Battery profitability analysis

This is part two of the battery analysis I did for a home in NSW. We figured out how much he could expect to save over the next ten years with a Tesla Powerwall 2.

This is the second part of the home battery analysis I did for a newsletter reader. After connecting his energy data to his own SolvingZero dashboard, we calculated the total dollar savings for a 13.5 kWh battery over a ten-year period.

The battery won't break even over ten years, but that's only part of the story.

A 13.5 kWh battery will save the homeowner just over $6,000 for a ten year period

In the last article, I discussed how buying energy from the grid, storing it, and then using it later in the day is not as profitable as one would think. For this specific home their overall savings increased by a modest 10 to 15% by buying and storing grid energy. However, I pointed out that the home was also on a harsh time-of-use plan with peak pricing from 7 am to 10 pm, making the whole buying battery energy exercise pretty risky. In particular, the battery would need to consistently forecast weather conditions for the coming day to buy the right amount of energy.

To take one step back this week, I want to discuss the battery's overall savings and how that factors into a homeowners desire for a battery.

Above, we can see the total savings of the battery over a ten-year period. At year ten the battery has saved the home just over $6,000 on their energy bills.

When talking about savings, we also need to consider the opportunity cost of not selling solar energy straight to the grid. In this case, the home is on a pretty generous 10¢ solar feed-in tariff credit, so for each kilowatt hour stored in the battery, that's 10¢ of solar credits lost.

Taking into account these solar credits, the battery saves the homeowner around $5,000 over ten years. But one important caveat is that the energy pricing in the above graph is static, as in I didn't adjust the cost of energy for each year, naturally energy prices change year to year.

The overall trend line of energy pricing and solar feed-in-tariff credits make batteries look better

Another topic I've covered pretty thoroughly in past articles is the upward trend of energy prices and the downward trend of solar credits.

As these trends continue over the next ten years, the profitability of the battery will continue to increase. To use the bar graph above, the yellow bar in that graph will continue to grow as energy becomes more expensive and the orange bar will only decrease as solar credits lose more value. Increasing the value of pairing solar with batteries year on year.

Other major considerations for an improved battery analysis

To reiterate quickly, energy pricing is the first port of call when considering impacts on profitability. The two biggest battery factors are how much it costs to buy and install followed by how much is it saving you.

That being said battery degradation is another evolving topic on which the jury is still out so it wasn't part of this analysis. I recently had the opportunity to chat with an energy grid and battery research fellow at RMIT, and he, too, was still waiting to see where the research on battery degradation ends up. For a bit more context, the idea behind degradation is that over the years, as you charge and discharge your battery repeatedly, it begins to take a toll on the battery itself. Over enough time, eventually, the battery can no longer hold as much power as it once did. Also, naturally time will take its toll on batteries, so they still slowly degrade even without regular use.

For example, Tesla has a warranty on its battery that it will be able to hold 70% of its original capacity by year ten. In the long term, this can impact the overall savings analysis of a battery and eventually does need to be considered.

A third consideration is battery chemistry. Different chemistry in the battery itself can lead to a longer shelf life or different efficiencies. Overall, battery chemistry is a lot to unpack, and it might become its own article in the future. But it is something to consider when shopping around especially as new batteries are continually hitting the market.

The two biggest motivators for installing a battery, blackouts and energy independence

Buying a battery today is not solely about making money. Buying a battery with blackout protection and having that energy independence from the grid is priceless to many.

Another way to rationalise buying a 13.5 kWh battery is you are purchasing the comfort of energy independence rather than trying to earn every cent back.

If the battery costs around $14,500 with installation and you expect to save at least $5,000 over the next ten years, that works out to an extra cost of $950 a year to purchase energy independence for your home.

The rabbit hole of reasons to buy a battery or to wait runs deep.

At the moment the rationale for buying a battery is more about wanting to buy it for reasons other than trying to turn it into a profit-making machine. It will be a few more years before battery prices drop far enough and energy prices increase high enough for us to confidently say this battery will turn you a profit in X years.

If you'd like a battery analysis for your home then let me know

In this battery analysis, we looked at all sorts of scenarios, modelling in different battery sizes, buying and storing grid energy, looking at different energy plans and more.

To access all this data, the homeowner easily connected their smart energy meter to their own SolvingZero dashboard in just a few clicks—and for free! No devices or house visits were needed.

Right now the dashboard doesn't have a battery analysis tool built in but I'm happy to personally do a battery analysis for your home.

If it sounds interesting then head over to SolvingZero to create your own personal energy dashboard, from there let me know you're interested in a battery analysis and we can chat!