Does the SA Energy Minister understand battery payback?
Last month my boss, Finn, received a letter inviting him to a “Home Battery Forum” hosted by South Australia’s Minister for Energy and Mining, Daniel Cornelius van Holst Pellekaan, at the Marion RSL. As Finn couldn’t make it and I was curious what the Dutchest of all Australian Energy Ministers had to say, I attended.
What I discovered was perhaps Minister Dan Van Holst Pellekaan should be known as Dan Van The Battery Salesman. He seemed certain normal households could save money by installing a solar battery system with the help of the SA battery subsidy. Unfortunately, this is not true. When I tried to correct his misapprehension by walking the Minister through the numbers on how solar battery payback really works, he told me that $9,300 was “very expensive” for an installed Tesla Powerwall 2. In reality $9,300 is the rock bottom price (including the $6,000 SA rebate).
This is a serious problem and Dan Pellekaan needs to stop spreading incorrect information about home batteries because he risks causing South Australian families real financial harm. Most of the people at the meeting appeared older than me and I look like Santa Claus. No one gave the impression they could afford to spend thousands of dollars on a home battery that would not save them money – even with the SA subsidy.
The Invitation
Finn didn’t receive the invitation because he works in the solar industry, has written a book about it, and has been solaring hard for 10 years. He got it because he lives in the seat of Gibson. I don’t know if they sent one to all of the seat’s 13,500 households or if they tried to pick suburbs where the residents have more disposable/wasteable income, but he was not individually selected. Since he would be out of town1, Finn asked me if I wanted to go.
I told him I wouldn’t miss it for $2.50. After all, it’s not as if the Brakels and the Pellekaans are involved in a thousand year feud back in the old country and can only speak on holy ground without blood being spilled. (It’s actually the Finnish fish thief, Pelle Kaan, that we hate.) And even if we were, an RSL is pretty much holy ground.
The Meeting
There were maybe 60 people at the meeting and, as you can see from the photo, there was plenty of grey hair and bald spots:
While some of the hairstyles were tres chic a la gris, no one appeared particularly loaded. I think my Maserati2 was the only one in the entire parking lot. I doubt anyone at the meeting could drop $10,000 on a whim for a solar battery system and then laugh about it over a bottle of Dom Perignon if it never paid for itself.
There were a couple of other pollies there, but Dan Van was the man and it was his show. He seemed convinced batteries could save many families money and they would get cheaper in the future. To his credit, he pointed out batteries weren’t for everyone. He said if your electricity use was low or you were still receiving a premium feed-in tariff then they weren’t for you.
To his discredit, he did not tell the people gathered in the hall the most important thing they needed to know about solar batteries. That is, they won’t save normal families money at this time. His failure to do this was shameful. I’m willing to bet a shitload of money there wasn’t a single person at the meeting who would see a positive return on a home battery within its warranty period.
Question Time
I felt sorry for Dan van Holst Pellekaan while he gave his talk at the meeting. The SA Home Battery Scheme has been running for almost 9 months and it seemed to me that he still didn’t know the basics of solar battery payback. I felt embarrassed on his behalf. What if other Energy Ministers found out and started picking on him? What if someone started writing about it on the internet? That would be really embarrassing. As a South Australian resident I felt a responsibility to fix this problem.
I even felt embarrassed on account of our accursed heritage. Despite despising all things Dutch, I felt an orange tide of Dutch pride welling up inside me, compelling me to stem the flow of disinformation, dam it!
I hear the screams of these people in my dreams, constantly… (Image: Newsweek)
I saw my chance to do something during question time and raised my hand…
BRAKELS: Can you give me a breakdown of how you’ve determined how much a typical family will save from getting a battery? Is there a printout or something I can have?
PELLEKAAN: There isn’t a printout because the typical family, there’s almost no such thing, that’s why I said every family, every household, really needs to check the sums for themselves. (He gives some background information and talks about commercial solar.)
