Since 2015 Australians have been talking about home battery storage being on the cusp of financial viability. Are home batteries worth the investment in 2017? We’ve crunched the number for all of Australia’s capital cities to find out.
This article was originally published in February 2017. It was last updated on 7 August 2017 to take into account changing grid electricity prices, solar feed-in tariff rates, battery installation prices and solar PV system installation prices.
Battery storage & payback periods in Australia
Batteries are in high demand thanks to the promise of energy self-sufficiency and back-up power in the event of blackouts. Battery storage system prices are coming down quickly and the number of households opting to install battery storage has risen dramatically compared to just a year ago. The analysts at SunWiz anticipate that 2017 will be an even bigger year for batteries.
Previously we’ve looked at the topic of when battery storage will become a ‘no-brainer’ investment. In that article, we said that the ultimate goal post is the point at which the addition of batteries actually reduces the payback period of a solar PV system – rather than lengthening it (see the table below).
If we assume that the batteries are charged only with the sun, by our estimates battery storage pricing needs to come down to about $200-$300 per kilowatt-hour (kWh) of storage capacity (for a lithium battery with a 10-year warranty) for it to make sense purely from an investment standpoint. Paybacks could be faster if tactics like tariff arbitrage, Reposit GridCredits and spot price trading are implemented. Currently, the lowest prices we’re seeing are about $750-$800/kWh of storage capacity.
Being ‘worth it’ vs ‘breaking even’
We’re still a few years off from hitting this much anticipated price milestone, so for the time being we’re mainly looking at whether a solar & battery system will pay for itself before it the battery warranty expires – breaking even.
Please note that throughout this article we refer to solar & battery storage systems as ‘whole’ systems. In fact, the vast majority of the value delivered comes from the solar PV portion of the system, not the batteries. Solar PV systems (without batteries) generally have payback periods as low as 3-5 years depending on the situation; because batteries deliver less value and cost more, adding them to a solar system will inevitably lengthen the payback period for the system as a whole. If your primary goals are greater energy independence and reduced electricity bills, then batteries can help you achieve them – but batteries on their own may not always be fantastic from an investment point of view.
Lithium batteries are shaping up to be the most popular battery chemistry for residential applications, with about 80% of the emerging products on the market using some lithium variation. Most of the (good quality) lithium battery banks have a 10-year warranty, and when we talk about batteries here that’s generally what we’re referring to: a lithium battery with a 10-year warranty. (For reference, solar panels usually have 25-year performance warranty, and warranties for solar inverters are typically 5-10 years.)
While the batteries will almost definitely continue to perform after the warranty has expired, you’ve got no concrete assurances that they will. Also keep in mind that a battery’s performance may be diminished at the end of the warranty term (read about battery ‘end of life’). We therefore suggest that anyone intent on getting batteries should at least aim for a system that will break even over its 10-year warranty period.
Whether simply breaking even within the warranty term is ‘worth it’ is a subjective question, but the growing uptake of home battery storage systems (nearly 7,000 last year) indicates that – for many people – it is.
Also note that throughout this article we have not taken into account the cost of finance, instead assuming that solar & battery system purchasers pay for their systems out-of-pocket.
Solar & battery payback periods in 2017: 3 battery sizes, city by city
Every city has a different set of circumstances when it comes to the amount of sunlight, grid electricity rates and the price of solar PV systems. This variability means that – like solar – battery storage will hit viability at different times in different places. We tried to take as many of these factors into account as possible. Here’s what we did:
- Using SunWiz’s PVSell software, we created scenarios for all of Australia’s capital cities, assuming that the home in question uses 30kWh of energy per day on the ‘day focus’ usage pattern – common amongst families with young children and/or a home office.
- Using EnergyMadeEasy.gov.au, we found some of the most competitive retail electricity plans on offer in each city (both flat/block rate and TOU) and plugged them into our scenarios in PVSell. The figures we ended up using are detailed in the table below. (Important to note that electricity retailer discounts (pay on time, etc) are not incorporated in this modelling.)
Electricity rates by capital city, based on most competitive plans available on EnergyMadeEasy.gov.au. **Daily usage charges for Adelaide TOU include demand charges of 47c/day (summer) and 20c/day (winter) for electricity usage in excess of 1kW. We were unable to model these in PVSell, which means battery payback periods may in fact be shorter for TOU customers in Adelaide.
