The sweet spot for battery storage? How the numbers stack up

There is a lot of talk about the ability of battery storage to take households and businesses off the grid. Yes, they can, but it’s probably only for those not on a strict budget, or for those who are building new, and probably won’t bother connecting to the grid because of the massive costs involved.
For everyone else, it is a numbers game. And right now, as even most purveyors of quality battery storage products admit, the numbers don’t yet add up for quitting the grid and building in the necessary redundancy.
So for those of us left, and interested in battery storage as a means of saving money, how do the numbers stack up?
Before tackling those numbers, it is worth noting that the numbers for battery storage are more complex than they may first appear.
Making the economics work will depend on how much your household consumes and when, the size of your solar array, if any, and the local tariff structure. Then you have to consider how you will use that battery, and how the grid might use it to.
It’s not just the cost of the hardware that counts, but the value you can extract – either by storing electricity for your own use later in the evening, to play an arbitrage game with time of use, playing the peaks, or meeting demand charges.
Enphase Energy estimate that their are four or five lines of value that can be extracted from battery storage, but right now – because of regulatory constraints – only a few are available.
In the US, the Rocky Mountain Institute identified 13 different services that could be provided by battery storage, yet less than one quarter of the those are being exploited.
That means, RMI said, that batteries are sitting unused or underutilized for well over half of the system’s lifetime. “For example, an energy storage system dispatched solely for demand charge reduction is utilized for only 5–50% of its useful life,” it wrote in a recent report on the value of battery storage.

So, with all those caveats, let’s get on with what the experts say. At their launch last week, Enphase estimates the sweet spot of storage to household consumers will be from around 3.5kWh to 5kWh.

That’s because they are only playing in the bottom line of the value stack, maybe the second line in some states.

Others agree, more or less.

Tony Vassallo, from the University of Sydney, and who also worked on the CSIRO Future Grid plan, which looked at the likelihood of mass defections from the grid, says that 2kW of solar PV and 5kWh of battery storage would deliver the fastest return on investment, but would only provide one third of an average consumer’s electricity needs.

That compares to more than 50 per cent for some people with 5kW or more of rooftop solar, and up to 80 or 90 per cent for those who add battery storage. Indeed, Vassallo says that with a 7kW solar PV system, and a 25kWh battery, that reaches the “break even” point.

It will cover around 90-93 per cent of demand, but any more, and you won’t recover your money. To get to 100 per cent, you will have to “gold plate” your own system to ensure your independence on extended cloudy days. And for much of the time, you will be throwing away the excess.

Vassallo says, however, that this could change quickly. Analysts have been notorious for underestimating the cost reductions of solar, electric vehicle battery storage, and maybe now household battery storage.

Most battery storage offerings are for more than $1,000kWh, but when the cost falls below this level, it starts to get very interesting for households, and Vassallo says battery storage has the potential to triple or quadruple the value of PV for the homeowner.

This also reflects the views of analysts such as Bloomberg New Energy Finance, which in July produced these estimates for returns on battery storage devices in Australian homes. Based on an average 4kW solar PV system in Queensland, BNEF said that smaller devices delivered an instant return.

Its estimate was that up to 5kWh of storage, it was cheaper than the grid. Above that level, it wasn’t. But that is also like to change quickly, which means that the large systems – 6kWh and above being offered by Tesla, LG and others – will also become cheaper than the grid.

In five, to ten, and then in 20 years time, the picture changes dramatically. (And that equation will depend largely on the nature of retail tariffs at the time – and how far they move from charging on volume, the level of fixed prices, and if they are calibrated at demand tariffs, and whether these are addressing network peaks or individual household peaks).

This gets back to the value of batteries storage. In the US, the Rocky Mountain Institute identified 13 different services that could be provided by battery storage, yet less than one quarter of the those are being exploited.

That means, RMI said, that batteries are sitting unused or underutilized for well over half of the system’s lifetime.

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“For example, an energy storage system dispatched solely for demand charge reduction is utilized for only 5–50% of its useful life,” it wrote in a recent report on the value of battery storage.

Oh, and one final point, and a word of warning. Yes, it is possible to find cheap battery storage, just as it is also possible to find very cheap solar panels.

But Australian households should be wary – you get what you pay for. As some in the solar industry readily admit, Australia is a land of cheapskates.

No country has installed a lower percentage of tier 1 module suppliers than Australia. Some suggest it may be barely half. And if Australian households go down the same route in battery storage, then there could be serious problems.

Right now, there is not even an Australian standard for battery storage, and probably won’t be one for another two years. Which means all there is to rely upon is the manufacturers guidance and warranty.

So if you are interested in battery storage, find an expert, and make sure he/she is one. And then find another to cross check. And if neither of them are interested in spending a lot of time finding out about your consumption patters and tariff structure, then go look for someone else.

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