BRAKELS: I’m in the solar industry and I’ve crunched the numbers and, even with the subsidy, I can’t see how a typical family is going to come out ahead by getting a battery system.
PELLEKAAN: Well, I can assure you it does work. It absolutely does. I’ve spoken to households.
BRAKELS: Can you send some figures to my office so I can check that myself?
PELLEKAAN: Well, I can’t share households’ private information.
BRAKELS: It doesn’t need to be any household’s private information!
PELEKAAN: I’ll tell you what. I’m happy to talk to you afterwards and share what I can with you. Please be assured, as I said, it doesn’t work for everyone, but it definitely, definitely works. There’s no doubt about it.
BRAKELS: So what percentage of households, roughly, would it work for?
PELLEKAAN: There isn’t a number I can tell you but I’m very happy to talk with you and share as much information as possible.
I wasn’t terribly satisfied with that exchange, but at least I could look forward to explaining to him how he’s horribly wrong and then receive his thanks for doing so when I talked to him face to face.
What I Wanted To Explain About Battery Payback
What I wanted to explain to Dan Pellekaan was it’s impossible for a solar battery system to save any remotely normal South Australian household money within its warranty period. I would do this by using the most famous home battery — the Tesla Powerwall 2 — as an example. I would point out that…
- The absolute lowest price for an installed Powerwall 2 after the $6,000 South Australian rebate is $9,300. This figure is from Tesla.
- When charged only with solar, the Tesla Powerwall 2 warranty is 10 years.
- Its usable storage capacity when new is 13.5 kilowatt-hours. If it provides that much stored energy every day for 10 years it would come to a total of 49,309 kilowatt-hours.
- Currently in South Australia you can get an electricity retail plan with a solar feed-in tariff of 18 cents and a per kilowatt-hour charge of around 37 cents.3
- Because the round trip efficiency of a Powerwall 2 is about 85%4, around 21.6 cents of feed-in tariff will be forgone for each kilowatt-hour of stored electricity used. So each kilowatt-hour of stored electricity used will reduce electricity bills by about 15.4 cents.
- If the Tesla Powerwall 2 provides a total of 49,309 kilowatt-hours in its 10-year warranty period then it will save a total of $7,593. This is $1,700 less than the minimum installation price of $9,300. Therefore, it is impossible for this battery system to pay for itself within its warranty period.
What I have written above may be simple enough to get a message across to a politician, but in reality the returns are far worse. This is because batteries degrade over time and no normal family would ever use all the available storage every single day. If we optimistically assume an average of 90% of its original capacity is available each day due to deterioration and the household uses an average of 80% of the available capacity, then after 10 years the battery will have only saved $5,467 on electricity bills. This means no home battery system can pay for itself at this time, even with the SA Home Battery Scheme subsidy and my optimistic assumptions.
My Face To Face With Pellekaan
Maybe it’s not fair to spring numbers on a politician, especially in the evening when they’re probably tired. But when I spoke face to face with Dan Pelekaan I made a point of drawing dollar signs to make it easier to follow. I tried my best to explain to the Energy Minister why he should stop making a fool of himself, but he distracted me early in my impromptu presentation by saying something that really threw me. He told me $9,300 for a Powerwall 2 was…
“…very expensive.”
I told him it wasn’t. He told me I should ask around for a better price5.
He honestly seemed to think it was possible to get a significantly better deal. The reality is that the price I used was unrealistically low. Talking to him was like peeling back the layers of an onion. There’s always something underneath that makes me cry.
Tesla will offer to install Powerwall 2 for a South Australian home with single phase power for $9,290. But this is only if everything is perfect when they arrive. If they have to do any work above the bare minimum it costs extra. Since it’s normal for there to be complications when installing one, households should expect to pay at least $10,000 in South Australia and $16,000 or more without subsidy.
I Talk To A Battery Installer
I decided I should talk to a professional battery installer and make sure I hadn’t missed out on a massive fall in the price of a Tesla Powerwall only nine months after its price was substantially increased, so I called Eddy May at the excellent NRG Solar. They install the Powerwall 2 among other battery systems and, of course, rooftop solar power systems.
