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What’s the Tipping Point for Home Battery Storage with Solar?

Posted by Matt Power, Editor-In-Chief

Mar 30, 2017 11:25:31 AM

It turns out that the price of storage batteries themselves may be more influential than grid-supplied energy costs.

A press release about the expected rapid growth of battery storage in Australia caught my eye this week. Although the content comes from a battery producer with a vested interest in this trend, I thought it a trend worth exploring.

Australia’s cost per kWh is substantially higher than most of the U.S., at about $.25 per kWh., compared with about $.12 kWh in my state of Maine. Like the U.S., Australia has no national net metering or “feed tariff” program. Such incentives are decided on the state level, and in general, they’re quite low, in the 6 cents per kWh range. It would make sense that higher kWh prices (should) = more battery storage sales. But is this really the case? Global trends do not support this hypothesis (see map). If they did, the U.S., with its low energy costs, would lag far behind other countries in solar battery sales.

There's no doubt that adding solar PV to residential rooftops in markets with high energy costs is an easy sell.

“We have had reports of customers reducing their power bills by up to 92 per cent in a year after installing a smart battery system,” claims Reposit Power CEO Lachlan Blackhall (an Australian company). “With Reposit, homeowners can also earn GridCredits, credit towards their next power bill, by taking advantage of the volatile wholesale electricity market.”

But what about battery systems? It turns out that the up-sell is not so simple, and when you look at the numbers, you can see why. Battery systems in their current iteration may offer limited "perks" for PV solar owners. Most systems do not switch over to keep the lights on during a power outage, and can not go fully "off grid." With a small (5 kWh) PV array, they add only a small boost in overall power output, and perhaps most importantly, they nearly triple the payback period for a panel-only installation.

Crunching the Numbers

A nice analysis of the payback period for PV with batteries I Australia is very useful in this analysis. Hat tip to Craig Donohue of Clean NRG for putting this together:

Example 1: 5kW solar PV system + Tesla Battery

Being modest with our figures, let’s say you have a 5kW solar PV system (facing north with no shade) with a Tesla battery, 6.4kWh of storage. On average this system will generate around 22 units per day.

If you use 16 units of this power while the sun is shining, then 6 units go to the battery to use later. This means you are using all the power your system is producing.

Total savings are:

22 units (power used Inc. power fed to battery) x 25.7c (Synergy A1 tariff Inc. gst)= $5.65 per day

Total annual savings = $2062 per year

Example 2: 5kW solar PV system (no battery)

battery storage payback australia.jpg

Now let’s look at the same system without the battery. Still generating 22 units per day, instead of sending the excess 6 units of power to the battery, you now send it to the grid. Synergy pays 7.13c per unit for this unused electricity.

Total savings are:

16 units(power used) x 25.7c (Synergy A1 tariff Inc. gst)= $4.11+ 6 units (fed to grid) x 7.13c (Renewable Energy Buy Back rate)= .43c per day; $4.11 + .43c = $4.54 savings per day

Total annual savings = $1657 per year

Donohue goes on to estimate the payback period for a PV plus battery storage system at 8 years, versus three years for PV alone. Based on the survey of consumer behavior, he notes that only about 6.35% of Australians would be interested in adding batteries at that cost.

Of course, this is not the end of the story. In fact, it’s just beginning. Battery technology in my view is still in its infancy. Even conservative estimates (from investment banks) see the price of high-powered systems dropping to a 5-year payoff range by 2020. That would significantly raise buyer interest.

Here’s a fascinating chart, also from Australia, showing survey results about payback periods for solar. These numbers may be a good starting point for battery adoption.

Batteries: Slow May Be Better

The current high up front cost of battery storage is probably good news for the environment.  While we’d all like to see greater energy independence and reliability, most of today’s batteries are constructed with a high level of toxicity, and their lack of recyclability and clean disposal makes them a less-than-perfect solution to energy needs. We have seen extremely promising technologies such as salt water batteries entering the market recently. But this technology is new and struggling to achieve market strength. Aquion energy, for example, an outstanding innovator, recently filed bankruptcy to recover some solvency.

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