Last Updated: 20th Nov 2023 By Finn Peacock, Chartered Electrical Engineer, Fact Checked By Ronald Brakels
Are Solar Batteries Worth It?
Summary: In 2023, if you are on a flat-rate tariff anywhere except South Australia, battery payback will likely be 12 years or more. But if you are on a time-of-use tariff anywhere except VIC, TAS, ACT or NT, a solar battery can pay for itself in under 10 years, sometimes as quickly as six years. Read on for the details:
Thinking about getting a solar battery but not sure about the economics? You’re not alone. When mass-market home batteries first arrived in Australia, their payback was over 20 years, but recently the economics have changed.
In this guide, I’ll break down typical savings and paybacks across different states and territories in Australia so you can decide if a battery is worth it for you.
Pro-Tip: This page is all about the financial returns of solar batteries. But batteries have more value than just low electricity bills. They provide blackout protection, help integrate more renewables into the grid and provide insurance against changing electricity tariffs.
First-Year Battery Savings
Here’s what you could save in the first year with a 10kWh battery that costs $10,000 installed. Using widely used electricity plans in each state or territory capital, I’ve considered both flat and time-of-use (ToU) tariffs. Below the table, you’ll see a heat map of how the states and territories compare on ToU tariffs.
Assumptions:
- The battery has a round-trip efficiency of 90%.
- Charged with rooftop solar panels.
- 100% of the battery’s storage capacity is used each day.
| State/Territory | Annual Savings: Flat Tariff | Annual Savings: ToU Tariff |
|---|---|---|
| ACT | $350 | $568 |
| NSW | $922 | $1,939 |
| NT | $656 | $787 |
| QLD | $850 | $1,248 |
| SA | $1,414 | $1,672 |
| TAS | $651 | $814 |
| VIC | $734 | $809 |
| WA | $982 | $1,729 |
Why are Time-Of-Use tariff savings higher than Flat Tariff savings?
If you have a flat-rate tariff, you save money by charging off solar and discharging after the sun goes down. For every kWh of battery energy you use in the evening, you will save the grid cost of that kWh minus the forgone feed-in-tariff (because you chose to put the solar electricity into the battery instead of selling it into the grid). So your daily savings are capped at the battery capacity times about 30 cents. For a 10 kWh solar battery, that’s $3 per day.
A time-of-use tariff charges much more for grid electricity during the evening peak (up to 75c per kWh), so using battery energy in the evening saves you more.
Pro-Tip: More & more Australian homes are being forced onto ToU plans, but if you have a choice of flat or ToU plans, these savings assume households without a battery are either better off on a ToU plan or would pay roughly the same amount if they were on a ToU plan.
Additional Savings From Avoiding The Morning Peak
If you drain your battery in the evening, on a ToU tariff, you can often recharge it overnight to get you through the morning peak pricing period. This can add to your savings. Discharging half the solar battery’s capacity in the morning will do the following:
| State/Territory | Additional ‘Morning Peak’ Savings |
|---|---|
| ACT | $86 |
| NSW | $210 |
| NT | Increases bills |
| QLD | $53 |
| SA | $328 |
| TAS | $227 |
| VIC | Increases bills |
| WA | Increases bills |
Virtual Power Plants (VPPs)
Joining a VPP can further boost your savings. However, be mindful of the potential disadvantages:
- Your battery will restrict which VPPs you can join.
- Normally you’ll be restricted to a specific electricity retailer and plan
- Loss of control over battery usage
- Increased battery wear and tear
Estimated Annual VPP Savings:
| State/Territory | VPP Savings |
|---|---|
| ACT | $100 |
| NSW | $180 |
| NT | Trials Only |
| QLD | $180 |
| SA | $180 |
| TAS | Limited VPP Options |
| VIC | $180 |
| WA | Trials only |
Pro-Tip: Compare Australian VPPs with my VPP Comparison Table
Total Estimated 1st Year Battery Savings
Combining all these factors, here are the estimated total first-year savings:
- A 100% discharge in the evening
- Where it makes sense, a 50% discharge in the morning.
