Since 2015 Australians have been talking about home battery storage being on the cusp of financial viability. Are home batteries worth the investment in 2018? We’ve crunched the number for all of Australia’s capital cities to find out.

This article was originally published in February 2017. We then had an August 2017 update, followed by this update (Jan 2018) to take into account changing grid electricity prices, solar feed-in tariff rates, battery installation prices and solar PV system installation prices. We plan on updating it again midway through the year. For regular updates, check out our monthly Battery Storage Price Index.

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Interest in battery storage remains high 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 couple of years ago. Accordingly, 2017 ended up being the best year ever for home battery storage in Australia – and there are widespread expectations that 2018 will be

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.

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, selective energy export 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 getting closer to 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’  or ‘battery only’ 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 – or better yet, offer an attractive return.

Whether simply breaking even within the warranty term is ‘worth it’ is a subjective question, but the growing uptake of home battery storage systems indicates that – for many people – it is.

Solar & battery payback periods in 2018: Our approach

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 our Solar & Battery Storage Sizing & Payback Estimator, we created scenarios for all of Australia’s capital cities, assuming that the home in question uses 25kWh of energy per day on the ‘evening peak’ usage pattern for weekdays and the ‘day focus’ pattern for weekends – common for households with 2 working adults and school-age children.
  • Using EnergyMadeEasy.gov.au and Wattever.com.au, we found some of the most competitive retail electricity plans on offer in each city (both flat and TOU) and plugged them into our scenarios into our calculator. The figures we ended up using are detailed in the table below. (Important to note that the rates in the table below are inclusive of retailer discounts – for example, pay on time discounts and/or pay online discounts.)

Electricity rates by capital city, based on most competitive plans available on EnergyMadeEasy.gov.au. 

  • We then plugged in average solar system prices from our January 2018 Solar PV Price Index for each capital city using 5kW for all 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 LG Chem’s RESU10, which has a usable energy storage capacity of 8.8kWh; and
    • For the ‘small’ battery system, we used SunGrow’s PowCube, which has a usable storage capacity of 4.5kWh.
  • We set battery degradation in accordance with the manufacturer’s specifications for each product (70% retained capacity at end of life for Powerwall & Powcube, and 60% for RESU10).
  • 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 retain the same price tag regardless of the city where it was installed.
  • 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.

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Results overview

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 two tables below sum up the results in one place (hover cursor to see numbers), while the following sections show the results in more detail.

Table above: Battery storage payback periods by battery system size, city and tariff type. (Looking at solar + batteries as a single package.)

Table above: Battery storage payback periods by battery system size, city and tariff type. (Looking at batteries as separate from solar.)


Results by system size/product

Large: Tesla Powerwall 2 (with a 5kW solar system)

tesla-powerwall-2

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% and a cycle life of about 3,600 cycles (1 cycle per day over 10 years). Installations commenced last year, and cost in the region of $11,500 installed. (Because the Powerwall 2 has its own inbuilt inverter, the price for a retrofit will be roughly the same as for if the unit were included in a brand new solar system. Also please note that the Powerwall 2 can only be installed in South Australia if the premises has a dual or 3-phase power connection.)

The table above provides a rough idea of payback periods for a Tesla Powerwall 2 when installed alongside a new 5kW solar system as a package. (Click to enlarge. Note that results are indicative only.)

The table above provides a rough idea of payback periods for a Tesla Powerwall 2 when considered separately from the solar or when installed as a retrofit onto an existing 5kW solar system. (Click to enlarge. Note that results are indicative only.)

Infographic gallery: Tesla Powerwall 2 energy flows & cash flows

Explore the numbers yourself with our Solar & Battery Storage Sizing & Payback Estimator tool:

Check out the Calculator


Medium: LG Chem RESU10 (with a 5kW solar system)

The RESU10 has a maximum storage capacity of 8.8kWh (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 $8,000 installed (without hybrid inverter, or about $12,700 with inverter, according to data we have available.)

The table above provides a rough idea of payback periods for an LG Chem RESU10 unit when installed alongside a new 5kW solar system as a package. We’ve assumed that the system will deploy a hybrid inverter to handle both the solar panels and the battery bank. (Click to enlarge. Note that results are indicative only.)

