Round-Trip Efficiency: Why Doesn’t a Battery Give Back All the Energy You Put In?

Understand BESS round-trip efficiency with simple calculations showing how energy losses affect battery arbitrage margins, break-even prices, and project economics.

The basic idea

A battery does not return all the energy that goes into it. Some energy is lost during the charging, storing and discharging process. This is captured by round-trip efficiency (RTE).

If a battery has a round-trip efficiency of 90%, then:

For every 100 MWh of energy put into the battery, approximately 90 MWh can be delivered back out.

The remaining 10 MWh represents energy losses.

1. Let’s Start with a simple example

Suppose we have: 100 MWh of electricity available for charging

and a battery with: 90% round-trip efficiency.

The energy eventually delivered back is:100×90%=90 MWh100 \times 90\% = 90\ MWh

So:

Energy charged: 100 MWh
Energy discharged: 90 MWh
Energy lost: 10 MWh

This immediately changes how we think about battery arbitrage.

If electricity is cheap when we charge and expensive when we discharge, we cannot simply calculate:Selling Price−Buying PriceSelling\ Price – Buying\ Price

because we don’t get all of the purchased energy back.

2. Efficiency changes the economics of arbitrage

Suppose electricity costs: $30/MWh when we charge.

Later, electricity is worth: $80/MWh when we discharge.

At first glance, the spread is:$80−$30=$50/MWh\$80-\$30=\boxed{\$50/MWh}

It looks like the battery has a $50/MWh opportunity.

But that’s not quite right.

3. What happens to 1 MWh?

Let’s say we want to deliver 1 MWh back to the grid.

With 90% round-trip efficiency, we need to put more than 1 MWh into the battery.

Assuming, for simplicity, that the 90% loss is applied to the complete charge-discharge cycle:Energy Required=10.90Energy\ Required = \frac{1}{0.90}=1.111 MWh=\boxed{1.111\ MWh}

So we need to buy approximately 1.111 MWh of electricity to eventually deliver 1 MWh.

At $30/MWh:1.111×$30=$33.331.111\times \$30 = \$33.33

Our effective energy cost is therefore:$33.33/MWh\boxed{\$33.33/MWh}

We then sell that 1 MWh for:$80\$80

So the gross energy margin is:$80−$33.33\$80-\$33.33=$46.67/MWh=\boxed{\$46.67/MWh}

The original $50/MWh spread has effectively become $46.67/MWh before other costs.

4. Why the distinction matters

Without accounting for efficiency, we might think: Buy at $30 → sell at $80 → make $50.

But the battery has to purchase more energy than it eventually sells.

So the actual calculation is closer to:Gross Margin=Selling Revenue−Cost of Energy Required\text{Gross Margin} = \text{Selling Revenue} – \text{Cost of Energy Required}

or:Gross Margin=Psell−Pbuyη\text{Gross Margin} = P_{sell} – \frac{P_{buy}}{\eta}

where:

  • PsellP_{sell} = discharge electricity price
  • PbuyP_{buy} = charging electricity price
  • η\eta = round-trip efficiency

For our example:80−300.9080-\frac{30}{0.90}=$46.67/MWh=\boxed{\$46.67/MWh}

5. What happens when the spread is smaller?

Now suppose electricity costs:

$60/MWh when charging

and:

$70/MWh when discharging.

The apparent spread is:70−60=$10/MWh70-60=\$10/MWh

But after accounting for efficiency:70−600.9070-\frac{60}{0.90}=70−66.67=70-66.67=$3.33/MWh=\boxed{\$3.33/MWh}

The battery still has a positive gross energy margin in this simplified example.

But now imagine we add:

  • degradation
  • trading costs
  • grid charges
  • imbalance costs
  • operating costs

That $3.33/MWh margin could disappear entirely.

This is why a positive electricity price spread does not necessarily mean a profitable battery trade.

6. The break-even price

We can take this one step further. At what selling price does the battery break even on energy costs?

If:Pbuy=$60/MWhP_{buy}=\$60/MWh

and:η=90%\eta=90\%

then the break-even selling price is:Psell=600.90P_{sell}=\frac{60}{0.90}=$66.67/MWh=\boxed{\$66.67/MWh}

So, ignoring every other cost, the battery needs to sell electricity for more than $66.67/MWh simply to recover the cost of the energy it purchased.

This gives us a useful concept:

The minimum arbitrage spread depends on efficiency.

7. Efficiency isn’t the only thing that matters

This calculation is deliberately simplified.

A real battery has separate charging and discharging efficiencies, auxiliary consumption, power losses and other operating constraints.

For example, we might eventually represent the process as:SOCt+1=SOCt+ηc×Charget−DischargetηdSOC_{t+1} = SOC_t + \eta_c \times Charge_t – \frac{Discharge_t}{\eta_d}

where:

  • ηc\eta_c = charging efficiency
  • ηd\eta_d = discharging efficiency

This is more useful when we eventually build an actual dispatch optimization model.

But the important idea comes first:

Energy entering the battery, energy stored inside the battery, and energy delivered back to the grid are not necessarily the same quantity.

8. Why efficiency matters to a battery operator

Consider two otherwise identical batteries.

Battery A: 90% RTE
Battery B: 80% RTE

Both buy electricity at $30/MWh and sell at $80/MWh.

For Battery A:80−300.90=$46.67/MWh80-\frac{30}{0.90} =\boxed{\$46.67/MWh}

For Battery B:80−300.80=$42.50/MWh80-\frac{30}{0.80} =\boxed{\$42.50/MWh}

The lower-efficiency battery earns:46.67−42.50=$4.17/MWh46.67-42.50 = \boxed{\$4.17/MWh}

less gross margin under these assumptions.

That difference can become significant when multiplied across large amounts of annual throughput.

And this is where battery technology begins connecting directly to project economics.

9. The bigger implication

Efficiency doesn’t simply tell us whether a battery is technically good. It affects:

  • How much energy must be purchased
  • How much can be sold
  • The effective cost of each MWh
  • Arbitrage margins
  • Potential revenue
  • Project returns.

So a seemingly small technical parameter can influence the economics of the entire asset.

This is one of the recurring themes in BESS:

Technical characteristics become economic variables.

The mental model

For now, remember:RTE=Energy DeliveredEnergy Charged\boxed{RTE=\frac{Energy\ Delivered}{Energy\ Charged}}

** Energy Charged” means the total amount of electricity you drew from the power grid and paid for at the boundary of the facility.

And for a simplified arbitrage calculation:Gross Margin/MWh=Psell−PbuyRTE\boxed{ Gross\ Margin/MWh = P_{sell} – \frac{P_{buy}}{RTE} }

A battery therefore doesn’t just need a price spread.

It needs a spread large enough to compensate for efficiency losses, degradation, operating/trading costs, and and eventually the opportunity cost of using the battery’s limited capacity.

That takes us naturally to the next question:

What Does One Battery Cycle Actually Cost?

This is where throughput, degradation, and the economic cost of using the battery start to matter.

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