Batteries (solar energy storage) seem to be all the rage at the moment and with good reason: energy storage is the key to the large-scale implementation of renewable energy. Energy storage also gives homeowners the chance to become much more independent of the grid, as well as have a backup in case of a power outage. However, the marketplace for batteries is becoming increasingly congested: there are now over three hundred battery companies in China alone. Batteries are a complicated technology, so how is the average homeowner supposed to choose a proper system for them?
Are batteries worth it?
The benefits of solar energy storage
There are several reasons for wanting a battery:
- One common reason is that people want to be more independent of the grid and electricity retailers. Many people have not had great experiences with their retailers and prefer to give them less money. Well, who can blame them? A battery enables you to store excess solar during the day and use it at night, therefore you use much less electricity from the grid.
- Another reason is EVs (Electrical vehicles), with the uptake of EVs not only in Australia but across the world, people have been investing in batteries to have minimum fuel costs associated with their cars. I.e. use the optimum amount of energy stored in the home battery to charge the EVs.
- Another reason is backup: do you live in an area with unreliable power? Do you have a critical appliance that you’ll need running during a blackout or brownout? Batteries can step in when the power goes out, minimising disruption and keeping any important systems powered up.
- Do you want to be a leader in sustainability and demonstrate practical action?
- Are you a pioneer (early adopter) of technology who would love to be seen as being at the frontier of this fight against climate change?
- And then there is a financial benefit. But do batteries make financial sense to homeowners? We’ll simplify the numbers below.
We have found that many people have gone ahead with solar energy storage more motivated by reasons 1-4 above, despite the financial benefit not being as good.
The economic benefits of residential solar energy storage
Solar-charging mode
In a residential setting, the use of the battery is quite simple. The battery is charged using excess solar during the day and discharged after solar generation drops. Thus, you use the power stored in the battery instead of power from the grid.
For a simple economic analysis, we can take the upfront cost of the battery, and divide this by the total amount of energy the battery will deliver during its lifetime. This gives a cost of energy from the battery, of $ per kWh. To make economic sense, this figure should be lower than the cost of energy from the grid.
Let’s look at a couple of case studies to see how this works. A popular battery is obviously the Tesla Powerwall. The typical offering has 13.5 kWh of storage (kWh is a unit of electrical energy) and will cost about $16,000 to install. Home batteries charge and discharge once per day, hence at the beginning you will get 13.5 kWh of energy from your battery each day. This will slowly reduce over time as the battery wears. The warranty on the Powerwall is ten years.
The cost of energy from the battery is calculated like this: The total energy delivered by the battery is 13.5 kWh x 365 days per year x 10 years x 90%. The 90% is there since, at the end of 10 years, the battery will only have 80% of its original energy. 90% is therefore the linear average over the 10 years. So, for the Powerwall 2, we get $16,000/ (13.5 x 365 x 10 x 0.9) = 36 cents per kWh. In most states in Australia, electricity costs less than this, and the battery doesn’t make sense financially (of course you might want the battery for other reasons!).
Another case study is a Pylontech 12.8 kWh battery. It costs about $13,400 installed and also comes with a 10-year warranty. The cost of energy from a Pylontech battery is therefore about 32 cents per kWh. Better than Powerwall 2 but still not really viable.
For a Sofar battery system, the cost is about $9,700 for a 13.5 kWh system. The cost of energy is about 22 cents per kWh. This becomes about break-even or slightly better in most states.
However, let’s consider the case in Victoria where homeowners can get a $4,174 subsidy. For Powerwall 2, this brings the cost down to about 27 cents per kWh. Still more expensive than electricity in most states of Australia. For the Pylontech battery, the cost comes down to 22 cents per kWh. At this point, the battery is about break even. For the Sofar battery, the cost comes down to about 12 cents per kWh. This starts to make financial sense, with a payback time of just under 5 years.
Some people prefer to look at battery analysis by taking into account the feed-in tariff because many people get a feed-in tariff by exporting to the grid instead of using a battery for self-storage. However, the feed-in tariff across different states has been generally dropping to very low levels. This means a stronger case for batteries
Grid-charging mode
An interesting additional benefit to consider is TOU (Time of Use) grid-charging saving. TOU basically utilises residential tariffs that have peak and off-peak components, instead of just a flat rate.
Some batteries have longer lifetimes which enable charging and discharging twice per day over 10 years. This requires 2 x 365 x 10 cycles which is 7300 cycles. Sonnen batteries are warranted to 10,000 cycles. Sofar batteries warranty 6000 cycles or 10 years. In other words, 2 cycles per day can be done by Sofar most days over 10 years, which is sufficient.
To take advantage of this customers need to be on a TOU peak/off-peak tariff. The way it works is you charge the battery off solar during the day and discharge during the evening peak. Then you charge the battery again overnight using off-peak and discharge the battery during the morning peak. In this way, you get two uses of your battery during the day which can save significantly more money.
Note that at the time of writing (Q1 2022), most battery systems cannot accommodate the grid-charging mode given the battery limitation warranty, such as Tesla, which would not be suitable for 2 cycles/ day use. Other batteries cannot do it because they don’t have the additional Time of Use operation mode.
A sample peak/off-peak tariff (Tango Energy) has 29c/kWh peak and 17c/kWh off-peak. We can use the example of the Sofar 13.5 kWh battery for $9,700. Sofar battery’s inverter does have the TOU mode.