- We then plugged in average solar system prices from our August 2017 Solar PV Price Index for each capital city, using 7kW for the ‘large’ scenario, and 5kW for the ‘medium’ and ‘small’ scenarios (plus an additional $1,000 on the solar system cost for ‘battery-ready’/hybrid inverter).
- We chose three lithium battery products with 10-year warranties, each of a different size category. (Please note that we are not aiming to pit battery manufacturers or products against one another in this analysis – battery products here were chosen for their size and relative price-competitiveness.)
- For the ‘large’ battery system, we used Tesla’s Powerwall 2, which has a usable energy storage capacity of 13.2kWh;
- For the ‘medium’ battery system, we used Alpha ESS’s Storion Eco, which has a usable energy storage capacity of 8.64kWh; and
- For the ‘small’ battery system, we used LG Chem’s RESU3.3, which has a usable storage capacity of 2.97kWh.
- We chose to ignore battery degradation, which happens naturally over time to lithium batteries. This could lead to longer payback periods than those detailed below but is not currently modelled in PVSell. Battery degradation is an important factor to keep in mind for anyone shopping for a battery storage system.
- We’ve also ignored most of the auxiliary benefits that batteries promise: Tariff arbitrage (for TOU customers) and compensation for exporting stored energy with systems like selective export programs like Reposit’s GridCredits. These benefits will have a positive impact on battery payback times where they are available.
- We haven’t taken into account incentives for battery storage available in Adelaide and Canberra.
- We assumed that each battery system would have the same price tag regardless of the city where it was installed.
Results by size
We’ve created the the following tables so anyone can quickly work out whether battery storage may be worthwhile for them – and if so, what size battery bank will offer the best returns.
The first table below sums up the results in one place (hover cursor to see numbers), while the following sections show the results in more detail.
Battery storage payback periods by battery system size, city and tariff type. (Click to enlarge.)
Large: Tesla Powerwall 2 (with a 7kW solar system)
Tesla’s Powerwall 2 is one of the most in-demand home battery solutions available in Australia. It has 13.2kWh of usable energy storage capacity, with an end of life retained capacity of 70%. Installations commenced this year and ordinarily cost about $12,000 (n.b. we’ve upped our estimate from the $10,500 figure we used in previous analysis because of market prices we’ve been seeing). Because of Powerwall 2’s large capacity, we’ve coupled it with a 7kW solar system in our modelling.
Medium: Alpha-ESS Storion Eco (with a 5kW solar system)
Alpha-ESS’s Storion Eco has a maximum storage capacity of 8.64kWh (usable), making it a great ‘middle of the road’ battery option in terms of size. It has an end of life retained capacity of 60% and retails for about $8,800 installed.
Small: LG Chem RESU3.3 (with a 5kW solar system)
LG Chem’s RESU3.3 has a usable storage capacity of 2.97kWh, making it one of the smallest units on the market. While the battery is modular and can be ‘stacked’ with other LG Chem units for added capacity, we wanted to see how it performed as a entry-level battery bank with a smaller price tag than the ‘medium’ & ‘large’ options above. The battery has an end of life retained capacity of 60%. We estimate that it retails for about $3,500 installed as a battery-only solution, and that there will be an additional $1,000 to the solar system for a hybrid/battery-ready inverter.
Results by city
The table below shows payback periods on batteries for each capital city (payback times averaged across all three battery sizes/products). In a nutshell, Perth was the best city for battery storage systems of all sizes, followed by Brisbane & Adelaide (virtually a tie). Sydney and Melbourne were also looking pretty good, while Canberra was the least attractive (mainly because of low grid electricity prices). Meanwhile, the numbers for Hobart are surprisingly good for Australia’s southernmost capital city.
Results for Darwin are not included because the high feed-in tariff rate on offer there means that installing battery storage actually results in an increase in energy bills (vs solar alone).
Read more in-depth city-by-city analysis in this article.
Estimated solar & battery system payback periods by capital city and tariff type. Note that payback periods for solar only systems will be shorter in all instances, as the ‘solar’ component of the system provides most of the value.
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© 2017 Solar Choice Pty Ltd
He is now the communications manager for energy technology startup SwitchDin, but remains an occasional contributor to the Solar Choice blog.
James lives in Newcastle in a house with a weird solar system.
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