Introduction: How Can Solar PV and Battery Storage Create Financial Value?
Solar photovoltaic (PV) systems can reduce electricity purchases by generating power during daylight hours. However, solar production and electricity demand do not always occur at the same time.
A household or business may export surplus solar power during the day and purchase electricity from the grid later, when solar generation has declined.
Battery energy storage can help bridge this gap.
By storing surplus solar generation or charging during lower-priced periods and discharging when electricity is more expensive, a properly designed battery system can improve solar self-consumption and reduce electricity costs. This strategy is commonly known as peak shaving and valley filling.
The financial value depends on several factors:
- Solar generation and the customer's electricity consumption profile
- The retail electricity price and compensation received for exported power
- The difference between peak and off-peak electricity prices
- Battery capacity, usable energy, power rating and round-trip efficiency
- Battery degradation, replacement costs, installation costs and maintenance
- Applicable electricity tariffs and grid-connection requirements
A 10 kW solar PV system provides a useful starting point for examining these factors. However, solar capacity alone does not determine whether adding a battery will be profitable. The system must be assessed against the customer's actual load profile and local electricity tariff.
1. How Does Solar PV and Battery Storage Arbitrage Work?
There are three main ways a combined solar-and-storage system can create financial value.
1.1 Increase Solar Self-Consumption
Solar panels generate electricity during the day, but a household may use much of its electricity in the morning and evening.
Without a battery, surplus solar generation may be exported to the grid, while electricity is purchased later. With storage, some of that surplus energy can be stored and used after sunset.
The financial benefit is generally the difference between the electricity purchase cost avoided and the compensation that would otherwise have been received for exporting the energy.
For example, if a battery stores 10 kWh of surplus solar energy that would otherwise have been exported, the value of using that energy later is not automatically equal to 10 kWh multiplied by the retail electricity price. The calculation must account for conversion losses and the value of the foregone export payment.
1.2 Charge During Low-Price Periods and Discharge During Peak Periods
Where an eligible customer has a time-of-use tariff, the battery can charge during lower-priced periods and discharge when electricity prices are higher.
The basic principle is straightforward:
Valley period: Charge the battery when electricity prices are relatively low.
Peak period: Discharge the battery to reduce electricity purchased at higher prices.
Price spread: The difference between the relevant peak and valley prices creates the potential arbitrage margin.
However, the full price difference is not pure profit. Some energy is lost during charging and discharging, and the battery incurs degradation as it cycles.
1.3 Reduce Peak Demand
For commercial and industrial customers, storage may also reduce demand during periods when the site's power consumption is high.
Depending on the electricity tariff, reducing peak demand may lower demand-related charges or help avoid costly peak-period electricity purchases.
This benefit is separate from simple energy arbitrage. It depends on the customer's billing structure, demand profile, battery power rating and dispatch strategy.
2. Example System: A 10 kW Solar PV Installation
Consider an illustrative 10 kW solar PV installation in Hunan Province. The system is designed to supply a home or small facility, with battery storage added to increase self-consumption and potentially shift electricity use between price periods.
The following figures are illustrative assumptions, not a quotation or a verified operating result. Actual results depend on the site, equipment configuration, tariffs and customer load data.
2.1 Estimated Annual Solar Generation
Assume the system produces approximately 1,100 kWh per installed kW each year.
[10\text{ kW}\times1,100\text{ h}=11,000\text{ kWh/year}]
This gives an estimated annual generation of 11,000 kWh.
The 1,100-hour assumption is used here to illustrate the calculation. A project-specific forecast should use the site's solar resource, roof orientation, tilt angle, shading, system losses and local weather data.
2.2 Annual Electricity Consumption
Assume the household consumes approximately 650 kWh per month.
[650\text{ kWh}\times12=7,800\text{ kWh/year}]
Annual consumption would therefore be around 7,800 kWh.
This does not mean that all 7,800 kWh can automatically be supplied by the PV system. Solar production varies by hour and season, and electricity consumption may occur when the panels are generating little or no power. A battery can improve the match, but its capacity and operating strategy must be modelled.
2.3 Illustrative Energy Balance
For a simplified example, assume 7,700 kWh of solar electricity is used on site and 3,300 kWh is exported to the grid.
| Energy item | Annual energy |
|---|---|
| Solar generation | 11,000 kWh |
| Solar electricity used on site | 7,700 kWh |
| Surplus electricity exported | 3,300 kWh |
| Total accounted-for solar energy | 11,000 kWh |
This balance is internally consistent, but the allocation is only an example. It must be validated against hourly or sub-hourly generation and load data. The 7,700 kWh of on-site solar use also does not mean that all household electricity demand is covered; grid imports may still be required at other times.
3. Estimating the Financial Value of Solar Generation
The financial value of solar electricity depends on how much is consumed on site and how much is exported.
3.1 Value of Electricity Used on Site
For illustrative purposes, assume the avoided electricity purchase price is RMB 0.453/kWh.
[7,700\times0.453=\text{RMB }3,488.10]
The estimated annual value of on-site solar consumption would be RMB 3,488.10 under this assumption.
3.2 Revenue from Exported Electricity
If the exported electricity were compensated at the same illustrative rate of RMB 0.453/kWh:
[3,300\times0.453=\text{RMB }1,494.90]
The estimated annual export revenue would be RMB 1,494.90.