He told me I hadn’t missed out on a mystery price drop and explained why the $9,300 figure I used in the example I presented to the Energy Minister is overly optimistic. He said,6 and I quote:
“We have had many customers asking for quotes on battery storage. We always do a site inspection for quoting solar and battery storage. It is not possible to do everything by satellite photos. You can’t determine proper equipment locations, meterbox compliance, changes needed to circuits. For example, many people do not know and do not get advised that circuits on Tesla backup need to be on RCBO’s or a type a safety switch (RCD) as per 5.4.4 of the AS/NZS 4777.1:2016. Many houses do not already have them.”
“When we quote customers for additional work to upgrade their home to be compliant with current regulations to do with backup protected circuits we are often told ‘that’s more than we expected’.”
On the cost of an installed Powerwall 2 with the $6,000 subsidy that’s available for it in South Australia, he told me:
“On average, a standard Tesla Powerwall 2 and gateway 27 is approx $16,000 fully installed. Less the $6,000 subsidy is around $10,000. Anyone, trying to do it cheaper than this is either cutting corners, not allowing for proper upgrade to circuits connected to the backup gateway or do not have the money to employ in house technical support required for future questions that arise with their systems.”
With regard to Dan Pellekaan telling me $9,300 was “very expensive” for a Powerwall 2, Eddy said:
“I am worried about a race to the bottom created by price driven messaging. We should all be after safe, compliant and sustainable solar and battery installations by companies who will profitable and survive. Not cheap, fast, unsafe installations by companies who are in it for the quick buck and aren’t considering the future of their customers.”
The Aftermath
Dan Van Holst Pellekaan invited me to request information from his office, so I guess I’ll get to work writing a letter to him. I suppose I’d better show it to Finn first, just so he can check the swear word to non-swear word ratio isn’t too high.
I’m afraid this article has been a woeful tale8 about how home batteries won’t save normal households money at the moment and South Australia’s Energy Minister seems oblivious to this fact. He is putting the financial security of families at risk by telling them…
“I can assure you it does work. It absolutely does.”
“It doesn’t work for everyone, but it definitely, definitely works. There’s no doubt about it.”
But, to end on a cheerful note, if you want a solar battery system and aren’t concerned about getting your money back, or you just highly value having backup power without the noise, fumes, and safety risks of a generator, then don’t let me stop you. Just so long as you know what you’re getting into I’ll be happy. I’m just a little jealous you’ll be receiving a hefty subsidy in South Australia when the electric car I’m looking at getting will have none.9
Footnotes
- Visiting my parents in Queensland, seeking a cure. ↩
- I’ve had it reskinned as a Hyundai Getz on account of having impeccable taste. ↩
- If you have solar power and you’re not getting a decent feed-in tariff you don’t need to get a battery, you need to make a phone call and change your electricity plan. ↩
- Finn has one and estimated it. ↩
- The irony of a politician telling someone who works for a company called SolarQuotes to shop around for a better price was not lost on me ↩
- Well, he didn’t actually say it. I got him to send it to me in an email. Life is always easier when you get other people to do your work for you. ↩
- Every Powerwall 2 has a gateway installed along with it. ↩
- Life’s but a walking shadow, a poor player, That struts and frets his hour upon the stage, And then is heard no more. It is a tale told about an idiot, full of unsound accounting, Signifying nothing. ↩
- Specifically, the electric car I am thinking of getting is Finn’s as soon as his back is turned. ↩
About Ronald Brakels
RSS - Posts
Don’t politicians just make you mad. I think Mr van Holst has been spending time with Mr Turnbull who of course holds a Master’s in ” The Internet”
Isn’t it ‘funny’ how battery prices increased so much after the SABS was introduced.
I was quoted $12,000 to install the Powerwall 2 in late 2017. Today, with the $6000 SABS rebate, that would equate to $6,000 installed. Installers appear to be taking the lions share of the SABS rebate!!
