Do batteries make solar payback even better?

Calculating Solar Payback | The Good Solar Guide Contents | Choosing Solar Hardware

If you buy a battery then, instead of buying electricity from the grid, you use stored solar electricity whenever possible.

Let’s do some simple calculations – back-of-an-envelope stuff – to determine how much money you can save by doing this.

Remember calculating your night-time usage way back in Step 2? Now is the time to use that figure to see if batteries make financial sense for you.

If you read the article I linked to in Step 1 ( you can probably guess what the results will be. But it’s a simple calculation, so let’s do it to see just how much money you can make or lose with a battery.

You save money with a battery by storing your excess solar during the day instead of exporting it to the grid. Then, as the sun goes down, your stored solar energy gets used to power your house instead of grid electricity. For each kWh of stored solar you use, you’re saving what you would have spent on your usage tariff: around 30c per kWh.

What many people forget is that for every kWh of solar energy stored, you’re forgoing your income from the feed-in tariff. Let’s call that 10c per kWh. Also, a battery loses energy in inefficiencies every time it charges and discharges, due to a thing called ‘round-trip efficiency’. Typically, you’ll lose at least 10% of your energy10. That adds 10% to the 10c per kWh you lose from storing instead of exporting, so you’re losing 11c per kWh.

For every kWh stored and used at night, the net amount you save is the usage tariff minus 110% of your feed-in tariff. In my example, that’s 30c – 11c = 19c per kWh. To keep things simple, we’ll ignore the battery inefficiencies in your calculation.

Write your savings per kWh stored here or on the worksheet:

Net savings

= usage tariff (_____c per kWh) – feed-in tariff (_____c per kWh)

= _____c per kWh

The best-case battery scenario is that you buy just the right size battery to get you through the night and then fully discharge it every night, drawing nothing from the grid. In practice, people typically use 80% of their battery capacity every day and reduce their grid imports by 70% to 90%. For the sake of this exercise, we’ll assume the perfect conditions.

The ideal battery size to maximise self-consumption is the same as your night-time usage. So, for example, I use 3.6 kWh overnight so my ideal battery stores 3.6 kWh of energy.

Battery costs at the time of writing are close to $1,000 per kWh of usable capacity. They are going down by about 15% per year, and bigger batteries are slightly cheaper, but it’s a good estimate.

That means my perfect battery will cost $3,600, fully installed.

Write your battery cost here or on the worksheet:

Your battery cost

= night-time usage (_____kWh/day) x $1,000

= $_____

The nightly savings are the net savings multiplied by the nightly usage. In my case, that’s 19c x 3.6 kWh = 68c per day, or $249.66 per year. This gives a simple payback (ignoring electricity price inflation) of 14.4 years.

The longest battery warranty I know of is 10 years, and I don’t expect any battery to last much longer than its warranty. In my situation, that means I’m likely to have to replace the battery before it has paid for itself.

Do the calculation for yourself here or on the worksheet:

Daily savings

= net savings (_____c per kWh) x night-time usage


= _____c per day or $_____ per day

Yearly savings

= daily savings ($_____per day) x 365

= $_____ per year

To find the simple payback of the battery, you divide the battery cost by the savings.

Write your battery payback here:


= Battery cost ($_____) ÷ yearly savings ($_____)

= _____ years

This is a simplified calculation. On the pessimistic side, it doesn’t account for rising electricity prices. On the optimistic side, it doesn’t account for battery degradation or charging/discharging inefficiencies.

Online resource: My battery payback calculator takes all these things into account:

Now we’ve looked at your battery payback from reducing your grid imports. Most people calculate a number between 14 and 25 years. Remember, the best battery warranties are for 10 years.

But there is another way to earn money from batteries right now that can improve the payback situation: grid support. Grid support is where you’re paid to push power into the grid to help stabilise it.

It doesn’t earn much, though. You can expect an extra saving of about $25 per year per kWh of storage. For example, if you’re looking at a 4 kWh battery, you may be able to get another $100 per year of savings. Bear in mind, though, that it costs about $1000 to add the fancy control system to your battery system. Last time I checked, it also chews up gigabytes of data per month off your internet plan to send all your data to the company servers for number-crunching.

In my experience, grid support doesn’t really move the needle in terms of making residential batteries stack up economically, but it’s a feature that’s fun to have, if, like me, you get your kicks from watching battery controllers perform their tricks. Also, they do – in a small way – help stabilise the grid, which should pave the way for more renewables to be integrated.

There’s a good possibility that batteries will be able to earn much more in the near future.

Will batteries become free to charge?

Thanks to wind power and low demand, we’re heading towards low wholesale electricity prices late at night, and thanks to solar, we can expect low wholesale prices during the day. During the evening, when renewable generation is low and demand is high, we’re looking at high wholesale prices with dispatchable gas, hydro and battery power meeting most of the demand.

As long as wind capacity expands, wholesale electricity prices may fall to zero late at night. Zero wholesale prices during the day will also be fairly common, thanks to solar. And wholesale prices during the evening will be as high as the owners of dispatchable generators can get away with charging.

Wouldn’t it be nice if you could charge your batteries for zero cents per kWh and save yourself the peak evening rate?

I think this is likely to happen in the next five to ten years. Combine that with the steadily reducing cost of batteries, and batteries have a bright future. But right now, buying a decent-sized battery will add at least $10,000 to your outlay and make your payback worse, not better.


  • If you can fit enough panels on your roof, get at least 6.6 kW of solar panels with a 5 kW inverter.
  • If your daytime usage is over 14 kWh, fill your north-, west- and east-facing roof spaces if possible. Most homes will accommodate about 10 kW – assuming your network approves it.
  • You have worked out the returns of your chosen system size. You understand that if electricity prices continue to rise, the returns get will better and compound.
  • If you are paying with savings, you’ve checked the returns compared to other investment options using my modified internal rate of return calculator.
  • If you are financing the system, you’ve used the online calculator to check that installing the system will improve your cash flow.
  • If you’re going to buy a battery because you want backup or you love the thought of them, go for it. In general, though, batteries will not pay for themselves before their warranty expires, and they’ll usually make the returns of the system as a whole worse. I suggest waiting for battery economics to improve before buying them.

10I’m starting to see real world data that suggests many battery owners are actually losing 20-30% of their energy when they charge and discharge their batteries, so I’m being generous to batteries here.

Calculating Solar Payback | The Good Solar Guide Contents | Choosing Solar Hardware

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