Nov 10 2022

Rooftop solar PV with a battery: does it stack up?

As the price reduces and technology improves, rooftop solar PV with battery storage is increasingly likely to be part of Australia’s transition to renewable energy. A key factor for many households will be the payback period. But, does the cost-benefit analysis stack up currently and how is it likely to change in future? We take a look at the types of batteries available, their costs and the incentives that are likely to encourage more households to take-up batteries with solar installations.

Batteries

There are three types of battery systems available for purchase in Australia:

1. Lead-acid batteries - Traditionally used for off-grid power systems but not widely used today

2. Lithium-ion batteries - most common type of battery and advancing rapidly

3. Flow batteries - Generally used for larger energy storage applications and gradually evolving

Prior to the release of the Tesla Powerwall in 2015, home battery systems were generally made up of lead-acid batteries. Lithium-ion batteries are now the most common battery in Australia due to their efficiency, scalability and longer life compared with lead-acid batteries.

Cost Implications

Over the past 10 years, cheaper electricity has not been the only factor leading households and businesses to invest in storage technology. Batteries provide backup power when grid supply is not available, allow a household to store excess solar energy from rooftop PV systems for later use and can help  make a property energy independent.

A recent report from the Australian Energy Market Commission (AEMC) says “falling battery costs and longer warranty lifetimes, accompanied by changes to solar feed-in tariffs and tariffs for using energy in peak periods, are changing the incentives to invest in residential batteries”.

In addition to the technical developments mentioned above the following factors re likely to make battery investment more attractive over time:

  • Changes to government incentives to store energy through direct battery subsidies
  • Changing solar feed-in tariffs
  • The introduction of solar export tariffs, expected in 2024
  • Peak energy usage tariffs

Direct battery subsidies

The AEC’s recently published Solar Report Q3 2022 lists a number of schemes and rebates offered by governments around Australia to subsidise battery installation with rooftop solar PV systems:

  • Victoria: The Solar Battery Rebate Program offers a rebate of up to $2,950 for a solar battery system starting 1 July 2022.
  • The Australian Capital Territory: The state’s Next Generation Energy Storage Program offers a rebate of $3,500 (excluding GST) or 50 per cent of the battery price (excluding GST) – whichever is lowest.
  • The Northern Territory’s Home and Business Battery Scheme allows residents to buy and install batteries and inverters with a maximum grant of $6,000.

According to the AEMC, the net benefit of owning a battery increased from 0.15-0.20 $/kWh in 2020 (the difference in the value of the generated energy from solar versus the cost of energy to that consumer during peak periods) to an average of 0.24 $/kWh in 2021.

The AEMC forecasts this trend to continue as solar feed-in tariffs fall, and export charges are introduced. However, the date at which batteries become economic is still unclear.  AEMC projects a potential net benefit of 0.30 $/kWh in 2024/25, which would further reduce payback periods. On this projection, a payback period is expected to be 7.5 years in 2025, bringing it under the standard 10-year warranty period and in theory providing 2.5 years of guaranteed cost-free usage of the battery.

Falling solar feed in tariffs and the introduction of export charges from 2024 will also add to the economics of a battery for the end user. An end user who is able to store excess solar energy at a time when feed-in tariffs apply not only avoids said feed in tariff, but also saves the cost of import charges when utilising the stored energy at a later time. Maximum benefits are gained if stored energy is utilised when time of use tariffs are at their peak.

In its report, the AEMC calculates the levelized cost of energy for batteries by conducting a time series comparison of the total capital cost of batteries divided by the total energy that can be cycled through the battery over its warranty lifetime. This comparison provides a $/kWh cost of the battery and is referred to as cost per warranted kilowatt-hour ($/kWh) or the Levelised cost of energy.

This is then directly compared to the $/kWh benefit from having a battery. Once a battery’s price per kWh drops below the aggregate of avoidable network charges and the value of the power that could have been exported to the grid (positive or negative), battery storage becomes economic for the end user. This comparison assumes the battery is connected to a suitably sized solar PV.

Across the National Electricity Market (NEM), the average cost per warranted hour ($/kWh) has halved from $0.80 in 2016 to $0.39 in 2022. While there is a slight uptick in 2022, the overall trend has been steeply downwards over the last five to six years (see figure 1 below).

Figure 1: Average cost per total warranted kWh (1 cycle per day) by year

Source: AEMC Report

Trends in the Market

The AEC’s recent solar report highlighted a year-on-year increase in rooftop solar PV systems with batteries being installed across the NEM. The trend through 2022 indicates that adoption of storage technology is being supported by more households and 2022 is expected to beat 2021’s record 13,126 combined system installations (figure 2).

When comparing the uptake of rooftop solar PV with battery installations (figure 2), South Australia has been overtaken by Victoria as the state with highest share of battery with rooftop solar installations. During the first nine months of 2022, Victoria and South Australia accounted for 24 and 21 per cent of national installations of rooftop solar with a battery respectively.

Figure 2: Number of solar with concurrent battery installations per state since 2014

Source: Clean Energy Regulator data, Australian Energy Council analysis, data as of 25 October 2022

According to the Clean Energy Regulator (CER) data at least 57,000 batteries have been installed with solar PV systems since 2014 in Australia. But the CER data underestimates the number of batteries installed in Australia because it reflects small-scale Renewable Energy Scheme installations. Battery storage systems and components are not eligible to participate in the scheme, but approved systems with an integrated battery may be eligible. It’s estimated that more than 30,000 batteries have been installed over the past couple of years and the total number of batteries installed in Australian residences to date is likely more than double that reported by the CER. Even so, households with a battery system installed remain only a small fraction of the more than 3.3 million homes with solar PV on their rooftops.

Given that the uptake of rooftop solar PV with a battery is likely to continue to grow driven by a range of factors, including users wish for greater control over their energy supply, as well the economic incentives highlighted above.

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