A solar battery storage system added to your current solar system can provide considerable financial and environmental benefits.
The largest advantage is the ability to store additional energy from solar production and use the energy at night or when your solar system is not producing electricity.
For the average home, a solar system will have a return on investment (ROI) of roughly 3-5 years. However, for a solar system and a battery, you would look at an ROI of approximately 7-10 years.
What is the payback on a solar battery?
If you are considering adding battery storage to your existing or new solar PV system, you are not alone. With more than 3 million solar systems on Australian rooftops and feed-in tariff payments by energy retailers for exported electricity dropping, battery enquiries and installs have increased significantly. The question is what is the payback on solar batteries?
Less than 10% of Australian solar systems have a battery attached
While the number of solar systems with batteries is still far below 10% of all installed PV systems, many Australian households are now keen to investigate the potential purchase of solar power storage batteries. This is to decrease their dependence on traditional power supply systems.
Batteries are being hailed as the future of household electricity supply. This is because they allow solar energy generated during the day to become stored for later use in the evening when the solar system shuts down. Still, household consumption continues or even goes up.
If you have a solar storage battery, your electricity consumption at night will be supplied by the battery reserve power, meaning you import and pay less for energy from the grid, as the electricity in the battery will have been generated by your solar system during the day. The result is a lower power bill.
Time-of-use tariffs can be costly
Additionally, Time-of-Use (ToU) tariffs can significantly raise the kWh cost of mains electricity. These tariffs in some areas kick in after 5 p.m. when consumption peaks and make the cost of electricity significantly higher in the early evening when air conditioners and electric stoves increase consumption patterns. A solar battery system can cushion the blow of the ToU.
So while the benefits of batteries are apparent, many solar system owners still wonder if purchasing a battery is worth it. They feverishly try to calculate the payback on investment numbers to make a decision. Yet, ironically, the same owner has never asked for the ROI on their new car, suit, or pool.
In those cases, it was just something they felt they wanted to add to their lives, so why not enjoy the comfort of battery backup during a blackout and fully utilise your solar power instead of feeding it back to the grid for a minimal payment? Why not tell the energy retailers to stick to it and become energy-independent via a solar and battery combo? But just in case you want to know current ROI numbers, here is the info:
The initial cost is coming down
Residential solar battery storage prices vary between $900 and $1,200 per kWh, including installation. Factors that can change the price include the brand, technology, sophistication of the battery management system, the monitoring, and the size of the battery. Other cost considerations are the required preparations in your home and the preparation of the location where the battery will be housed. In addition, cable runs, brackets, enclosures, and potential meter upgrades can all add to the costs.
The benefits of a solar battery
Consider your current situation to understand whether solar battery storage is worth the investment. For example, if your area gets a lot of blackouts, a battery will save your food from spoiling in the fridge. If you dislike your energy retailer and seek energy independence – a large battery can achieve this.
Do you reside in a bush fire zone and rely on electricity to operate life and property-saving water pumps – again, a battery can save the day. Will you purchase an EV soon and seek to power the vehicle’s driving electricity via your solar system and the battery?
The solar battery payback question
In a financial sense, a solar system alone still has a lower payback than a solar and battery system combo. A retrofitted battery has the lowest ROI but can still make sense in some circumstances, like if it enables you to charge your EV and avoid the more than $3000 annual cost of petrol.
As a rough average, a solar-only install has an ROI of 3 to 5 years with a 15 to 25-year life span. A solar battery combo has a 6 to 8-year payback, and a battery-alone retrofit has an 8 to 12-year ROI with a 10 – 15-year lifespan expected for many batteries.
Below are three scenarios you might relate to that could answer the question of whether a battery is worth it.
Can you receive government incentives?
Government incentives such also rebates and tariffs help improve the financial case for battery purchases. These can be pretty generous, like in the ACT, but smaller in other States. So it depends on where you live to see what battery incentives are available.
There could be upfront battery rebates or demand response programs that reward you with reduced load on the power network. Considering a decent, long-lasting solar storage system may cost an average of $12,000 to $15,000, these incentives should be utilised if available.
Australia has many active battery programs. These vary from one State to the next. Some examples around Australia include the Victorian Solar Homes Program which offers solar battery rebates up to a value of $4,174 per household; South Australia’s Home Battery Scheme offers $3,000; NSW provides an interest-free loan up to $14,000; the NT $6,000 and the ACT a rebate of $825 for each kW of power, up to 30kW or $4,000 in total.
Incentives can make it more feasible to use batteries. They either reduce the upfront cost or increase savings over the long term. Combining battery incentives with expensive electricity, such as a 55c/kWh time of use tariff like in some parts of Australia, can improve the outlook and overall ROI. We suggest discussing the final details for your area with our authorised recommended Your Energy Partner.
You are concerned about the future of energy
When getting a solar battery, you, your family, or your business will be able to live pretty much without the grid for long periods of time. You may not need it right now, but you will not regret the purchase of a quality battery over time. For example, suppose you decide to invest in an electric car. In that case, you can install a battery, such as the Tesla Powerwall or a Sungrow battery, an LG Energy Solution, or a Sonnen battery.
This will allow you to be ready for anything, even if the grid goes down. If money is not an issue, and you can afford the repayments of a solar and battery combo, go for it. You can install as many panels as your roof allows. The more panels you have, the more energy you can use. Why not invest in your home and reduce your carbon footprint? Your personal convictions and choices will determine what makes sense for you.
Do the batteries come with a good warranty?
Many solar batteries have warranties that go beyond the standard 10-year warranty. Some even come with a warranty for a certain number of cycles, which is much more feasible for a decent ROI, especially when combined with government incentives. The longer the warranty, the less fine print and exclusion, and the bigger the manufacturer – the stronger the battery warranty. Stay away from battery suppliers who have just entered the market, as reliable after-sales service regularly still needs to be established.
Australians with solar panels should consider solar batteries if they want to reduce their electricity bills and become less dependent on the grid or should they choose to leave the grid entirely.
Unfortunately, the prices for solar batteries in Australia are still relatively high, especially compared to a solar-only system setup. There was an expectation that battery prices come down due to volume increases. Still, unfortunately, the competition of the electric car manufacturers for battery raw materials has meant that battery prices in the past three years have increased due to surging demand and supply issues during COVID-19.
- As a golden rule, a battery as a retrofit has a longer ROI than a solar and battery combo. So when buying a new solar system now, consider adding 2-3 years to the ROI and get the whole solar and storage battery combo.
- On the other hand, a solar battery, while a great addition to many homes, may not be worth the initial cost for some Australians until they consider purchasing an EV as well. In this instance, the battery will assist in the EV vehicle charging process. So maybe get the solar and battery now – and then the EV soon after.
- Solar panels with batteries are a good option when local electricity costs are very high, especially with the time-of-day tariffs.
- State Government incentives can also help tip the balance for battery purchases. The benefits of battery storage go beyond financial. As we move towards a zero-carbon future, more Australians are looking to energy storage to help them achieve energy independence while reducing their carbon footprint.
- So as a final summary – if you retrofit a battery, it’s not financially advantageous in ROI years as if you get a brand new solar and battery combo. We have an ROI calculator on Your Energy Answers where you check the ROI on a solar-only system vs a solar and battery combo system. This calculator can be found here.