when you want a lower upfront cost for a new system and are fine using utility grid electricity when solar power is not available. In locations with 1:1 net metering, where avoiding grid energy and sending electricity back to the grid are equally valuable, batteries may be less important.

A backup battery can be a wise addition if you can save more money by using more of your solar electricity and you want some backup power during blackouts. In most locations, a backup battery won’t pay for itself in savings, but provides the non-monetary benefits of security and greater independence from the grid.

A consumption-only battery gives you a lower upfront cost for adding energy storage to your system but won’t give you backup power in a power outage. You will be able to store cheap electricity from your solar panels or the grid and use the electricity or discharge it to the grid when doing so saves you money.

Either type of battery can help you use more of your solar electricity and gain more independence from your utility.

To see what you can save with solar and storage, use our solar savings calculator or contact a Palmetto solar advisor today.

Frequently Asked Questions

Will a battery back up my home during a power outage?

To provide backup power to your home or part of your home in an outage, your battery must be configured to do so. How much backup power it can provide depends on if your battery is charged, the size of the battery system, how much of your home draws power from the battery, and if your home solar system can recharge the battery during the outage. 

Can a battery save me more money when I get solar panels?

A backup battery, or bank of batteries, is a significant investment as part of a home solar system and, depending where you live, can increase the solar payback period. An arbitrage battery is less expensive to buy and install. In places like California, you’ll likely save more from an arbitrage battery than a backup battery. 

Why isn’t my home battery keeping my power on after the power went out?

If your battery isn’t designed and installed for backup power and the grid goes out, your battery will shut down, too. An arbitrage battery won’t discharge electricity during a power outage. A backup battery may go out during an outage for a few reasons, including not being full when the outage hits or not being able to recharge during the outage.