Banking on solar and batteries


Which Australian cities are best for solar and home battery storage?

When should you take charge?


Installing a solar and battery storage system is an enticing idea for many of us fed up with the rising cost of electricity. However, a system will set you back many thousands of dollars and it's important to know if the investment will eventually pay for itself.

While each household has different consumption patterns, each state in Australia also offers different conditions for the economics of batteries. We've drawn on research undertaken by solar system advisor Solar Choice to show which cities are best placed for solar and batteries, and which are not.

In this article:

Before leaping into the solar and storage revolution, it's a good idea to take a long-term view to see if the investment will pay itself back under the conditions you're likely to use them. 

One way of assessing this is by considering the payback period – how much time it will take for the money spent in the first place to be paid back by the resulting savings. In the case of solar and batteries, this is:

Payback period = Total cost of solar and battery system ÷ annual savings on power bills

If the payback period is longer than the warranty period of the battery then it's not the right time to invest in solar and battery storage.

Instead, a battery-ready solar photovoltaic (PV) system is likely to be a better investment as solar panels have a useful life of approximately 25 years. James Martin, solar system analyst and author of the research, says that most batteries offer a warranty of 10 years. 

The useful life of batteries differs with the various chemistries being used and it's not wise to bank on their performance beyond the warranty. According to James Sturch, Australian technical business manager with German battery maker Sonnen, "After a battery's capacity deteriorates to 60% or below, it tends to drop off a cliff and die." 

Beware the conditions on the battery warranty!

Make sure you clearly understand battery warranty terms and conditions when choosing a system, so you do not find yourself out of pocket with a battery that hasn't lasted as long as expected, or a voided warranty. 

Battery warranties are often expressed like a car warranty which is an amount of time in years or a cumulative mileage, whichever comes first. And there are often a few pages of fine print regarding terms and operating conditions. 

Take the example of LG Chem's RESU3.3kWh battery warranty. It states a 10-year performance warranty, or an energy throughput of 10,000kWh, whichever comes first.

The latter would amount to approximately one cycle per day for about 10 years (a cycle being one recharge and one discharge). According to LG Chem, most of their users in Australia only charge from PV and use between 250-300 cycles per year because not everyone is home every day to use that energy, nor is there always sufficient excess solar all year round to fully charge batteries every day.

If the payback period is longer than the warranty period of the battery then it's not the right time to invest in solar and battery storage.

However, if you were also drawing from the grid at night to store cheap off-peak energy for use in the morning, called tariff arbitrage, you'd be cycling your battery more than once a day.

There are two main ways a battery can save you money. One is by storing excess daytime solar for night-time use, and the other is through tariff arbitrage. Doing both of these, in a household that has some daytime usage, can be financially beneficial.

Tariff arbitrage involves charging the battery with energy from the grid when it is cheap (off-peak, usually around 11pm-7am) and using the power from the battery in the morning in the peak period when tariffs are expensive (usually after 7am).

We asked Jamie Allen, LG Chem's business manager, how this might affect the warranty. 

"The most we really see is around 1.5 full charge/discharge cycles per day for people who also charge from off-peak energy, and that would be around 7.5 years under warranty if done every day." 

Keep this in mind when assessing payback periods. The research we have drawn on for this article uses scenarios that only cycle the battery once per day with energy drawn from the solar system.

Location, location, location – it makes a difference

Results from the Solar Choice research show that, under the scenarios examined, payback times from state to state can vary from six to nearly 15 years. 

Influencing factors include:

• Available sunshine hours 
• Cost of the system 
• Cost of grid electricity (the tariffs) and any feed-in tariffs
• Size of the system (the solar system and the batteries)
• Amount of power the household consumes, and the consumption patterns (daytime or nighttime)
• Any rebates or incentives on offer (this research included the benefits on offer for solar installations through the federal government's Small-scale Renewable Energy Scheme).

Scenarios for the comparison

In each city, Solar Choice looked at six scenarios by using three different sized systems teamed with a flat rate electricity tariff or a time of use (TOU) electricity tariff. It's important to note that the research we drew on used a household with very high daily consumption of 30kWh a day, and day usage pattern (akin to a young family or home office). The results would be different for a low consumption household. 

The three systems were:

1. Large Tesla Powerwall 2 with 13.2kWh of usable storage capacity + 7kW solar system
2. Medium ALPHA ESS Storion ECO with 8.64kWh of usable storage capacity + 5kW solar system
3. Small LG Chem RESU3.3 with 2.9kWh of usable storage capacity + 5kW solar system

The best cities were...

