Many of us in the solar industry, along with many solar PV system owners have been long awaiting the day when solar home battery prices will drop sufficiently for them to offer a reasonable financial return.
Solar Choice regularly updates this article to provide a scientific view of “Are we there yet?”. Since our first analysis back in February 2017, we have modified our calculators, assumptions and methodology to reflect the changes in the solar battery storage market.
How do solar batteries work?
Before we begin our analysis, let’s recap on how a solar battery works. Solar panels generate power during the day when the sun is shining. This power is used first to supply energy to any needs of the home and surplus energy is then typically exported back into the grid. Some energy retailers offer a ‘feed-in tariff’ to buy energy back from the customer.
As an alternative to exported energy back into the grid, the surplus power can be used to charge a battery. The home battery storage system can then be discharged in the evening to reduce the amount of power the homeowner needs to buy from the grid.
Solar power batteries store energy in DC. Batteries can be connected via DC cables to a hybrid solar inverter. Some batteries come with their own inverter built in (e.g. the Tesla Powerwall) and can therefore simply be connected to the main switchboard like any other AC appliance. Read more on AC and DC connections for solar battery storage.
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How do you benefit from a solar battery?
There are several ways in which a homeowner can benefit from connecting a solar battery to their solar panel system.
Saving on energy bills by reducing the amount of power you buy from the grid
The obvious one is the financial benefit of reducing the amount of power that you need to buy off the grid.
A typical residential solar system without a battery will cover about 30%-50% of household power consumption. With a solar battery, this can be increased to 80%, 90% or potentially even 100% of household power consumption.
When calculating your benefits, bear in mind that to charge a battery you have to forgo some solar feed-in tariff revenue. For example, if you charge a 10kWh battery during the day, that’s a 10kWh less feed-in tariff that you will see on your bill.
There will still be a benefit as you always pay a much higher rate to buy power than the rate that retailers are willing to buy it back from you.
Keep the lights on during a blackout
Blackouts can be highly frustrating and in some cases a risk to health. Different areas of the electrical network are more prone to receiving blackouts than others.
Most solar batteries on the market are now capable of keeping the lights on during a power outage. With some battery models, additional hardware is required to enable the battery to continue providing power during a blackout.
With the energy market closing due to soaring energy prices in mid-2022, for some Australians, we see a desire to increase their independence from the power network. Solar and batteries effectively take the majority of requirements and costs into your own hands.
Reduce your carbon footprint
Although we’ve made huge progress on the rollout of renewable energy infrastructure in Australia, the majority of the power generated on the grid is still from carbon-intensive, fossil fuel sources.
Installing solar panels is a great start to reducing your carbon footprint, but adding a solar battery will often more than double the reduction in your carbon footprint.
Solar Battery Virtual Power Plant (VPP)
In recent years we’ve seen the emergence of many different Virtual Power Plant schemes in Australia.
For participating homeowners, their solar battery may be discharged or charged by the VPP operator at times when they can make money on the wholesale or ancillary markets.
In exchange for this usage (which is often only a couple of times a year), the VPP operator will offer a benefit to the homeowner which might take the form of one of the below:
- Bonus feed-in tariff (very high rate for power that is used)
- Annual fixed fee for participating
- A discount on the installation of the battery
How much do solar batteries cost?
Solar Choice has been tracking the average cost of residential batteries in Australia across our database of over 200 solar installers in our Battery Price Index since 2017. Residential solar batteries usually cost between $1,000 to $1,300 per kWh of capacity installed depending on brand, size and location.
The below table shows our current price index which excludes all of the state-based rebates:
Average Solar Battery System Costs (Fully Installed) – February 2023
|Battery Size||Battery Only Price*||Battery + Inverter/Charger**|
Notes on Pricing:
- Includes costs for wiring, other necessary components and installation
- Excludes any rebates that are available in the different states and territories
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State rebates for solar batteries
While there is no federal rebate for solar batteries like the STC rebate for solar panels, some of state governments have introduced rebate programs aimed at accelerating the uptake of residential batteries.
Solar Victoria has now discontinued their rebate for solar batteries as of 30 June 2023 with no indication that it will return.
In the ACT you can get an interest-free loan up to $15,000 to cover the cost of solar and battery systems. The eligibility criteria are quite broad and support the uptake of a range of climate-friendly products.
Solar battery ROI, savings and payback period
To demonstrate the potential returns of a solar battery we’ve put together a common scenario for a homeowner in Australia. We’ve used up-to-date prices for electricity and solar feed-in tariffs and used our proprietary model which simulates the outcome of the project on an hourly basis for the next 2 decades.
If this scenario does not match your circumstances, then you can enter your details into our advanced solar and battery calculator.
Energy Usage Scenario
We have taken a typical scenario with peak energy usage in the morning and evening with a total energy usage per day of 30kWh. Energy rates were assumed to be a flat rate of 30 cents per kWh and a feed-in tariff of 5 cents per kWh.
Solar and Battery Solutions
We have analysed the impact of a 6.6kW solar system with a 10kWh solar battery on a household with 30kWh of daily usage following the profile in the above graph. Together the solar and battery system would cover 66% of the energy requirements of the house (increasing from 39% to 6.6kW of solar panels only).
The battery is recharged completely on 98.5% of the days. Given the high cost of batteries, we recommend including enough solar panels to reach at least an 80% battery utilisation.
See the below table which summarises the outcome of the above scenario. The key takeaway is that the payback period for the solar battery is 13 years. Most solar batteries on the market are only warrantied for 5 to 10 years, so in this scenario, it is likely that the solar battery will not be able to pay for itself during its lifetime.
|6.6kW Solar & 10kWh battery||
8 years (total)
5 years (solar)
13 years (battery)
- Flat electricity rate of 30 cents per kWh and a feed-in tariff of 5 cents per kWh
- Solar and battery pricing from Solar Choice Price Index and Battery Price Index
- Electricity usage of 30kWh a day with load profile as described above
- Energy price inflation at 3% and future cash flow discount rate of 5%
Does this scenario match up? Put your own details into our Advanced Solar and Batteries calculator and determine the ROI for your own circumstances.
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Solar Battery Storage Payback Results by Australian city
In our detailed solar battery study we assessed 24 scenarios including examining the different outcomes in each of Australia’s states and territories. As described in the graph below, solar batteries are most attractive in Perth and Sydney when comparing the payback periods.
Conclusion: Solar Batteries Financially Challenged
Based on our numerous analyses of scenarios over the years, we are yet to see a case to install a residential battery with an attractive financial return.
The payback period for a solar battery is usually longer than the warrantied life of the battery, even after factoring in additional benefits from participating in a Virtual Power Plant scheme.
So installing a solar battery is generally only worth it if homeowners place some value on blackout protection and reducing carbon emissions.
Previously Solar Choice has estimated that residential solar battery prices would need to fall to $200-$300 per kWh of battery capacity installed to provide an attractive return, while the current market price is closer to $1,000 per kWh.
We have seen the case for batteries become financially attractive in commercial applications and off-grid scenarios where the revenue calculations are a little different.
Since 2008 our knowledge and sophisticated software has allowed over 300,000 Australian households and businesses to make a well-informed choice on their solar & battery installer.