A new deep-dive into the economics of home batteries – and how long it takes the average household to recover this cost through electricity bill savings – has found the payback period could be as low as four years, when factoring in rebates and virtual power plant participation.
The research, published on Thursday by the Australian Energy Market Commission (AEMC), is based on a comprehensive analysis of 1,000 New South Wales households using hourly customer data and taking in more than 70 battery products.
The researchers found that the average payback period for a battery without any government subsidies was 14.5 years, but this could be more or less halved to 7.3 years using the discount provided through the federal Cheaper Home Batteries rebate.
If a NSW battery owner joins a virtual power plant (VPP), making them eligible for both the federal rebate and the state VPP incentive, the average payback period could then be almost halved again, to as little as four years.
“We’re seeing battery economics reach a genuine sweet spot similar to the early solar boom,” says AEMC chair Anna Collyer.
“The battery market has grown 80% in two years, but we’re still only seeing 4.1% penetration of solar households.
“Understanding how individual and system benefits align will be crucial as we potentially approach solar-like adoption levels.”
The findings follow the latest progress report from the Albanese government’s Cheaper Home Batteries rebate, which revealed that 28,000 discounted home energy storage systems have been installed in the first six weeks of the scheme – around the same amount as was installed in the entire first six months of 2024.
The rebate, as designed by the federal government, cuts the up-front cost of home battery installation by an average of around 30 per cent, as long as the discounted battery is VPP compatible.
In most states, it is up to each individual household whether or not they actually join a VPP. The exceptions are Western Australia, where VPP participation is mandatory for rebate participants, and NSW, where the state’s Peak Demand Reduction Scheme (PDRS) offers an extra up to $1,500 in return for VPP connection.
Data shared at the start of August found NSW leading the nation in uptake of batteries through the rebate, accounting for 38 per cent of all registered storage for the first month of the scheme.
Statistics on VPP participation are less easy to nail down, but the operator of one of the nation’s most popular VPPs, Amber Electric, told One Step Off The Grid last week that it signed up about 2,800 new battery customers in July.
And it has been particularly busy in NSW, according to Amber CEO and co-founder Dan Adams.
“In New South Wales, from May to July, [new customers numbers are up by] 5.5x … presumably because of the PDRS subsidy,” he said last week.
All told, it’s a vastly different picture to when the AEMC first examined the economics of home batteries, back in 2022 and concluded that by 2025, installations could become financially viable for many Australian households.
As this latest report notes, this result was predicated on a hypothesis that battery prices would continue to fall, which the AEMC concedes “has not necessarily borne out” in the case of home batteries. Hence, the rebate.
“We found that subsidies are the single most impactful contributor when reducing battery payback periods,” the report says. “Without subsidies, battery owners may struggle to recoup their capital cost before their warranty period expires.
“For example, the recently introduced federal Battery Rebate …can reduce the capital cost of a battery by up to circa 50%, and the newly amended NSW VPP-based incentive can also assist with upfront battery costs.”
But there are plenty of variables affecting payback periods, such as battery size, battery ticket price, individual household energy use patterns and differing retail electricity plans, tariffs or VPP structures.
The AEMC report notes that Australian consumers can choose from more than 70 home batteries across a huge price spectrum, ranging from under $2,000 to nearly $20,000.
Batteries vary greatly in storage capacity, too, with an average size of around 10kWh, but a range of between 2kWh and 20kWh, and a large number of “stackable” options.
Other characteristics, like rated power, warranty, and degradation, also vary from battery to battery, the report adds, which “is to say that consumers can choose from a wide array of batteries to suit their specific usage profile, load and financial goals.”
All of that said, the research has singled out a number of factors that were found to boost the rate of return for home batteries installed under the rebate.
The AEMC study found that budget batteries outperformed premium brands financially, with NSW households seeing 10-year returns of $2,308 on average.
“We analysed both premium batteries and cost-efficient alternatives,” the report says. “The results were clear: Lower-cost, less-known batteries outperformed premium-brand options on a financial basis.
“These lesser-known batteries typically have a lower cost per kWh of storage, which results in superior 10-year NPVs and shorter paybacks.
“Premium batteries, by contrast, often produced negative 10-year NPVs and failed to deliver a return within their warranty period (10 years).
“This result is evident in Figure 6 below and is reflective of current trends in Australia, with longtime favourites losing popularity and cost-efficient batteries jumping up the ranks.”
Source: Australian Energy Market Commission
Another way to speed up payback is connected to how and when households consume the bulk of their daily energy supply.
The AEMC analysis finds that consumers with relatively high loads during evening hours – dubbed “evening peakers” in the report – are the “clear winners” when it comes to battery economics, because they store their solar during the day and shift it into the peak period, displacing grid consumption.
“This means that the battery can be fully utilised to offset relatively more costly evening electricity consumption with lower cost daytime solar generation,” the report says.
Another interesting finding from the analysis is that households that bought solar and battery systems together rather than independently tended to achieve faster returns.
“This is because the performance and value of each are closely linked, and mismatched systems can limit returns,” the report explains.
“If a solar system is undersized, a battery may remain undercharged, and benefits may be stunted. Alternatively, an oversized solar system can mean the consumer is overpaying.
“This suggests that there is no one-size-fits-all solution, and an optimal point for battery and solar size that best suits consumers’ specific load and consumption patterns can be found.”
Finally, the report finds that VPP participation can also speed up the return on investment for a home battery system, by taking control of a system to take advantage of high-price periods.
Source: Australian Energy Market Commission
“NSW consumers in our sample who participate in VPPs can achieve the best of both worlds,” the report says.
“On average, they would gain a 10-year NPV (net present value) similar to wholesale pass-through consumers without the risk of being exposed to peaky, volatile prices, and receive shorter payback periods.
“While these individuals may forgo some control of their battery (typically 50 days per year), the financial benefits more than offset any missed arbitrage opportunities,” the report says.
Ultimately, the AEMC counsels that battery economics are “far from uniform” and the benefits are “highly individualistic,” so it’s worth shopping around, asking lots of questions and getting to know your homes energy consumption profile (or paying someone else to!).
“Understanding consumption patterns and making informed, data-driven purchasing decisions is critical to unlocking the full value of batteries,” the report says.
Sophie is editor of One Step Off The Grid and editor of its sister site, Renew Economy. Sophie has been writing about clean energy for more than a decade.