According to Solar Choice's results, only the top three cities – Perth, Brisbane and Adelaide – had positive conditions for investing in solar and batteries in 2017, meaning it would be likely to pay back the investment by the end of the warranty period (under the scenarios modelled). 

Our advice: wait until 2021

From advice CHOICE has received, waiting until 2021 will see a substantial drop in battery prices, reducing payback times in all cities. 

Battery costs currently sit at around $1000-$3000 per kWh. Martin says they will make good economic sense when they cost $500 per kWh. Additionally, he suggests that projected increases in electricity prices are likely to improve the outlook for investing in batteries.

Mark Byrne, energy market advocate with the Total Environment Centre, has researched the costs of new solar and battery systems in NSW. 

"Payback times for new solar systems with batteries are much better in 2021 than 2017, with payback periods likely to reduce by around three years," he says.

"By 2021, most new solar plus battery systems will pay for themselves in less than 10 years, except low consumption households with large batteries."

What are the best states for investing in new solar and batteries? 

1. Perth, WA – 7.3 years average payback

Thanks to its plentiful sunshine and low solar system prices, Perth offered the shortest solar and battery payback times, according to the Solar Choice research. 

• The lowest payback period, at 6 years, was for the smallest system ($9,500) and a TOU tariff.
• The large system ($17,800) on a TOU tariff had a longer payback period of 8.5 years.

2. Brisbane, Qld – 8.2 years average payback

Brisbane enjoys high average sunshine hours per day and the research found that, for the scenarios tested, it's a better environment for investing in solar and batteries than most. This may not be the case for households with lower electricity consumption, however, and we recommend investigating your household's consumption patterns and the costs before any investment. 

• The smallest system ($11,000) on a flat rate tariff had the lowest payback period of 7.7 years.
• The largest system ($19,100) was the longest payback period at 8.9 years.

3. Adelaide, SA – 8.4 years average payback

Adelaide's very high electricity rates, plentiful sunshine and competitive solar pricing create good conditions for investing in solar and batteries. Payback rates were reduced under flat and block rate tariffs. 

• The smallest system ($11,850) had a payback period of 7.7 years on a flat rate tariff.
• The largest system ($17,350) had the longest payback period at 9.5 years under a TOU tariff.

Properties within the City of Adelaide council area may also be eligible for rebates on solar and battery installations under its Sustainability Incentives Scheme. If so, the payback time will be reduced.          

4. Sydney, NSW – 9 years average payback

In Sydney TOU tariffs can offer cheaper off-peak rates. Batteries can allow you to avoid drawing from the grid in peak periods, but the payback period is often only marginally less than the warranty so it's not a clear winner with batteries.

• The shortest payback period (8.1 years) for the six scenarios was with the small system ($10,500) on a TOU tariff.
• The longest payback was with the medium sized system ($13,500) at 9.7 years on a flat rate tariff.

5. Melbourne, Vic – 9.6 years average payback

From 1 July 2017, the new minimum rate for solar fed into the grid in Victoria is 11.3c per kWh, up from 5c per kWh. Higher feed-in tariff rates, while good for solar PV owners, make the payback time for new solar and battery installations longer. The smaller the gap between the feed-in tariff and the retail rates, the worse the savings from batteries. Solar Choice found the average flat rate retail tariff in Melbourne to be 26c per kWh.

• The smallest system ($11,500) had the shortest payback period of 8.7 years under a TOU tariff.
• The medium ($14,500) sized system had the longest payback period of 10.1 years with a flat rate tariff.

6. Hobart, Tas – 11.4 years average payback

Hobart and Melbourne have the lowest rates of sunshine of all our capital cities and Hobart has high average solar and battery system prices. The net effect is that solar battery payback times are prolonged and not worth the investment at this point. 

• The largest system ($20,900) had the shortest payback period of 11.1 years under a flat rate tariff.
• The largest system also had the longest payback period of 12.1 years when coupled with the TOU tariff.

7. Canberra, ACT – 12.7 years average payback

With some of the cheapest electricity in the country (an average flat rate tariff of 17c per kWh) batteries are not worth your while without a subsidy. The ACT has the Next Generation Energy Storage Grants program that householders can apply for through solar installers. These grants have not been included in the calculations but if applied could bring average payback periods down to a 10-year mark.

• The smallest system ($13,000) on a TOU tariff was under the 10-year benchmark at 9.9 years.
• The medium sized system ($16,000) had the longest payback period of 14.9 years under a flat rate tariff.

