I’ve been publishing thoughts on the solar industry since 2009. And since Tesla announced their Powerwall battery to great media hype in May 2015, a lot of those thoughts have concerned batteries.
Unfortunately, a lot of the facts I’ve published about batteries, their economics and their environmental impacts have not gone down well with some parts of the solar industry, generally the parts that have bet their future on selling lots of batteries in the short to medium term.
The reason they don’t like what I say (and one battery reseller has even threatened to ‘destroy’ me and my company) is that I (or Ronald) simply point out that home batteries do not currently pay for themselves financially or environmentally. These are not opinions – these are facts based on impartially looking at the numbers and engineering.
So I do have a reputation among some as being ‘anti-battery’. I am not. I have a big-ass battery installed at home (see picture above). I am simply pro-truth.
We have reached a point where big, centralised batteries like the Tesla Big Battery™ can make sense in grids with lots of renewables. At some point in the nearish future, individual home batteries should make economic and environmental sense (as solar panels do now). When that happens, I’ll be the first to shout about it from the rooftops.
Until then, if you are considering buying a battery to go with your solar power system, here’s what you need to know.
The top 6 battery myths
Myth #1: Batteries improve the economics of solar power
For most homes in Australia, the return on investment from solar is going to vary from good to bloody fantastic.
Unfortunately, many people still look at solar, then look at the feed-in tariff, and mistakenly say:
“8 cents for exported electricity! What a rip-off. Solar can’t pay for itself without a battery; I refuse to virtually give my electricity away to the grid!”
This attitude is stoked by:
- The mainstream media, who are either too lazy to do the sums or innumerate.
- Much of the ‘green’ media, who have decided that batteries, and specifically Elon Musk, are the silver bullet that will solve all the world’s energy and CO2 problems.
- The battery manufacturers who relentlessly gild the lily of battery payback.
- A psychological condition called ‘inequity bias’ or ‘inequality aversion’. This is a powerful condition where humans hate inequality and will often act in a way that causes them to lose out if it means that it prevents another person (or company) getting what they perceive to be an unfair gain. The result of this very human condition is that people will often buy batteries that will never pay for themselves simply to avoid selling electricity cheaply to the grid, which the ‘evil’ electricity companies can then on-sell to your neighbours at a profit. I would go so far as to say that this is the biggest driver of battery sales at the time of writing.
The truth is that at current prices, for the vast majority of Australian homeowners, batteries will not pay for themselves before the warranty expires. And when buying a solar power system, if you add batteries, you’ll make the payback of the system as a whole worse – not better.
Myth #2: Grid-connected batteries save you the full cost of buying grid electricity
I occasionally get emails from people who claim I don’t know what I’m talking about when I advise that batteries don’t pay for themselves yet. They then helpfully do the maths for me. And they almost always make the same mistakes in their calculations. The chief one being that they don’t seem to understand the concept of ‘opportunity cost’.
Q. How much do you save, per kWh, if you store your solar energy in a battery and then use it at night?
A. Although you save 30c (or whatever your usage tariff is), by not drawing a kWh from the grid, you are, obviously, not now exporting that kWh to the grid. So you are losing the feed-in tariff on that kWh. Most people, if they shop around, can get at least a 10c per kWh feed-in tariff. So if you are saving 30c per kWh, but losing 10c per kWh. Your net benefit is 20c per kWh. In fact, it’s a bit worse because every time you charge and discharge the battery, you lose ten to thirty per cent of your energy to battery inefficiencies1 .
Further reading: Why Feed In Tariffs Hurt The Economics Of Batteries
But not everyone wants a battery for economic reasons. Many want a battery to reduce the carbon footprint of their home. That brings us onto our third battery myth:
Myth #3: Batteries reduce your carbon footprint
If you have a grid-connected solar power system that exports surplus solar electricity to the grid and you add batteries, you actually increase your home’s carbon footprint. Sound crazy? Bear with me.
If you don’t have batteries, any excess solar energy gets exported to the grid. While you may be disappointed with the feed-in tariff this pays you, the environmental benefits of your exported solar electricity are very real. Each kWh you export means that the grid has to generate a kWh less from fossil fuels. You should feel good about that.
However, if you have batteries on your home, every kWh you put into the battery is one less that goes into the grid. So although your stored solar means that you have to import one less kWh, it also means that you’ve exported one less kWh. So there is no net environmental benefit.