Without a grant, charging and discharging twice per day, the Sofar battery can pay itself off in about 5.6 years. With a 6,000-cycle warranty, 2 cycles per day give just over 8 years warranty. So, it’s a fair bit better than break-even.
With a grant, the payback period shifts to just over three years. A fantastic investment!
How to select the best battery for you?
Safety
The number one issue when choosing a battery should be safety. Lithium batteries are a complex technology that, when done right, is very reliable and safe. However, the technology to ensure that literally millions of batteries can be made every week to very tight quality specifications isn’t that commonly available, certainly not to all of the hundreds of battery companies springing up in China. And with incidents with the Samsung Galaxy, and the recent recall of LG batteries in the Hyundai Kona, sometimes even the big guys don’t get it right.
To try and ensure you get a safe battery a little common sense and a bit of homework can go a long way. If a battery company has only been in operation a few years, then it doesn’t have much of a track record to rely on. Problems with safety often pop up as the battery ages. So, it is much better to go with a well-known brand that has been around a long time and has a good safety record. Internet searches can be a big help
Battery chemistries – Nickel Manganese Cobalt (NMC) vs Lithium Iron Phosphate (LFP)
There is a fair bit of publicity around NMC vs LFP. NMC and LFP refer to the different types of cathode materials used in the batteries. Many manufacturers use NMC since these are the batteries of choice for EVs, having higher energy density than LFP batteries. Since they are already making millions of NMC batteries some companies simply choose to use NMC batteries, even though LFP may be a better choice for home energy storage systems.
LFP is inherently longer life and safer compared to NMC. This doesn’t mean that NMC is necessarily unsafe or has insufficient life: it means that a higher degree of technology is required to make NMC batteries last longer and be safe. Some companies have this technology, and some don’t. For example, Tesla uses NMC and is able to offer a 10-year warranty and reasonable performance.
Warranties
Warranties are extremely important as they set the economic lifetime for your system and are also a good indicator of the quality of the battery. Good quality batteries should have a 10-year warranty. The warranty should not only cover time but should also cover the number of charge/discharge cycles that the battery will operate. In a home, this will be at least once per day over 10 years, so 3,650 cycles. The warranty should thus cover at least 3,650 cycles.
As an example, we can compare the warranties from Tesla, Sonnen and Pylontech. All three have 10-year warranties, however, Sonnen has a 10,000 cycle warranty whereas standard warranties for Tesla and Pylontech are one cycle per day for 10 years.
And be careful: you should read very carefully exactly what the warranty covers and does not cover.
For example. Tesla battery warranty is limited to 37800 kWh. This means Tesla warranty would run out in around 4 years only if cycled twice/ day.
Performance
The Australian Battery Test Centre ( https://batterytestcentre.com.au/ ) has been testing a wide range of domestic batteries for several years and is thus a treasure of information regarding performance and particularly reliability. They publish their results in quarterly updates. Their findings mirror the state of the battery industry: many batteries experienced major problems either at start-up or during operation. And quite a few batteries displayed an alarming reduction in performance over time.
These reports are almost an essential source of reading for anyone considering buying a battery. The image below is an example of the analysis of the performance over time. All batteries decrease in performance over time, the question is how fast do they degrade. A plot of available discharge capacity vs the number of charge/discharge cycles gives this information.
Top batteries comparison
The table below compares some popular batteries. The costs can be compared using the $ per warranted kWh number.
To get the best solution and avoid disappointment, there are a few key questions you should ask yourself when considering solar energy storage.
- What are your reasons for getting a battery? Are you willing to put the payback concern aside?
- What budget do you have? We’d suggest a minimum of $10,000 for supply and install
- How flexible are you with the brand? Are you open to digging deeper beyond just flashy marketing? For example, Tesla is a good product, but its dominant marketing often makes people forget about its disadvantages.
- How important is safety to you? LFP batteries are perceived to be safer than NMC batteries
- Do you want an all-in-one system? This means that an inverter is included with the battery. Batteries that are not all-in-one will need a hybrid inverter which adds to the cost. As a guide, a 10kW hybrid inverter can be about $3,500.
- Do you need backup functionality? Some systems come with this while others require a separate module, hence additional cost.
- Installation cost is also an important consideration. For example, quoted prices for installation of a Powerwall 2 can be about $2,000, whereas the Pylontech Force, with very simple installation, should come in well under $1,000.
- What kind of warranty do you want? With batteries being a new technology, we would suggest a strong track record and warranty. These are critical.
What are the available battery rebates or grants
The main battery rebates are in Victoria, where a $4,174 rebate (at the time of writing) can be used to offset the cost of a battery. The only downside to this is that you cannot claim both the battery rebate and the solar rebate together. Since the solar rebate is less and solar can more than stand on its own feet financially, it makes sense to claim the battery rebate for a solar plus battery system.
Finding the right retailer/ battery installer
The installer needs to have Clean Energy Council accreditation for battery installation. As with solar, it’s best to go with companies that have been around a long time and are likely to still be in business should any warranty issues occur. Many solar companies won’t have much experience with batteries so consulting with specialist engineers with more experience that can give better third-party advice is the most logical and best way to go.
Who we are and the next step
If you are seriously considering residential or commercial battery, we can connect you with a group of engineers and battery experts who have done a number of battery projects. Click ‘Ask a Question' to contact us.