8. Darwin, NT

Darwin is deemed unsuitable for solar and battery systems because of its generous feed-in tariff that matches the retail electricity rate. When grid electricity costs the same as the solar that you are exporting, there's no incentive to save it.

There's a great incentive here to get solar alone but there's no financial point in investing in batteries unless you are not on the grid.

Comparing batteries is like comparing apples and oranges

Sturch says there are about 20-25 different batteries available on the market in Australia today and they are not easily comparable products. 

The complexities are myriad, including the characteristics of the many chemical types; safety aspects; depth charges; cycling rates; the expected life of the batteries; their rate of output; warranty and operating conditions; and the inclusion or absence of inbuilt programs and components. 

"Payback times for new solar systems with batteries are much better in 2021 than 2017, with payback periods likely to reduce by around three years."

"Currently, the majority of consumers in the market are the guinea pigs as they are trialing first and second generation products which the manufacturers themselves do not know how they perform over time," Sturch says. 

On top of advising customers to look for a product with a proven track record, he also says that only four or five of the batteries available are all-in-one solutions. The others are modular systems in which the installer decides how to compile and will add together various components – with more opportunities for failure and less clarity around warranties. 

Who should go off-grid?

Total energy independence is an appealing idea for many who want to extract themselves from the fixed costs of electricity supply, but it's not yet viable for urban or existing grid-connected households. 

"Many urban residents ask us about going off the grid but soon shy away from the idea once they learn about the costs," says James Martin.

To go 'off grid', you need to plan for several days without sunshine – that means extra solar panels or other sources of renewable energy (wind), large battery capacity and a back-up generator.

In 2015, the Grattan Institute found that to have 99.9% of reliability throughout the year (which allows for about nine hours a year without power) a household would have to outlay more than $72,000 for a 15kW solar PV system and 85kWh of storage. And the physical size of such a system would be prohibitive for most urban households.

However, for any properties on the fringe or remote from the grid, being energy-independent with solar and battery storage is likely to be a smart move, when compared with the costs of connecting to the grid or installing and running a diesel generator over the long-term.

Battery and solar system size

You don't want to be saddled with an expensive asset that never pays dividends so it's important to get a system that is optimally sized for your usage and solar generation.

Modelling by the Alternative Technology Association in 2015 found that, when coupled with a 4kW solar system, a 4kWh battery was almost always more cost efficient than a 7kWh battery. This is because the larger battery capacity is less likely to be fully utilised each day.

The verdict

Unless you are an avid early adopter or looking for energy independence, CHOICE recommends that most people wanting solar and batteries should hold out for two to three years. As the market settles, battery prices will fall and there will be more historical evidence on the performance of different products. 

Martin says it may be worth installing a solar PV system now that is 'battery ready' while you're waiting for the prices of battery storage to come down. Payback periods for solar alone are shorter than solar and battery systems as the solar portion delivers the vast majority of the savings. Some older systems may not be suitable for retrofitting.

CHOICE recommends consumers calculate their own payback periods with the help of a solar broker, taking into account the size, type and cost of the system, the tariff type, your location, your household size, and your energy consumption patterns.

The assumptions for the calculations

• Average solar system prices for each capital city (Feb 2017)
• Best available electricity costs for each city (Feb 2017, energymadeeasy.gov.au
• Daily consumption of 30kWh per day 
• A solar feed-in rate of 8c per kWh, except in NT and VIC where household power usage patterns are akin to a young family or home office 
• Batteries were only charged from solar (not from the grid at night)
• The calculations take into account the rebates derived from Small-scale Technology Certificates from the federal government's Renewable Energy Target.  

State-based incentives or electricity discounts were not included in the calculations – but we have noted some of the currently available rebates under the results and their likely effect on the payback times. These results are indicative only, and individual circumstances will vary. 

Read more

CHOICE enlists CSIRO for solar panel reviews

Video: CHOICE visits the CSIRO's solar ground station where our tests are carried out.

Use your mouse to explore a 360-degree view of this video or watch it through your virtual reality headset.

CHOICE has teamed up with the CSIRO to test solar panels. See the brands we're testing, the specifications and how the panels have performed so far in our solar panel reviews. See our member survey for the best products as rated by our members.
CHOICE has teamed up with the CSIRO to test solar panels. See the brands we're testing, the specifications and how the panels have performed so far in our solar panel reviews. See our member survey for the best products as rated by our members.


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