In fact, because a battery system is only seventy to ninety per cent efficient2, you are offsetting ten to thirty per cent less CO2. And you also have to repay the large amount of CO2 emitted in the manufacture, delivery and installation of the battery and battery inverter.
But there is another, non-environmental, non-financial reason for buying batteries: energy security. Which brings us onto myth number 4:
Myth #4: All batteries can provide blackout protection
No one likes losing power to their home. Batteries can power your home during a blackout. So perhaps you are thinking of buying batteries for blackout protection.
There are a few things you need to know if that is the case.
Firstly, many solar battery systems will not work when the grid goes down unless you pay extra for the engineering and electronics to allow this. Running a home without the grid is quite a complicated task, because you need to:
- Isolate the house safely from the grid, so you don’t send electricity into the grid and kill lineworkers trying to fix it.
- Balance all the generation and loads so that you match supply and demand at all times.
- Ensure that the battery is never overloaded by the house loads.
- Ensure that the battery is never overcharged from the solar.
All this functionality comes at a cost. So if you are buying a battery and want blackout protection, be sure you are getting a system that will actually do that3.
Before you do that, however, you should have a think about how big a problem blackouts are for you, and consider other, much cheaper, solutions.
If blackouts are a major issue for you, the cheapest form of blackout protection is a petrol generator. You can buy one that pushes out 3 kW for about $1,000 at Bunnings. Three kilowatts will power most of your home most of the time, unless you have a particularly large air conditioner, in which case you may want to spend more on your generator. The generator will last as long as you have petrol.
A suitable battery-based solution will cost you about $12,000 at the time of writing.
So, although the generator requires a jerry can of fuel and is noisy and creates exhaust fumes, it is 12 times cheaper. And if it is only used once or twice per year, the overall carbon footprint is likely to be less than a big battery that sits idle ninety-nine per cent of the year.
At some point in the next three to ten years, batteries will become so cheap that it will be crazy not to have them on your home. And if you have batteries on your home, you may as well configure them to back up your home in emergencies. Especially as climate change sends more extreme weather our way.
Further Reading: Does your hybrid solar system really need backup?
So it is important to be able to add batteries to your solar power system in the future. Which brings us onto our last battery myth:
Myth #5: You need a specially designed solar system to add batteries in the future
If you are thinking that a ‘battery ready’ solar system might be a good idea – I agree. That is a great idea. And the good news is that every grid-connect solar power system ever sold in Australia is ‘battery ready’.
Batteries can be added to any existing solar power system using a technique called AC coupling. The batteries’ power simply goes into your home through the standard 230V AC wires. Simple as that.
So don’t worry about buying a special ‘battery ready’ system. Batteries can be fitted to any solar system you buy. The only thing you need to bear in mind is that you have enough panels to charge a future battery. Generally, if you think you’ll add batteries (or an electric car) to your home in the future, I’d err on the large side for your system and buy at least 6kW of solar capacity.
Now, there’s one more myth…
Myth #6: Adding batteries to your solar is sticking one finger up to the electricity companies
Hands up if you like your electricity company?
Thought so. But before we get into the reasons why electricity companies are so hated (the only country that hates them more is the UK), you may not realise there are actually up to four companies that are responsible for getting electricity to your house and they all get paid from your bill. Let’s explore who they are and see which ones we really have the bad feelings for.
Generators own the power generation fleet, be they coal-fired power stations, wind farms, gas power stations or hydroelectric systems.
Examples are AGL Energy (who are also a retailer), who own lots of coal, gas and wind, Origin (also a retailer), TRUenergy, Macquarie Generation, Snowy Hydro and a handful of others.
For every $100 you pay on your electricity bill, these guys get an average of $22 for generating the electricity. Yes – that’s right – only twenty-two per cent of your bill is paying for electricity to be generated.
When you buy grid electricity, you can have some control of whom you buy your electricity from. If clean energy is important to you (and I personally believe it should be), you can pay more for green power, and the part of your bill that pays the generators will only go to people who have generated enough renewable energy to cover your usage. This is a good thing because it increases demand for green energy, which means more renewable generation will get built.
But bear in mind that many of the largest fossil fuel generators also have the largest fleets of wind and solar, e.g. AGL Energy. So if you really want to ‘stick it to the man’, understand that, even with green power, you may still be lining the man’s pockets.