I understand it may seem that way, but after the hardware is bought from Tesla very little is left over to cover installation and after sales service.
I do not live in SA (but love the state! Love those motorcycling roads in the Hills…) I also recently visited for the Climate Council tour to Port Augusta (another story).
As an early adopter, I want to back my grid-connect solar with a battery. I have 14Kw of panels on the roof (so well endowed). I am looking at the new model Victron 5Kw charger/inverter, with a used 48v 500Ah flooded L/A battery. At least with that, when the battery fails in 2-4 years, I can recoup a few hundred $s for lead scrap, then install another newer technology battery. I will only be using about 5-6 Kw per night so the battery should have an easy life. Cost: Possibly $5K installed.
Even that is not really economical as a TCO proposition.
Hi John,
I realise it looks that way but globally Tesla Powerwall 2.0s have come up by over $3k retail in the last 2 years. So in fact installers are making less than they were last year. Its fair to assume that the grant from little ol Adelaide did not force a global price rise.
Having said that its not all for nothing, Tesla has improved their system with the launch of the Gateway 2 earlier this year which comes at an additional cost.
Hi Eddy
Hiw has the new gateway helped? Does this work for a 3 phase supply?
I have recently had someone include the Neurio Kit with additional CT’s. I thought that the PW2 had a sufficiently sophisticated energy monitoring/control system. Seems like upselling to me.
Ronald… this Post goes straight to the Pool Room. There are more gags in this one than your previous posts and the giggle rate was high. I laughed a lot and shared it with a few people. Love your work. Keep it up.
Ronald,
I hear and agree with your pain. At this stage, making a financial return on a battery at current battery and energy prices seems to be a pipe dream when you do the numbers properly. Keep up the good work in trying to get a more realistic message out there.
But a couple of comments :-
1. It does not make much difference to your calculation, but I suspect that PW2 efficiency might be marginally better than Finn thinks on average. From a whirlpool post https://forums.whirlpool.net.au/thread/91q420m9?p=134 it would seem that the long term averages people are seeing might be closer to 88%. It is nice to have a pleasant surprise from the hype of batteries, even if it does not change the economics.
2. The other thing that hammers battery economics is the utilisation which is negatively impacted by the fact that on a lot of days, there is not enough solar to charge the batteries, or people do not use enough power to get anywhere near a full cycle. From the same forum as above, it looks like averages might be below 70% for people and that needs to be added on top of the degradation etc you discuss and together are going to hammer returns.
3. Do not give up in SA. I am equally, if not more concerned with the NSW scheme. I suspect the numbers are even worse in NSW for a range of reasons :-
2a – my estimate is the arbitrage between FiT and price of power is even worse at 12.5c for FiT and 23c for power (Ausgrid area, Energy Australia).
2b – NSW scheme is only an interest free loan, so ultimately the purchaser is not getting a subsidy at all, and short of going broke will ultimately have to get the full price of the battery back which is NEVER going to happen.
My concern is that with governments endorsing these schemes the way they are, it appears that governments are endorsing that they are a sensible way to save money, and clearly what you have here is a polly why is actually saying they “can” save money which does not seem to be correct and he is not even prepared to show you the figures that that is based on. Ie they are just propagating the myth that is so widely shared in the mainstream media and further propagated in social media etc.
I have no problems with the schemes if our elected representatives believe this is the way to seed the market for our collective benefit down the track. But if this is the case, a subsidy is better than a loan to avoid unintended individuals disproportional bearing the burden. I suspect even this argument (ie seeding the market to push prices down) is a bit of a pipe dream and it will probably just line the pockets of the battery manufacturers because they are under no pressure to build and deliver the economic battery we so desperately need. If they can sell uneconomic batteries with big margins, whey would you both developing an economic 1. I would also have no problem with SA or NSW programs, if they produced and distributed documentation that accurately shares the economics, so purchases are informed. There will still be lots of people who want batteries anyway, so why bull@#$%.