The table above provides a rough idea of payback periods for an LG Chem RESU10 when considered separately to the solar system or when installed as a retrofit onto an existing 5kW solar system. If your system already has a hybrid inverter, the ‘simple retrofit’ columns apply to your situation; if installing batteries will require a new inverter, the ‘full retrofit’ columns apply to you. (Click to enlarge. Note that results are indicative only.)

Infographic gallery: LG Chem RESU10 energy flows & cash flows

Explore the numbers yourself with our Solar & Battery Storage Sizing & Payback Estimator tool:

Check out the Calculator

 


Small: Sungrow PowCube (with a 5kW solar system)

Sungrow’s PowCube consists of a hybrid inverter by Sungrow and a battery by Sungrow/Samsung SDI. It has a usable storage capacity of 4.5kWh, making it one of the smaller units on the market. While as many as 3 PowCubes units can be strung together 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 70% and a cycle life of 4,000 cycles. We’ve been told that it will retail 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. (As a full retrofit, inclusive of inverter & emergency backup functionality, we’ve been told by the manufacturer it retails for about $5,800, installed.)

The table above provides a rough idea of payback periods for a Sungrow PowCube unit when installed alongside a new 5kW solar system as a package. We’ve assumed that the system will deploy a hybrid inverter to handle both the solar panels and the battery bank. (Click to enlarge. Note that results are indicative only.)

The table above provides a rough idea of payback periods for a SunGrow PowCube when considered separately to the solar system or when installed as a retrofit onto an existing 5kW solar system. If your system already has a hybrid inverter, the ‘simple retrofit’ columns apply to your situation; if installing batteries will require a new inverter, the ‘full retrofit’ columns apply to you. (Click to enlarge. Note that results are indicative only.)

Infographic gallery: Sungrow PowCube energy flows & cash flows

Explore the numbers yourself with our Solar & Battery Storage Sizing & Payback Estimator tool:

Check out the Calculator

 


Results by city

The table below shows payback periods on batteries for each capital city (payback times averaged across all three battery sizes/products). The nation-wide average payback period for a brand new solar-plus-storage system was just under 10 years, with payback periods for customers on time of use electricity tariffs being shorter than for flat rate tariffs. Adelaide, Perth & Sydney (7, 7.5 & 8 years, respectively) were the most attractive places to install a battery, while Melbourne & Hobart (about 11 years each) were the least attractive. (We excluded Darwin from the analysis due to the fact that residents still have access to a strong, state-backed solar feed-in tariff there.)

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 (recently updated for 2018).

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.

Ready to shop for solar & batteries? Compare solar & battery quotes from installers in your area.

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© 2018 Solar Choice Pty Ltd

{ 7 comments }

+Jack Watson 20 January, 2018 at 8:31 am

ps. CORRECTION:- My first panels were sixty FOUR watt panels. The only others available were 45-watt and 30-watt. I recall the earliest ‘energy-saving’ light-globes’ ~ of which I STILL have two!’ ~ cost about $40 each…or 5 for a week’s wages. Free auto light-globes with/without suitable reflectors from the wreckers were a much better option, even if they used a bit more power. They didn’t, for example, need an inverter since most (DIY owner-builder) houses were wired for both 240vac AND 12vdc straight off the battery-bank. (I also still own a 12-volt tv from back then…and it STILL runs on EIGHT watts.

Solar Choice Staff 22 January, 2018 at 10:20 am

Hi Jack. Thanks for your comments. You are certainly ahead of the curve in your deployment of solar & batteries for home. When it comes to off-grid systems, there’s no question that lead acid batteries are still the best option, offering an affordable, tried-and-true solution that gets the job done. While the intrepid and the determined can surely put together systems such as yourself, for those who want to remain grid-connected without limitations on their energy consumption but still want a high degree of energy independence, solar plus a lithium battery is likely to be the preferred option going forward for a few reasons (warranties & piece of mind being a big part of that). These days professionally installed rooftop solar is affordable enough that there’s generally not a need to go DIY; it’s just a matter of time before (lithium) batteries reach this point as well.

