Maximising the value of battery energy storage systems in the Western Cape by leveraging time-of-use tariffs

This industry brief by GreenCape examines the financial viability of using battery energy storage systems (BESS) for tariff arbitrage in the Western Cape, South Africa. It focuses on leveraging time-of-use (TOU) tariffs to reduce energy costs by charging batteries during off-peak periods and discharging during peak periods, particularly as the decline in loadshedding has left many existing BESS installations underutilised.

• Businesses in the Western Cape that already own BESS installations originally intended for loadshedding mitigation can repurpose these systems for tariff arbitrage if they are on a municipal or Eskom time-of-use (TOU) tariff. This transition offers high financial returns because the primary capital expenditure has already been incurred, meaning savings translate almost directly into returns.
• The financial attractiveness of new BESS installations for tariff arbitrage is highly sensitive to electricity tariff escalation rates and the investment horizon. Over a 10-year period, a moderate escalation scenario (12% in year one, then 6% annually) results in internal rates of return (IRR) below the 10.5% prime lending rate for most municipalities. However, a historical escalation rate of 12% per year makes the investment more attractive in municipalities such as Prince Albert, Overstrand, and Mossel Bay.
• Extending the investment outlook for new BESS installations from 10 to 15 years improves financial performance across more municipalities. This longer horizon allows for a greater accumulation of arbitrage savings after the initial fixed costs are recovered.
• The viability of BESS arbitrage is limited by the availability of TOU tariff structures, which are not uniform across all municipalities and are often restricted to specific business types. Some municipalities, including Saldanha Bay, Laingsburg, and Hessequa, are noted as having no TOU structure.
• Several risks can undermine the business case for BESS arbitrage, including the possibility of NERSA or municipalities adjusting tariff structures to be less attractive, battery degradation caused by excessive cycling, and the impact of power outages. Grid outages can deprioritise arbitrage and may leave a battery discharged when backup power is most needed.
• Upgrading existing BESS for arbitrage may require specific technical enhancements, including advanced energy management systems for automated scheduling, inverter reprogramming or replacement for bidirectional power flow, TOU compatible metering, and BMS firmware upgrades to manage increased cycling intensity.

APA

GreenCape (n.d.). Maximising the value of battery energy storage systems in the Western Cape by leveraging time-of-use tariffs. https://greencape.co.za/wp-content/uploads/2026/01/GC-Industry-Brief-Energy-BESS-Digital-medium-res.pdf

Chicago

GreenCape. Maximising the value of battery energy storage systems in the Western Cape by leveraging time-of-use tariffs. n.d. https://greencape.co.za/wp-content/uploads/2026/01/GC-Industry-Brief-Energy-BESS-Digital-medium-res.pdf.

Wikipedia

{{cite report |author=GreenCape |title=Maximising the value of battery energy storage systems in the Western Cape by leveraging time-of-use tariffs |url=https://greencape.co.za/wp-content/uploads/2026/01/GC-Industry-Brief-Energy-BESS-Digital-medium-res.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{greencapendmaximising, author = {{GreenCape}}, title = {{Maximising the value of battery energy storage systems in the Western Cape by leveraging time-of-use tariffs}}, institution = {GreenCape}, url = {https://greencape.co.za/wp-content/uploads/2026/01/GC-Industry-Brief-Energy-BESS-Digital-medium-res.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }