Explainer
April 26, 2022

Australian households love solar panels, with more than 3 million jumping on the bandwagon. But it’s an investment that makes perfect sense when faced with high electricity prices, generous government incentives, and an attractive investment payback timeframe of only 4-6 years.

But what about solar’s sidekick - batteries?

While it’s undoubtedly a revolution in its own right in offering access to even cheaper electricity, is this (expensive) investment really worth it?

Let’s find out.

Breaking Down the Financials

To understand the savings you could make on your electricity bill by installing a home battery, we’ve run the numbers for two different example scenarios.

Disclaimer: These are rudimentary figures. They are not based on professional financial advice.

Example 1: Solar PV Only (No Battery)

Let’s assume the household has a 6.6kWp solar PV system installed and generates approx. 25kWh / day over the course of a year.

The household self-consumes 40% of this generation (10kWh) and has 15kWh leftover which it exports to the grid each day.

In return, they get a solar feed-in tariff (FiT) of an assumed $0.10 / kWh. This means the household offsets their electricity bill by around $1.50 each day (approximately $547 per year).

Additionally, the self-consumed 10kWh / day offsets the electricity usage the household would have drawn from the grid. For this example, let’s assume the electricity cost is $0.25 / kWh. So the household saves an additional $2.50 / day.

Therefore, as installing a quality 6.6kWp solar PV system costs approx. $6,000, the payback period would be around 4 years.

Example 2: Adding a 10kwh Battery to the Existing Solar PV System

After the battery installation, the household still generates 25kWh per day, self-consumes 40% (10kWh), and is left with 15kWh of generation.

In this example, 10kWh is stored in the battery and the leftover 5kWh is exported back to the grid (10kWh less than the Solar PV Only example).

So after losing the $1.00 per day from the solar FiT offset (10kWh x $0.10), what would the household gain instead?

First, given the household can now use the stored electricity in the evening, they are no longer required to draw from the electricity grid for that 10kWh (and the cost to draw power from the grid is more expensive than the solar FiT which ranges from $0.20 - $0.45 depending on your electricity plan).

Let’s take $0.25 per kWh solar FiT for our analysis. The household will save $2.50 / day (10kWh x $0.25) or approximately $912 per year from the energy stored in the battery.

The net benefit to this household is $2.50 - $1.00 = $1.50 per day or approx. $547.50 per year. Assuming a 12-year battery life, the total incremental nominal saving could be $6,570.

Installing a quality battery costs $12,000, so the payback period is around 21 years!

So Are Household Batteries Worth It?

The short answer? It depends, but likely not quite yet.

The payback period is very long compared to a solar PV only system. Depending on your electricity usage, the existing solar PV system and location, it could take up to 21 years.

The main determinant is the difference between your solar FiT and general electricity usage rates. In the battery example, the electricity usage savings are $0.15 / kWh. If this increased to $0.25 / kWh,the annual household savings jump to $912 and the payback period reduces to around 13 years.

Despite the gained savings and considering the $12,000-$15,000 price tag, from a purely financial perspective, the purchase of a household battery doesn’t make sense for most homeowners.

Will Batteries Become More Affordable?

It’s important to reiterate the above is a super simple analysis. It also makes some big assumptions that may not holdover time.

There are a few more things that may affect the costs of battery purchases and the savings they offer:

1.     Solar FiT Tariff Changes

It’s not likely the solar FiT will remain at $0.10. As more solar power feeds into the network during the day and we don’t have any way to use the electricity, this tariff will reduce over time and increase the value of using a home battery.

 2.     Electricity Rates

Over time, electricity rates will likely go up, especially for peak periods i.e. the evenings. It’s a time when everyone is home using power, plus there’s no sunlight to generate electricity to deal with this increased demand. By utilising stored battery power, you can bypass using the grid at peak times and save even more money.

 3.     Virtual Power Plants

Retailers are now forming Virtual Power Plants (VPPs) which open up additional sources of revenue to offset your electricity bill, and further boost the value of a household battery.

 4.     Battery Prices

Battery prices are bound to fall over time as more manufacturers enter the market and boost supply.

 5.     State Government Support

State governments are starting to address the battery cost issue. For instance, Victorians can now access a $3,500 battery solar homes rebate when they purchase new solar panels with battery storage. Under the newly introduced Sustainable Household Scheme, the ACT government is offering a $3,500 grant and interest-free loans ranging from $2,000 - $15,000 that can be used for battery storage installation.

These incentives are putting pressure on other state governments to follow in a similar vein, and help solar owners to get more value from their panels and stabilise the grid.

Should I or Shouldn’t I?

Having crunched the numbers, it seems a home battery investment may not be wise just yet. However, saving money is not the only reason why you should consider battery installation. There are quite a few more, but we’ll outline these for you in another article soon.

If you’re interested in hearing more about this topic, check back in regularly or subscribe to our newsletter and we’ll keep you updated.

 

 

 

Arrow pointing left
Back to blog
Start Saving

Like what you see?

So what are you waiting for! Join thousands of other Aussies using Huglo’s services and get started today.

More from the blog