3.3 Illustrative Total Annual Value
| Item | Calculation | Annual value |
|---|---|---|
| On-site solar consumption | 7,700 × RMB 0.453 | RMB 3,488.10 |
| Exported electricity | 3,300 × RMB 0.453 | RMB 1,494.90 |
| Total illustrative value | 11,000 × RMB 0.453 | RMB 4,983.00 |
These figures illustrate the arithmetic only. RMB 0.453/kWh should not be treated as a confirmed current residential retail tariff or a guaranteed export price in Hunan.
In particular, a benchmark coal-fired power price is not necessarily the same as the retail electricity price paid by a household or the settlement price received for exported distributed solar generation.
China's renewable electricity pricing framework has also been changing. The National Development and Reform Commission and the National Energy Administration issued a reform notice in February 2025 to move renewable electricity prices further toward market-based formation, alongside a mechanism intended to support the transition. Project owners should confirm the applicable provincial rules, project eligibility and settlement arrangements before estimating export revenue.
Sources:
4. What Determines Whether a Project Is Profitable?
Before purchasing or specifying a battery, customers and installers should evaluate the following factors.
Solar Generation and Load Matching
A solar production estimate should be based on the site rather than a generic annual-hours figure. The timing of generation matters as much as total annual output.
Electricity Purchase and Export Prices
Use the actual applicable retail tariff and the current export settlement arrangement. A benchmark wholesale or coal-fired power price should not automatically be treated as either value.
Battery Capacity and Power
Capacity determines how much energy can be stored; power determines how quickly it can be charged or discharged. Both must match the intended use case.
Efficiency and Degradation
Round-trip efficiency affects the amount of electricity required for charging. Battery degradation reduces available capacity over time and should be considered in the financial model.
Installation and Lifecycle Costs
Include the costs of the battery, inverter where required, electrical protection, installation, maintenance, replacement and any other relevant equipment. Avoid counting equipment twice if it is already included in the solar installation cost.
Tariff Eligibility and Regulatory Requirements
Confirm the applicable tariff category, metering arrangement, export rules, grid-connection requirements and relevant standards before committing to a design.
Sensitivity Analysis
A robust investment model should test several scenarios, including lower-than-expected solar generation, smaller price spreads, fewer operating cycles, higher replacement costs and changes in electricity prices.
The purpose is not to produce a single optimistic payback figure. It is to understand which assumptions have the greatest impact on the result.
Contact Tenz Energy to discuss your battery energy-storage requirements.
Final system selection and financial projections should be based on verified product specifications,
the applicable electricity tariff and a project-specific assessment.
Mail：leeana.long@tenzenergy.com
Conclusion: Model the Whole System, Not Just the Battery Price
A 10 kW solar PV system can create value through on-site electricity use and, where permitted, exported electricity. Adding a battery may improve self-consumption, support backup power and enable peak-valley arbitrage for customers on suitable tariffs.
However, the economics are not determined by the battery's nominal capacity or the headline peak-valley price difference alone. Charging losses, battery degradation, electricity settlement rules, replacement costs and the customer's actual load profile all affect the result.
The illustrative calculation in this article shows that a 20 kWh daily discharge, 300 operating days per year and a RMB 0.28/kWh price difference produce only RMB 1,680 in simplified annual gross arbitrage value. That does not support a five-year payback on a RMB 36,480 battery investment.
The most reliable approach is to use verified tariffs, realistic energy-flow assumptions and transparent lifecycle costs. When the system is sized and operated for the customer's actual needs, solar PV and battery storage can be evaluated as an energy-management investment rather than relying on an unverified promise of quick returns.
Common Problem
1. Can a 10 kW solar PV system benefit from battery storage?
Yes, potentially. A battery can store some surplus solar generation for later use, reducing grid purchases when the solar system is not generating enough power. The financial benefit depends on the customer's consumption profile, export compensation, electricity prices and battery costs.
2. How much usable energy does a battery provide?
Usable energy is lower than nominal capacity when the battery has a permitted depth-of-discharge limit and the system incurs conversion losses. For example, 12 nominal 12 V, 200 Ah batteries represent 28.8 kWh before these adjustments. The actual usable energy depends on the battery chemistry, BMS, inverter and manufacturer's specifications.
3. Is peak-valley arbitrage always profitable?
No. Arbitrage is more attractive when the price difference is sufficiently large and the battery can cycle regularly, but charging losses, degradation, installation costs and replacement costs can reduce or eliminate the financial benefit. A project should be modelled using the customer's actual tariff and operating data.
5. What information is needed to estimate a project's payback period?
At a minimum, the assessment needs the solar system's expected generation, the customer's load profile, retail and export electricity prices, battery usable capacity and efficiency, operating schedule, installed cost, expected replacement costs and maintenance assumptions. For commercial customers, demand charges and tariff eligibility may also be important.
References
National Development and Reform Commission. Notice on Deepening Market-Oriented Reform of Renewable Electricity Pricing and Promoting High-Quality Development of Renewable Energy (2025).
https://www.ndrc.gov.cn/xxgk/zcfb/tz/202502/t20250209_1396066.html
Hunan Provincial Development and Reform Commission. Notice on Optimising the Time-of-Use Electricity Pricing Policy in Hunan Province (2025).
https://fgw.hunan.gov.cn/fgw/jgzc11/202507/t20250702_33733479.html