The rise of tariff arbitrage – How South African businesses can stabilise energy costs

Rising electricity tariffs and unpredictable peak charges are creating significant cost pressure for energy-intensive businesses across South Africa. In response, tariff arbitrage is becoming a practical way for companies to manage costs without disrupting operations. At its core, tariff arbitrage targets the most expensive time-of-use periods, typically early mornings and late evenings, when tariffs can be significantly higher than standard rates.

In simple terms, tariff arbitrage involves shifting the timing of when electricity is drawn from the grid so that more consumption falls into lower-priced time-of-use periods and less into expensive peak blocks, without necessarily reducing total energy use. With smart battery storage and data-driven control systems, businesses can use stored energy during peak periods, offsetting high tariffs while maintaining uninterrupted operations.

“Tariffs during early morning and late evening periods can be four to five times higher than standard rates, or even seven times higher than off-peak rates,” explains Charles Neethling, Senior Business Developer at SPS. “Solar generation covers some of the peak hours, but with Eskom’s recent changes, moving one morning peak hour to the evening, solar alone is no longer enough. The solution is to combine a battery with smart controls, charging from off-peak or solar and discharging during expensive peak hours.”

How tariff arbitrage works in practice

For many businesses, changing operating hours to avoid peak tariffs is not feasible. “A properly sized battery can discharge energy during peak periods while the company continues using equipment as normal, without any operational disruption,” says Neethling.

This makes battery energy storage a key enabler of tariff arbitrage, allowing businesses to shift energy usage without altering core operations.

The result is a predictable reduction in electricity costs. “Currently, tariff arbitrage is only viable in certain municipalities, like Ekurhuleni, where summer peak tariffs can reach between R9 and R12 per kilowatt-hour,” Neethling notes. “There are also opportunities in parts of Gauteng and the Western Cape, but feasibility depends heavily on local tariff structures and the differential between peak and off-peak rates.”

Anja Visagie, Chief Growth and Marketing Officer at SPS, adds, “The financial viability also depends on whether a business funds the system outright or uses a funded solution. With a self-funded purchase, savings start from day one, although the payback period may still be lengthy. With a funded solution, the savings must be sufficient to offset the monthly payments for the battery. That is why careful assessment of peak-to-off-peak differentials, ideally exceeding R3, is essential.”

Structuring bankable projects

A successful tariff arbitrage project must align with both operational and financial objectives. Visagie explains, “Funded models such as equipment rental agreements can allow businesses to pay a fixed monthly fee while the energy provider guarantees battery availability. In many cases, these agreements are structured over periods of around 10 years. Outright purchase is an option for those with available capital, but owning a system comes with operational and maintenance responsibilities that many businesses prefer to outsource.”

Neethling adds, “If companies purchase a battery outright, they handle warranties and potential component failures themselves. With a funded solution, the operational and maintenance responsibilities typically sit with the provider.”

For many organisations, partnering with specialist energy providers can also reduce the complexity associated with battery management, maintenance, optimisation, and long-term performance monitoring, while allowing internal teams to remain focused on core business operations.

Optimising for success

The technical foundation of tariff arbitrage is just as important as the financial model. “The ideal business has a consistent load profile, typically operating from around 6 or 7 a.m. until 6 or 7 p.m.,” says Neethling. “Flat profiles can work, but consistency throughout the year is critical. Seasonal fluctuations can limit potential savings if high consumption periods do not align with peak tariffs.”

Consistency is especially important for seasonal industries, such as agriculture, where lower winter activity can reduce savings potential during high-tariff periods, typically in June, July, and August.

Visagie emphasises that businesses also need clear objectives. “Businesses need to define whether their priority is cost savings, backup power, or both. Batteries designed for tariff arbitrage are optimised for cost reduction, not necessarily for backup.”

Avoiding common pitfalls

Many businesses expect a single battery system to solve every energy challenge. “Some businesses want a system for backup, tariff arbitrage, and load shedding all in one,” Visagie explains. “This requires a more sophisticated and expensive solution that may not provide the best return on investment.”

Misalignment between expectations and system design can result in underperformance, particularly when batteries are not sized correctly for their intended use.

Long-term project success also depends on ongoing monitoring, predictive maintenance, and the flexibility to adapt systems as tariffs, regulations, and operational requirements evolve. Specialist energy partners can play an important role by managing system performance and helping businesses adapt their energy strategies over time.

The bottom line

Tariff arbitrage is becoming an increasingly viable option for South African businesses facing rising electricity costs and volatile peak tariffs. For organisations with the right load profiles and tariff structures, battery storage paired with intelligent energy management can deliver meaningful savings while improving operational resilience.

As tariff structures continue to rise and battery technology becomes more commercially accessible, businesses that previously ruled out battery-backed tariff arbitrage may find that the economics now look very different.

“Tariff arbitrage works,” Neethling concludes. “With the right battery, controls, and design, companies can stabilise costs without disrupting operations.”