Transmission networks get about eight per cent of your bill. They are the companies that build and maintain those big pylons that carry electricity from the big generators to the big substations near population centres.4
Their formal name is transmission network service providers or TNSPs to their friends.
Below are the details of local TNSPs:
Are you angry with any of these companies? You may well be – I don’t know. They are a large part of ‘the grid’. They enable coal-fired power stations to distribute their power. But they also make wind and solar farms and the snowy hydro scheme viable. Being angry is your call.
If you decide that a deep dislike of your local transmission network is a reason you want to get batteries, just be aware that they only get eight per cent of your bill. And some of that will come from the fixed ‘service charge’ part. So even if you get your grid imports down to almost zero, as long as you are connected to the grid, you will be giving money to the network companies.
Once the electricity leaves the transmission network, it uses the distribution network to get to your home. The companies that own and operate the distribution network are called the distribution network service providers (DNSPs). These guys get about thirty per cent of your bill.
Below are the details of your local DNSPs:
Again, part of the DNSPs’ income comes from the fixed service charge, so even if you import almost nothing from the grid, these guys will still get paid. Also, they are responsible for administering the premium feed-in tariffs, which are no longer open for new customers, but are still paying really good rates to customers that invested in solar energy many years ago. That was a big part of building the solar industry and a major reason that it became so efficient, meaning Australia now has the cheapest residential solar in the world.
The last company in the line for your cash is the Electricity retailer.
Electricity retailers collect all your money and typically keep thirty per cent of your bill to cover their overheads and profit (these are the guys you can switch easily). These are the brands you probably think of when you think of ‘electricity companies’.
So here are your potential positions:
- You hate them all. Then you must go off grid. Even if you draw no energy from the grid, if you are connected, you will still pay the service charge5 of 70c – $2 per day, and every type of company in the list above will get a cut.
- You hate the TNSPs or the DNSPs. It’s off grid for you as you can’t avoid paying them.
- You hate some of the generators (usually people hate the coal burners or frackers). You can pay extra and specify ‘green power’ with many electricity retailers. The good news is that this will prevent your money going to the generators that don’t have any renewables. The bad news that if you hate the biggest coal generator in Australia (and fan of fracking): AGL, much of your money is still likely to head their way because, ironically, they are also one of the largest renewable generators in Australia thanks to their wind and solar farms. It’s worth noting that any ‘green power’ payment they do get from you has to be for renewable generation, though – so you are encouraging them to mend their ways.
- You hate the retailers. Really? All of them? There are some quite nice ones out there who are very pro solar. Two that spring to mind are Diamond Energy and Powershop. You can see how their rates compare with this tool. But again, if you really hate the retailers, you must go off grid to avoid giving them your cash.
So if you have a strong emotional need to stop giving cash to the four types of companies that make up the electricity market, you need to not only get batteries, but disconnect from the grid altogether. This is a much, much more expensive option than adding batteries and staying on the grid. In fact, it is so expensive that you may reconsider quite how much you need to ‘stick it to the power companies’ altogether.
Conclusion: Should you add batteries?
For financial reasons? No. Not for a few years anyway. Don’t worry – I’ll update this post as soon as they make financial sense.
For emotional reasons (sticking it to the man)? No. Batteries only reduce your kWh usage from the grid, you will still be supporting 4 big electricity companies with the daily service charge. If you really don’t want to be part of the grid, then the only rational choice is to go off grid. If you have an average Australian home, a suitable system will start at about $50k6
For green reasons? Hell no. It is better for the environment to reduce your remaining post-solar impact with green power from a friendly retailer like Diamond Energy.
For security? Absolutely. But be aware it adds to the cost, and as I’ve mentioned – many batteries do not come with backup by default, strange as that may seem. So buyer beware.
For nerdy reasons? Go for it. You like new technology and have the cash to spare? Then you can get a big box of batteries and watch the monitoring software to your heart’s content.
Here’s what I tell my friends when they ask for advice on solar and batteries: Unless you need generator-free backup or really, really want a battery for technology’s sake, conserve your cash. Batteries will make sense in a few years, both environmentally and economically. Until then, a big solar power system is a much cheaper way to get tiny bills. The worst thing you can do is put off getting solar panels because you have an emotional aversion to exporting solar electricity back into the grid at far less than the retail rate. You’ll just be subjecting yourself to more years of high electricity bills and boosting the profits of those electricity companies you dislike so intensely.