- Estimated VPP savings
| State/Territory | Flat Tariff Total Savings | TOU Tariff Total Savings |
|---|---|---|
| ACT | $450 | $754 |
| NSW | $1,102 | $2,329 |
| NT | $656 | $787 |
| QLD | $1,030 | $1,481 |
| SA | $1,594 | $2,180 |
| TAS | $651 | $1,041 |
| VIC | $914 | $989 |
| WA | $982 | $1,729 |
Solar Battery Payback
Using the first year savings in the table above we can calculate the Simple Payback For a 10kWh, $10,000 battery:
| State/Territory | Flat Tariff: Payback | TOU Tariff: Payback |
|---|---|---|
| ACT | 22 years | 13 years |
| NSW | 9 years | 4.3 years |
| NT | 15 years | 13 years |
| QLD | 9.7 years | 7 years |
| SA | 6.3 years | 4.6 years |
| TAS | 15 years | 10 years |
| VIC | 11 years | 10 years |
| WA | 10 years | 6 years |
Things to Watch Out For
- Battery capacity usage
- TOU vs flat tariffs
- Capacity loss over time
- Changing electricity prices, feed-in tariffs and VPP payments
- You may not fully utilise the battery every day
Time-of-Use (TOU) Peak Times by State
Understanding TOU peak times is crucial when considering a solar battery. The longer and more frequent the peak pricing periods are, the more likely you are to use all your battery capacity every day to avoid them.
| State/Territory | Usual Peak Periods | Weekends |
|---|---|---|
| ACT | 3-hr Evening, 2-hr Morning | Yes |
| NSW | 6-hr Evening | Yes |
| NT | 12-hr Peak | No |
| QLD | 4-hr Evening | Yes |
| SA | 10-hr Evening, 4-hr Morning | Yes |
| TAS | 5-hr Evening, 3-hr Morning | No |
| VIC | 4-hr Evening | No |
| WA | 6-hr Peak | Yes |
Key Takeaways:
- SA has the longest evening and morning peak periods, giving batteries there an advantage.
- VIC might be a challenging market due to its short 4-hour weekday evening peak and no morning or weekend peaks.
Capital Costs
The paybacks above do not include the cost of money, AKA ‘Capital costs’. These are often overlooked but are vital in the total cost equation of owning a home battery.
Here’s why:
Interest Rates vs Inflation
If you’re not spending money on a solar battery, you’re likely using that cash to pay off your home loan instead. Right now, the average home loan interest rate is about 6%. But with inflation at around 4%, the ‘real cost’ of using your money for something else—like a solar battery—is actually closer to 2%
Future Outlook on Capital Costs
Current interest rates are the highest they’ve been for the past 12 years. They are likely to fall, making a 1% cost of capital reasonable in the near future. Over a 10-year period, a $10,000 investment at a 1% cost of capital would amount to $11,050—adding roughly $1,000 to your initial investment.
Electricity Price Outlook
The savings above assume a constant electricity price, but a significant electricity price drop is expected in July 2024, which could affect your solar battery savings.
Playing The Wholesale Market With Your Battery
One way to get outsized financial returns from your battery is to enrol in an electricity plan that exposes you to the wholesale electricity spot price – a price that can go as cheap as negative $1 to over $15 per kWh. Energy retailer Amber Electric offers such a service. The theory is that you can make loads of money if your battery charges when prices are low and discharges when they’re crazy high. Certainly, some people with large solar batteries and flexible loads report making thousands of dollars over 12 months doing this. But be careful, as with most high-reward activities, there is a risk of getting it wrong and getting giant electricity bills instead. For advanced players only.
Tools for Better Decision Making
Solar & Battery Calculator: Quickly see estimated savings and payback when you combine a battery with solar power. Crucially, my calculator will split the solar and battery payback so you can decide if the battery is worth it.
Energy Tariff Comparison Tool: Your retail tariff affects your battery payback. Quickly see what’s offered in your area, and sort them easily.
VPP Comparison Tool: See what VPPs are available in your area.
Solar Batteries compared: Compare solar batteries available in Australia.
If you’re ready to buy a solar battery, I can help arrange quotes for you from installers I trust – quickly and easily: