Part 1: If you want to sell batteries, you have to understand commercial tariffs.

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This blog is part of a multi-part series that unpacks in detail the opportunities for commercial batteries in the UK. Read Part 2 here.

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In Australia, the world's leading solar market per capita, we at Orkestra have witnessed both the boom-bust cycle of the solar industry and what it takes to achieve the stability and credibility needed to decarbonise and electrify entire economies. We aim to share our insights to help the UK avoid similar market challenges.

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The UK solar industry has ample room for improvement in its approach to commercial solar opportunities. Many solar installers are:

• Missing opportunities to deliver additional value and create bigger revenue opportunities for themselves.
• Presenting financial returns that are difficult to justify to customers or funders therefore lowering close rates
• Creating reputational risk for themselves and the industry by overstating value for solar

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Huh? How can you leave value on the table while also overstating the value? Many solar providers rely on simplistic financial models that overstate solar's value while overlooking more comprehensive, higher-value solutions that exist by incorporating batteries and tariff charges.

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This article aims to help Commercial Solar Co executives and directors understand the risks of inadequate financial modelling and the opportunities that arise from detailed, accurate modelling.

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Why is detailed feasibility and tariff modelling so important?

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When selling commercial solar and battery systems, customers typically want to understand the system's financial returns. It's essential to persuade a financial decision-maker, such as a CEO or CFO, that investing significantly in solar and batteries - a typical non-core business investment - is highly beneficial. The quality of your project's financials is likely crucial for closing the deal.

The economics of a solar and battery system centre on:

• The initial cost of the system
• The savings on electricity bills that the system will provide

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For project bankability, it's vital to determine bill savings with utility-grade accuracy. This requires calculating both the baseline and after-project electricity bills as accurately as an electricity supplier would.

The electricity bill savings are a function of both the reduction in electricity consumption (and, critically for C&I, the shape of the half-hourly load profile) and the electricity tariff.

The challenges often arise from modelling the electricity tariff, as it can be intricate. To sidestep detailed tariff modelling, many solar companies opt for blended electricity rates when assessing solar and battery solutions. This approach involves using the total bill costs in £, excluding clear fixed costs, then dividing by total consumption in kWh to establish a p/kWh metric for savings evaluation. 

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However, undercooking the electricity tariff modelling will directly impact the savings and project economics. 

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Simple modelling approaches ignore the value of:

• Network demand tariffs
• Transmission demand tariffs
• Time of use factors that exist for both commodity and usage charges
• Opportunities for tariff optimisation

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What are the biggest opportunities being missed?

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Holistic energy solutions that incorporate batteries and tariff optimisation. The battery part of this equation is a huge revenue opportunity for solar installers being left on the table.

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Battery economics stack up when a battery can charge when electricity prices are low and discharge when electricity prices are high. As a rule of thumb, we observe projects will start to “stack up” where the battery cycles on average once per day on a 16p/kWh arbitrage opportunity.

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If you use blended electricity rates, the only arbitrage opportunity you assess is between an export tariff and the blended rate. The only opportunity you can assess with this simple analysis is to improve solar self-consumption in a way that is “blind” to a site's tariff. 

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Doing feasibility analysis on batteries using blended electricity rates quite literally averages out the opportunities for a battery - not ideal.

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If you do detailed modelling, you’ll be revealing opportunities for:

• Time of use arbitrage on retail, distribution and capacity market tariffs
• Reducing peak demand costs from distribution and transmission charges
• Optimising fixed residual charges for distribution and transmission
• Capturing transmission support payments

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Neatly, as many of the most valuable opportunities occur in winter, these battery value streams will supplement improved solar self-consumption, which occurs predominantly in the summer.

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Unless you model tariffs in detail, it will be a classic case of garbage in, garbage out.  In the next blog in this series, we’ll look at all these opportunities in detail. Read Part 2 here.

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How can Orkestra help?

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Orkestra has developed an e-book for commercial solar installers that details the opportunities for behind-the-meter batteries in the UK.

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Further, Orkestra is fast emerging as a leading feasibility modelling software for analysing and selling commercial new energy projects - solar, batteries, emobility, financing and more - that is fast, easy and accurate to use.

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As of November 2024, Orkestra is now operating in the UK and UK commercial solar cos are quickly signing up.

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Core to Orkestra’s software is a tariff engine able to produce a bill at utility-grade level. This enables solar companies to determining the financially optimal sizing and feasibility of solar and battery projects. 

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By simulating how a site uses and generates energy, Orkestra's platform can pinpoint the best battery size and how to operate it to rake in the most savings and revenue. This helps solar companies fine-tune their project designs, minimise risk, and build trust with customers.

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Keen to dive in further? Read Part 2: Detailed feasibility and tariff modelling sells commercial batteries.

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Want to learn more about how Orkestra can help with tariff modelling? Book a demo with our team, or start a free 3 week trial today.

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