Updated: Sep 1, 2020
Climate change is an existential threat to humans, which is why it is our mission at BlueRoof Foundation to educate consumers on how to reduce their carbon footprint. It is important that everyone make changes in their lives to address this problem before we are forced to make more drastic changes.
In this article we will explore the pros and cons of adding an energy storage system, like a battery, to your solar system. It is important to note that in the past decade both solar and battery costs have reduced by more than 80% and will continue to do so in the following decade. Costs of both these energy systems have reached a level where it makes financial sense for some homes to install a battery. Both a solar system and battery storage, that charges from this solar system, will qualify for a 30% federal tax credit in 2019, but this is reducing to 26%, 22% and 10% in the next 3 years respectively. The next few years are a good time to take advantage of this combo system. There are multiple battery storage chemistry options available in the market today, but the market is quickly consolidating around Lithium-Ion battery technology for the residential market. These batteries will last for at least 10 years, and they can last even longer if the battery is not charged and discharged every day.
Let us explore some of the most common reasons for a homeowner to install a battery system. The most common reason is to offer energy backup to your home in case of a power failure. Given the frequency of natural disasters these days, it does make sense to backup your home energy needs with a battery if you can afford it. Without a battery system, when there is a power failure during day time your solar system will be cut off to prevent electrocution of any crew working on the power grid outside of your home to fix the power outage. This is a standard practice all over the country and is required by law. Unfortunately, if the power failure happens during day, you will lose all the energy generated during a power failure event without a battery. Installing a battery prevents this problem. With a battery, when there is a power failure the battery system is smart enough to detect the outage and disconnect your home from the grid and continue to feed the solar energy to your home, or when required after dark, feed backup power to your home.
Some of the other reasons for installing a battery system are peak demand shaving and off-grid home. Peak demand shaving is relevant in places where the price of electricity uses a Time-of-Use rate plan. Most battery systems allow for home owners to setup time windows for peak and off-peak energy costs. Once setup, the battery system will automatically try to optimize your energy usage cost by switching your home to consume energy stored in the battery during peak cost time windows and charge the battery during off-peak windows.
The BlueRoof Foundation always tries to provide a financial Return on Investment (ROI) for all your energy investments. Let us now understand what the financial ROI looks like for your battery system. The initial cost for installing a battery can be somewhat high and it largely depends on the size of the battery. The size of the battery you need depends on how much electricity your home consumes and how many hours of power backup is desirable. A battery system installer should be able to look at your home energy consumption and come up with a recommended battery size. Typically, battery costs run anywhere between $600 to $800 per KWh installed, not including any tax credits, and an average home can make do with a 10KWh battery size for power backup. Please include your federal and state tax credit to come up with the final cost. ROI for a power backup battery system really depends on the time of year and cost of inconvenience for you. It is fair to say, however, that a single multi-day power failure will more than pay for your battery installation. Consider how many times you have experienced power outages over the past decade (the average lifespan of a battery system) – certainly a few days for most people.
Now let us look at the ROI for a peak shaving battery system. Most Time-of-Use rate plans are setup to incentivize electricity use when the demand for electricity is low. Under this plan for about 6 to 12 hours during the middle of the day the energy cost is 1.5 to 2 times the off-peak cost during the summer season. For the sake of simplicity let us assume that a typical home consumes 1,500 KWh per month during the summer, which averages to about 50KWh per day. Let us also assume the peak price window is about 6 hours and the cost is twice that of the off-peak cost. At a peak energy cost of 30c/KWh and assuming 25% of the daily consumption during peak hours, the energy cost works out to $3.75/12.5KWH or an increase of $1.88 over off-peak rate. If the battery can supply all the energy needs during the peak cost window then it amounts to savings of about $250 per year for about 5 months of summer. Assuming your battery installation cost of about $7,500 for 15KWh, after tax credit, the ROI for your battery works out to 30 years. Your battery system will last for about 10-15 years so there is not much financial incentive for installing a battery system for peak shaving purposes alone. Since a battery system is typically coupled with solar, your peak cost window should be covered by solar generation and hence your battery is not a good investment for peak shaving purposes. Finally, if your home is off-grid, a battery storage system becomes absolutely essential and a survival tool.
It is obvious from this article that the best use case for your battery is off-grid home, followed by power backup in areas prone to power outages. It is hard to justify a battery system cost for managing your energy cost in a Time-of-Use rate plan, though if you also desire power backup in case of an outage, it may still be worth the cost for you.