The new film Dumb Money gives home traders the Hollywood treatment. The movie, based on the GameStop saga of 2021, recounts how amateur stock enthusiasts and trolls united on online platforms like Reddit drove up the stock price of an over-the-hill video game store and caused huge losses for hedge funds that bet against the stock.
The bizarre episode shone a spotlight on just how many armchair stock jockeys are out there. Now, another type of trader is quietly growing in popularity: the garage energy baron.
Online, you can find solar enthusiasts not only celebrating how much energy their panels created but also how much money they made by selling energy back to the electric utility. As more homes can make and store their own energy, more homeowners are trying to get in on “energy arbitrage.” They are buying low and selling high, though this time the product in question is not a share of company stock, but a kilowatt-hour of energy.
Most people have minimal control of their home energy. It is a resource we consume, and the principal way to affect the monthly bill is by turning up the AC or turning off the lights. The roughly 5 percent of Americans with solar panels, along with those who have wind turbines or other ways to generate electricity, have been changing the equation by becoming energy providers rather than passive recipients.
Home solar lowers the amount of energy a home must buy from the grid. Sometimes, when the sun shines high and unobstructed, homeowners with a large solar setup can make more energy than the home requires. In most places, they can turn around and sell the excess energy back to the grid. Net metering, as it is called, helps to recoup the five-figure sum needed to pay for solar panels in the first place.
The revenue can be eye-popping. In the Tesla Solar subreddit, a hive of people with Elon Musk’s solar panels and integrated home energy systems, users recount the details of their system and their savings. A poster from Texas this week uploaded a screenshot showing they made $600 in a month by selling back energy as part of Tesla Electric, the company’s virtual power plant (VPP).
Tesla Electric works because of a new wrinkle in the energy game. With the advent of products such as Tesla’s Powerwall — basically a big, intelligent battery for the house — homeowners can now make their own energy and store it for later, which opens new possibilities. The first is a no-brainer: Stashing excess energy in the battery creates a backup power supply in case of a blackout. However, the ability to charge and discharge the battery at will gives rise to gamesmanship.
Suppose that instead of selling solar energy to the grid right away (in the afternoon when there’s lots of it), a homeowner stashes it and waits. In the evening, when energy demand rises as people get home from work and the price of energy rises, that’s when their system hits the “sell button.”
This is energy arbitrage. It earns the biggest windfalls when prices are volatile, with big gaps between high and low. That’s exactly what happened in Australia in 2022, where wild markets earned record profits for anyone who could use a big battery to buy and sell energy. In Texas, the Tesla Electric VPP automatically sells the energy stored in customers’ home Powerwalls when the price is the highest (and refills the battery when electricity is cheap), which leads to windfall profits during a major “sell event.” One Redditor claimed to be up more than $800 this summer, mostly by using his Powerwall to perform energy arbitrage.
Indeed, homeowners don’t need solar panels or wind turbines to do this, says Jeff Maguire, a researcher at the National Renewable Energy Lab.
“If you're in that scenario and you have a battery, you can charge the battery when energy is cheap and discharge it when energy is expensive,” he says. “You'll make a little bit of profit, and you can do that every day. It’s called energy arbitrage. It's one way to pay [yourself] back for the batteries. It's usually not enough to cover the cost of the battery itself, but it certainly helps, and then you'll have it for resilience when you need it.”
Of course, all this scheming and strategy is reliant upon one basic idea: that a person can sell electricity back to the grid at fair market price. There is no guarantee this will continue indefinitely.
Over the past couple of years, state lawmakers and electric utility operators around the country have proposed cutting off net metering, slashing the rates residents get paid for extra energy. One (disputed) argument from utilities is “cost-shift,” the idea that people with solar panels are subsidized by everybody else who pays for standard electricity, and who pays for the upkeep of the grid as part of every kWh they purchase. Another is technical: America’s aging infrastructure wasn’t built with this “backfeeding” in mind, and may not be able to deal with a very large number of homes sending juice back onto the grid.
The gambit is also about the big utilities’ bottom line. They don’t want to have to “curtail” some of their solar because there’s too much on the grid, thanks to net-metering residents. And they, too, are engaged in the energy arbitrage game.
Many electric utilities are installing their own large energy storage facilities, which is crucial as the country uses more and more renewable energy: If people can’t move their electricity consumption to the times of peak energy supply — say, by charging their EV in the middle of the day when the sun shines — then we need to save lots of our renewable energy for later. When the utility stashes solar energy made from the noontime sun and sells it at 7 p.m. when residential electricity is costlier, it makes a little profit in the process to help pay for the cost of those storage systems.
What all this means for the home energy trader could vary wildly state by state. New Hampshire, in a surprise, just decided against slashing net metering rates. Sunny California, the country’s biggest residential solar market, cut energy payments for new PV installations by 75 percent – in theory because there’s already too much solar – while grandfathering in all the people who already have panels.
It may turn out that if you want to be a solar trader, you should have started yesterday.
Courtesy of Rhodium Group