So it begs the question. Are the pollies just ignorant or do they want to propagate the myth for political purposes. I am hoping it is the former, and with a bit of education from people like you can turn it around….but I am not holding my breath.
You get 18c FiT?
I can get higher in NSW but the TOU rates all increase too much to make it worthwhile. AGL’s rate is about 12c for standard tariffs.
It’s possible to get a 22 cent feed-in tariff with Amaysim:
https://www.solarquotes.com.au/energy/
But I just went with the retail plan with the highest feed-in tariff offered to normal SA households by Australia’s largest electricity retailer, Origin Energy. That way no one can complain they haven’t heard of the retailer.
Hey Solar Quotes.
As you know I am a firm believer in home batteries and have been benefiting from one in my home and business for years now. Customers love the autonomy and self sufficiency a battery provides. The SA Home Battery Scheme is a great initiative and we need to find ways to help customers take advantage, not discourage them.
To follow are some of my views.
You are assuming that tariffs will remain unchanged for the next 10 years.
Here are some facts:
1. 18 cent feed in tariffs are not sustainable and will not continue for very long. The current wholesale price for power during peak export times is well under 8 cents. Why would anyone pay 18 cents for power they can buy for 8? Well its because the big guys don’t know what else to do and to be sure, it cannot continue for much longer
2. Time of day tariffs are coming in SA with trials beginning end of this year. Once this happens peak rates will exceed 50 cents and other times will drop, overall benefit to customers with solar batteries will improve.
3. Because of the 2 factors above the spread will be between 40 and 50 cents within the next 3 years.
You are assuming the battery life expires on end of warranty. However we know that most things we buy last longer than the warranty period.
You are also not factoring the change of habit that customers experience once they become more self reliant.
If you take a more realistic view on tariffs, time of use and export limiting in SA you will see a different picture. And customers not taking advantage of the SA Home Battery Scheme are missing out on savings now by delaying their decisions because of information like this.
All this might be true. But why buy a battery today, that does not make sense today on the hope that it might or might not make sense in the future. But by the time that is true (high rates and lower FiT if in fact it ever happens), you will be no doubt able to buy a better, more feature rich battery and a cheaper price, rather than trying to recoup money on a battery that was to expensive to ever give a payback.
Sorry, to think there is likely to be regular and significant volumes of arbitrage between solar FiT and peak rates of 40 – 50 cents is optimistic to say the least. The laws of supply and demand are never likely to allow this to be possible. If it was that high the gentailers would simply install lots of batteries cheaper and more effectively than a home own could a eat this market and cap this price well before that happens. As I understand it, firmed (ie battery added) wind and solar is now well less than 10c / kWh. So gentailers are noting going to be setting rates to give that market away to you just because some years ago you brought a battery that was never going to pay for itself. Even if gentailers do not, everyone is going to have solar and batteries, and when that happens the rules of supply and demand are going to push the prices down.
Buy the way, I have done the battery economics with TOU pricing to get greater benefit from arbitrage of very high peak electricity prices. And certainly for battery owners, TOU will almost certainly represent a more economic option because they can probably mostly eliminate the peak rate, and anything you need in the shoulder / off peak rates are probably cheaper. But even with this the economics still do not stack up because the reality is most people do not use enough peak power to make a good return. A lot of power will be wasted discharging into non peak times where the arbitrage benefits are minimal, or often negative by the time you factor in your lost solar FiT and efficiency losses. Your only other choice is to not discharge into shoulder/off peak (if your battery has this feature and it actually works effectively which I can tell you some do not), but then for most people your utilisation will plummet. It is hard to pay off a battery that is not used because of low utilisation. Even if you can use all your battery every night to offset all peak power, because you do not have peak rates in weekends, public holidays and in a lot of cases spring and autumn, then there is a lot of time your battery is not being used.
Arguments about “most things we buy last longer than the warranty” suggest a lack of appreciation of a battery as a consumable component much like the battery in your car. Sure, it might last longer than the warranty by a bit, but I would not count on significant benefits here. And lets be honest, if you need this to get the payback then I think that speaks volumes about the pure economics of the battery.
