Is home solar battery storage worth it?

Since 2015 Australians have been talking about home battery storage being on the cusp of financial viability. Are home batteries worth the investment in 2019? 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 an update in Jan 2018 and now again in April 2019 to take into account changing grid electricity prices, solar feed-in tariff rates, battery installation prices and solar PV system installation prices. 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, 2018 ended up being the best year ever for home battery storage in Australia – and there are widespread expectations that 2019 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 $500-$600/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 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 2-5 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 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 2019: 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 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:

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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.

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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Comments

  1. Rigorous study with few holes that continues to demonstrate that money spent on batteries instead of panels is wasted. The same money spent on panels can result in a credit each quarter cutting payback periods for the panels to just a few years. As an example I have a reasonably inefficient 10KW system that is seven years old, use about 11KWh a day, try to organise pool pump, dishwasher, washing machine etc to run when electricity is being generated, have a time of use meter, rooftop solar hot water which is not boosted 95% of the time and pay a ridiculous 1.45 (approx) daily charge. Each quarter I receive a refund of between 150 and 300 from a fit of 20c. If I had spent 1/2 the money on batteries I would be paying each quarter. The only logical argument, in the current climate, for installing batteries is to be independent of the grid.

    1. Hi Brian,

      Thanks for your feedback and great to hear your system is working for you. We indeed highlight that solar alone as an investment has much quicker payback periods. Take in mind what works for you will not be the case for everybody, as everyone’s energy consumption is very different. For starters we have seen many situations where grid connect systems have gone ahead with battery storage, mainly due to a high night time consumption pattern. Also, as you have had your system for many years you are receiving a very attractive feed in tariff, which would not be the case for people installing a solar alone system in 2019.

      Regards,
      Jake

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