Are batteries worth the cost

Batteries will save you money but probably not enough to pay itself off. But for most people they are buying energy independence from the grid, instead of trying to make money. For now at least.

A newsletter subscriber contacted me asking me to analyse the potential savings of a battery for his home. After connecting his energy data to his own SolvingZero dashboard, we calculated if his excess solar energy might be better off being fed into a battery, and what kind of savings he could expect.

In the end, I found some surprising answers.

A battery for this home would not break even within ten years

The profitability calculation considers many of the expenses and running costs of having a battery. Year on year, it's trending in the right direction as energy prices increase and feed-in-tariff credits decrease, but today, it's still not breaking even.

We calculated that per year the homeowner would save...

$560 to $500 for a 13.5kw battery

$515 to $440 for a 10kw battery

$450 to $425 for a 8kw battery

It's important to note that each house and its energy consumption is unique. There are a lot of caveats and fluctuating costs that go into a battery analysis. It is hard to say if the savings above will reflect anywhere close to your own situation.

One more note! We used ten years as the determining timeline of breakeven as it is one of the more common lengths for a battery warranty. The very popular 13.5kw Tesla Powerwall 2 is on a ten-year warranty. That being said, of course, buying a battery will save you more money well past the ten-year mark.

There are so many different factors to talk about in a battery analysis, so I'm going to break them down into a few newsletter articles.

But because it was a big burning question for the homeowner and me, first, I'm going to jump into answering if purchasing energy from the grid to store in the battery makes a huge difference in the profitability of the battery.

The calculations take into account solar export costs and buying energy from the grid to use later

Below is a graph that tracks the monthly savings of a 13.5kw battery.

The green bar represents the total savings per month. The red bar is the cost incurred by buying energy from the grid and storing it in the battery. The yellow bar is the opportunity cost of not selling the solar for the feed-in tariff credits, as in the money the home could have earned by selling that solar energy instead of storing it.

The biggest eye-catcher here is those big red bars, which are incurred by buying energy when it's cheap, storing it and then using it when the energy prices have increased. Even though it's cheaper energy it still costs a lot to buy relative to the savings. While in theory, buying cheap energy and storing it sounds like a great idea to significantly increase the value of the battery, in the real world, it might not be so lucrative.

Lets go deeper into why its so hard to make money of buying grid energy and storing it.

Buying energy to charge the battery, storing it and using it later is like gambling with cents

First, it's important to consider the home's energy pricing. For this example, they are on a time-of-use plan, which means they have different energy pricing throughout the day as energy availability and demand change. Their cheapest off-peak energy price runs all night from 10pm to 7am, and costs around 24¢ per kilowatt hour. They have both a peak and shoulder price, which alternate back and forth throughout the day, but the peak is 38¢ and the shoulder is 37¢, so let's treat them more or less the same. The house can also sell its solar energy for 7¢ kWh. The end result of all that pricing is they are best off buying energy before 7am and then using it throughout the day. The truly tricky part is knowing how much energy to buy to spread across that long fourteen-hour window before the off-peak pricing activates again at 10pm.

Not every house has such harsh pricing schedules but the next point is still an important one. It's a gamble to fill up the battery with purchased energy. If a battery is filled up with purchased grid energy in the morning and then later in the day the battery is too full to store free solar energy, then that's a huge hit to the potential savings that could have been achieved.

Some simple math to emphasise how easy it is to lose potential savings by storing grid energy

If the home stores its free solar energy in the battery and uses that energy in the evening when prices are high, it saves 31¢ a kilowatt hour. It's 31¢ because their grid rate is 38¢, and we would subtract the 7¢ opportunity cost of not simply selling the solar energy. Now, consider that if the home buys energy at 24¢ in the morning before 7am, stores it, and uses it later in the day when prices are higher, at best, the home will earn 14¢ in savings because we are covering the expensive rate with the cheaper rate, 38¢ - 24¢ = 14¢. If the home accidentally overfills the battery with purchased energy, it will miss out on the much higher 31¢ savings it could have had. This could easily happen if the battery tries to predict the weather and preemptively store energy on cloudy days. But even the best weather predictions in the world aren't perfect. A home will buy energy to store in their battery only to find it's sunnier than expected, and now they're stuck selling their free energy to the grid for 7¢ when they just bought energy for 24¢ a few hours before. If this lost savings goes on long enough, those few cents a difference each hour turn into a few dollars a day, which can turn into hundreds of dollars a year. It won't always happen, but it's a big hit to the potential savings when it does. The ideal scenario would be a more favourable plan price structure that encourages storing or buying cheap energy until sunset. Then, the home will have a full solar battery, which can be immediately used in the evening. No long forecasting would be necessary.

This only scratches the surface of the battery analysis

Overall in the battery analysis, we looked at all sorts of scenarios, modelling in different battery sizes and looking at different energy plan pricing for this home.

For this home their plan pricing is fairly harsh and it makes it more difficult for a battery to buy energy from the grid in a profitable way. For other plans in other parts of the country you might have more luck.

The biggest factors that decide the profitability of a battery are how much it costs to buy and install and how much your energy costs. If battery prices continue to come down and energy prices continue to go up, batteries will become more attractive each year. I'll be going deeper into this battery analysis for the next newsletter so stay tuned.