Jack Watson 20 January, 2018 at 8:19 am

You may twiddle your numbers until your fingers fall off, but the question is a specious one; stand-alone battery-storage has ALWAYS been the more viable option ~ in terms of value for money if not convenience. One reason for your claims being way off the mark is that you(along with other commercial interests) insist upon using false parameters:- ‘power-walls’, lithium-etc and remaining connected to the grid.
I installed my first solar panels in 1981,before most people had even heard of such a thing, and components were horribly expensive; eg I bought my first 2nd-hand panels for $13.80 per watt ~ and they’re still working at about 80% efficiency. They were 6-watt panels ~ the largest available at the time. But for the people who bought them (hill-dwelling hippies etc.) who couldn’t afford the price of buying land within rifle-shot of the grid even that price was easily the best option. And the storage system was lead-acid batteries: 2nd-hand ones were plentiful. A friend of mine recently retired a set of 200ah ex-SEC batteries after 28 years of careful use. We used to buy them from the SEC depot in Port Melbourne (since privatised/closed) for between $9 and $15 each.
All the other parts were expensive too, but could be substituted for at tiny cost with a little initiative. Such measures are still available (dabbbles@gmail.com), though the price of modern gee-whiz components has also come down dramatically in price and well-worth a look.
Over the years I’ve installed/helped installed hundreds of solar systems in all sorts of circumstances, and can say that DIY Stand-Alone systems are STILL (and probably always will be be) by far the best, most economically-efficient and self-satisfying way to go. eg. Deep-cycle LA batteries have become far more reliable than ever and can be bought for as little as $1.50 per AH.: ie about $150 for 1kw of storage. Records show such batteries can be bought with a 3-year warranty, and experience shows they can be expected to last 5-8 years. So even if you had to replace them after 5 years the savings over the modern set-ups would still be HUGE. Moreover, since all such components are plug-and-play, installation costs are ZERO. Further, being grid-free means you don’t pay the ‘service-charge’. (Until recently ~despite the costs mentioned above I was paying about $600 pa. I was connected ONLY because I was still getting $1600 back from Origin on a 66-cent per kwh FIT.

Point is: DIY stand-alone is much cheaper, easier, more reliable and self-sufficient. However the offers and figures stack up, always remember that NONE of the ‘providers’ work at a loss. Their profits come out of YOUR pocket.

Peter 24 January, 2018 at 1:20 pm

Hi Jack, just reading your comments. They make sense if you have the skills and knowledge. The issue I would have is that without an electrician’s ticket, if my house burnt down, likely that insurance wouldn’t pay for it, particularly if the fire was caused by an electrical fault (and probably even if it wasn’t, given the reputation of some providers.) If you are qualified or have a mate who is, probably all good.

Otherwise, like most things in life, you factor in your own time, plus the enjoyment you get from doing it, and balance that against paying for someone else’s time and profit. Several decades ago, I built a pine book case – more expensive than the chipboard ones – because I had the time and the tools. The chipboard are long gone, my one was worth the time and had fun building it. These days, I’d just buy a good quality one, because I am time poor and have a brummy back. So I’ll probably pay for someone to put in batteries too!

Mick 19 January, 2018 at 6:31 pm

Thank you for your time and analysis in your blog ‘Is home solar battery storage worth it? (Jan 2018 update)’. This is very useful information.
I am having a problem with the tables in the article. I do not understand the columns ‘IRR’. I have reread the article couple of times and maybe I just keep missing it, but I cannot find what ‘IRR’ means or the related percentage.
Could you please let me know what IRR stands for or add a definition somewhere.
Thanks
Mick

Solar Choice Staff 22 January, 2018 at 10:25 am

Hi Mick,

Thanks for the comment. IRR means ‘internal rate of return‘ and is a slightly more sophisticated cousin of ‘return on investment’ that takes into account electricity price inflation as well as the financial ‘discount rate’ that is used when evaluating & comparing different investment options.

From the page that I’ve linked to above:

You can think of internal rate of return as the rate of growth a project is expected to generate. While the actual rate of return that a given project ends up generating will often differ from its estimated IRR rate, a project with a substantially higher IRR value than other available options would still provide a much better chance of strong growth. One popular use of IRR is in comparing the profitability of establishing new operations with that of expanding old ones. For example, an energy company may use IRR in deciding whether to open a new power plant or to renovate and expand a previously existing one. While both projects are likely to add value to the company, it is likely that one will be the more logical decision as prescribed by IRR.

Apologies for not making this clearer in the article itself. I’ll look into making this more explicit & clear in similar articles in the future.

Mick 22 January, 2018 at 11:49 pm

Thanks for the reply. I’ll take a closer look.

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