Don’t get me wrong. Batteries have their place. And there are lots of reasons you might have to get a battery. But if you think it is economics, you probably need to re look at your numbers because if you do that, justification for a battery is probably non existent. Ask yourself if you really just wanted a battery “because….” and coming up with some form of your own economic justification helps you justify it for yourself which is fine.
But if you were going advice some someone living pay to pay and desperately looking to really save money, or a retiree living on the pension or their own savings and trying to make them last, it is hard to come up with any sensible cost justification. Lets stop the hype and advise people objectively if that is what they are there for.
Actually solar quotes analysis is very generous indeed.
It leaves out the most expensive item other than the initial down payment.
The money you will have to pay in interest on a loan or the money you lost by not investing the 9K in the first place if you had cash. It also pretty much assumed max use every day which is unlikely even for a big family which may go on holiday or during daylight savings.
At say 7% private loan which in most times is better interest rate than you would get. that’s roughly about 650$/year about the max return you can expect for close to 100% usage. This is assuming no maintenance costs in 10 years.
So after 10 years you may have payed the interest off but you have now a battery worth not much at all and still the entire loan. You proabably need close to 15-20% return just to break even after 10 years.
If you had 9 k and invested it after 10 years of dividends and normal increases you should have approx. 15 to 20 k.
Well, the powerwalls might last for longer than ten years. The advantage of having uninterrupted to the old and frail might be worth the premium. The coal they are not burning at night might help them sleep. And virtual power stations and demand management batteries, so come on, you’re to close to the numbers.
This face to face meeting with the long streak. Were you standing on a chair?
Luckily I locked in for 2 years a 20c FiT but note that AGL has dropped theirs to 14.2c kWh from July 1 in SA. And they dropped the discount.
I expect with all the large scale solar coming on line the FiTs will continue to fall.
Maybe then batteries will make more sense.
I have to admit I did feel like I was being towered over by a high windmill or dyke.
Having just been through the process of installing a Power wall 2 and Gateway 2 I agree with the sentiments. I had pre-installed solar and already had a smart meter and an up to date switchboard with available expansion. I had some robust discussions re how the cables were to be run so that there was no extra conduits running up my walls.
I am delighted with result. I have now have back up power in the case of an outage and feel comfortable that the Powerwall is powering our house overnight even at this time of year as long we are sensible with usage. I.e change habits to run power hungry devices such as dishwasher and clothes dryer when my panels are providing power during the daytime hours. I am delighted with the Tesla usage app on my phone. The unanticipated benefit is that our family is now involved with efficient energy consumption via the monitoring allowing us to make informed choices of when to use additional available non grid energy.
I never expect the Powerwall to pay for itself but am grateful that the SA subsidy encouraged me to install because the out of pocket cost over the anticipated 10 year lifetime of the system is palatable and it gives me benefits other than financial.
Nice to hear Johnny.
I hear this alot!
I did up a couple of tables on battery break even costs. It’s a grid showing the range of import and export tariffs which would cover most locations in Australia. See here:
10 year battery break even cost:
https://i.imgur.com/FggHoWC.png
7 year battery break even cost:
https://i.imgur.com/loUJQTt.png
Just identify the row and column with your tariffs and the intersection is the break even cost per kWh of battery capacity.
As an example of how to use the tables:
If your import tariff is $0.30/kWh and
Your export tariff is $0.10/kWh
Then find the intersection of those tariffs in the table.
In this case the 10-year break even cost is $419/kWh.
IOW for a 10kWh battery, that’s $4,190, or for a 13.8kWh Tesla PW2 that’s $5,782.
If the intersection of your tariffs results in a negative (red) number then you really can forget it!
In each case I assume:
– A realistic capacity utilisation of 70% which, based on straw poll of the Tesla PW2 users on Whirlpool, is typical,
– Round trip efficiency of 85%
– 10 year average degradation of 90% (i.e. a linear drop in useable capacity over 10 years to 80%)
The tables show, for each combination of import and export tariffs, what the break even cost per kWh is. Obviously the wider the gap between the import and export tariffs are, the higher the breakeven cost becomes.
