Solar Battery Costs - Are They Worth It? (2024)

Many of us in the solar industry and PV system owners have long awaited the day when the cost of home solar batteries drops enough 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 solar & battery calculators, assumptions and methodology to reflect the changes in the solar battery storage market.

The article explores solar batteries for residential homes, examining if they’re worth the investment through scientific analysis and real-life examples. It breaks down how these batteries function, advantages such as lower energy bills, reliability during blackouts, battery prices, and available government rebates.

In short, the answer is the current price of batteries provides a low return on investment. Often, the time it takes to recoup your investment exceeds the batteries’ warranties. For many homeowners, solar batteries don’t yet offer compelling financial value unless you highly value black-out protection during power outages and the positive impact on the environment. Keep reading to find out what you need to know below.

For those technically minded – see our more detailed analysis with 24 case examples here.

What is a solar battery & how do they work?

Before we begin our solar battery cost 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 solar ‘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. They can be connected via DC cables to a hybrid solar inverter. Some come with their own inverter built in (e.g. the Tesla Powerwall 3) 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.

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:

1. Bonus feed-in tariff (very high rate for power that is used)
2. Annual fixed fee for participating
3. A discount on the installation of the battery

How much do solar batteries cost?

Solar Choice has been tracking the average price of solar batteries in Australia across our database of over 200 solar installers in our Solar 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:

* Battery only price is applicable if you are installing solar and batteries at the same time or have an existing solar system with a hybrid solar inverter

** This price is for retrofitting batteries to a solar system that has not allowed for a battery integration in the future which requires an additional inverter/charger to be installed along with the battery

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.

NSW

NSW have announced a battery rebate which will become available in November 2024. This will offer between $1,600 to $2,400 for eligible homes depending on the size of the battery. Read more here.

Victoria

Solar Victoria offers a interest-free battery loan of up to $8,800. Eligibility criteria includes a means test, houses with at least 5kW of solar installed and for owner occupiers only.

ACT

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.

Queensland

Queensland’s battery booster program with rebates of $3,000 – $4,000 closed for new applications in May 2024. There has been no indication at this stage that there will be future rounds.

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 circ*mstances, 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.

Financial return

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 12 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.

Assumptions:

• Flat electricity rate of 36 cents per kWh and a feed-in tariff of 5 cents per kWh
• Solar and battery pricing in Sydney 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 circ*mstances.

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. In the typical scenario above the battery takes 12 years to pay for itself and most batteries have a 10 year product warranty.

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.

FAQs