If your import tariffs are variable, such as in a TOU plan, then use a weighted average value as an estimate.
Now I didn’t add in a zero export tariff option, but probably should for those unfortunate enough not permitted to export any excess solar PV production.
The clear implication is, for the majority of electricity tariffs in play in Australia, batteries are simply too far expensive to break even over 10 years, let alone save money.
Those charts are really good!
Hi Alex, good write up, but I totally disagree with pretty much everything. You can not assume that someone pays the same rate for electricity. You can not easily work out these figures just by a graph. I have successfully (almost paid off my batteries and solar system in 5.5 years). It is a very complicated subject. Let me start by giving you my energy suppliers plan im on a time of use plan (as most people in Sydney that have a solar system) 10pm to 7am 12c per kw. 7am to 2pm 21c per kw, 2pm to 8pm 60c per kw 8pm to 10pm 21c per kw.
Now I make sure that my batteries are full, even on rainy and overcast days as to alleviate the need to draw electricity from the grid during peak times (2pm-8pm). I haven’t paid peak rate since I got my batteries installed some 3 years ago. Our household runs pretty much on battery power (24kw battery storage and a 10.4 kw solar system. I have fine turned my system, by switching off the hot water system and switching it on during the day when my batteries are fully charged, whalla, hot water heats up from solar power. If I know that there is going to be cloudy days ahead, I will force charge my batteries during the night on off peak electricity (as well as switching my hot waster system to off peak) and have power for the following overcast day(s). So I never pay more that 12c per kw for electricity, furthermore, I sell excess solar production back to the grid at 12.5 cents. This system has worked excellent for me and was a very wise decision. I don’t throw away money easily, I’m 52 and have been self funded retiree for the pas 2 years. This essentially is an investment, which has been paying for itself in the past and another (roughly 3 years) will be fully paid off and the rest is a bonus. I now receive about $400.00 credit per 1/4 in summer and about $220.00 credit during winter. We have a pool, ducted vacuum system, ducted air conditioner, dryer (twice a day) etc. etc. Furthermore I supply electricity to a tenant of mine which has a private meter and is charged at .35c per kw. apart from the credits I receive from my energy supplier, I make another $260.00 per 1/4 from my tenant.
Hi Tim,
I would love to find my 1st ever person who actually saved money with a battery purchase, and maybe you are it. It will happen 1 day. But I very much doubt it that day is here yet. My rates are similar to yours (except my peak rate is only about 42c peak…Ausgrid / Energy Australia). I use a lot of power and have a lot of ability to maximise discharge into peak times. I also have 18kW of solar. But the best incremental saving I can get from a Tesla PW2 battery is $400 / year real world. So your extortionate 60c peak rate would help with your return, but I wonder if all you need to do is look at options to find something a little more cost effective (definitely an options for you if you are with Ausgrid)?? It would probably also help a lot that your tenant is paying well above market rates for power with 35c tariff which is all profit in your pocket which would help. I assume the market rate is probably closer to 23c. But that would certainly be good for you. But I still struggle to see how you would have any chance of paying of a 24kWh lithium ion battery in 10 years, never mind 3 years unless if fell off the back of a truck.
But I suspect we might be talking at cross points. I suspect to make your “justification” work, you are using blended payback. That is were to do the payback on the solar and battery. BUT this hides the fact that your solar is doing the saving, and your battery probably makes a minimal contribution. To Put it in prospective, in my case, a PW2 saves me about $400 a year. But the solar saves me about $4000 a year. $400 / year is not going to pay off a $15000 PW2. Anyway, if you want to focus on blended payback, I pretty much guaranty you if you do the numbers with just the solar system, your payback would be MUCH better. But again that a blended payback justification which is VERY different to battery justification.
When you say you have a 24kw battery, I assume you mean 24kWh. Do you mind asking how much you paid for that, and is it lithium ion, which has a reasonable life or lead acid which will be cheaper but less life? I am assuming you you brought a lithium ion battery 3 years ago would would be WAY north of $30K?? I would love to see more numbers to justify how a battery can reduce you electricity prices by around $30k in 5.5 years (or is it 3 years). If my assumptions are somewhere in the ballpark with my guess of $30K for the battery, that would mean you are saving at least $15 a day 365 days a year which is just not going to happen on the rates you outline.
Anyway, I would be interested in your calculations. But I assume to get the numbers you have got, you have made some or all of the following mistakes :-
1. not factoring in the lost solar FiT
2. not factoring in the efficiency losses
3. using using blended payback (ie using solar payback to pay for the battery),
4. are comparing electricity bills before and after buying a battery but also at the same time making the changes that do save them money but attributing the whole saving to the battery, rather than the things that do save money. eg getting solar, getting a better electricity plan, changing usage to reduce bill etc.
5. assuming they will get one full cycle a day out of the battery, that almost no one gets.
6. not factoring in battery degradation
7. doing cost justifications factoring in massive power price rises and no solar FiT rises.
8. etc etc etc
Hi Matt and thanks for your reply. I am using blended figures as the solar system does do the bulk of the work. If you strictly look at the figures of ‘just battery’ then, your probably right in the payback times. As you can see, it is very complex to compare apples with apples. My system is a 5.w. solar system, with a pw1 connected to one phase. Then the other 5.4k.w. solar system is connected to two lg chem resu batteries. This system is connected to another phase, (with the highest load). The third phase doesn’t have anything connected to it, but, the third phase only runs led lights and a couple of light powerpoints. Now the reason I charge my tenant .35c per k.w. is because, being on a time of use rate, I have to average out a figure that suits me, (even though the electricity drawn by the tenant is through the batteries). I also don’t charge the tenant G.S.T. or an account keeping fee. So in essence, his getting a good deal. He just pays for the k.w. he used x .35c. that’s it. My payback figures were derived by, what I was paying in electricity prior to solar/battery install. which was about $1,000 – 1,200 per 1/4. after the install, I get credits of about $1150-1200 per year, if you include the tenants electricity usage charge of about $1,000 per year, which gives me a credit of about $2,150 per year. So, from my bills before the system, I’m now saving about $4,000 + $2,150 CREDITS = about $6,150 saving per annum. So $6,150 x 5 years = $30,750. This figure is without battery degradation, which shouldn’t be much of an issue at 5 years old. My whole system has cost me, $30,000. So this is why I say, I’m well on my way to having the system paid off, and yes the bulk of the work is done by the solar system, which I have panels facing east, north (most of them) and west. So I get solar electricity, from very early morning to late afternoon. I got a good deal on the lg batteries which were much cheaper than the pw2 and I have 16.5 k.w. as opposed to 14 k.w from the pw2. Also the lg’s are much smaller and obviously quieter as they don’t have fans. Cheers for now.
Hi Tim,
I am very interested in this, as I genuinely am looking to find someone whose battery makes sense. But even that I have had to give up on for now, because we are so far outside the parameters where they make sense. So my target is to find a real person who really will save 50% of the price of the battery in 10 years which you would have thought should be a low enough bar that we should be able to find someone who can jump over it (remember I am doing battery economics and not solar economics so want to make sure everything is factor in and not adding up savings that are not really directly attributable to the battery). But turns out it is difficult and often the more people think they are saving from the battery, when you take out all the real factors I list above that hammer the economics, I have not been able to find anyone who is really getting even 50% of the purchase price back in 10 years. But they are bound to be out there, and maybe you are that person.
But, I on first read your figures looked VERY attractive, but I had a gut feeling your figures looked too good in all sorts of areas. And when I started crunching the numbers, the problems become worse. I suspect you are missing something or double counting something. Or it might be that I am totally missing something simple for which I would love to be corrected.
I have shared a spreadsheet with the number I have crunched :-
https://docs.google.com/spreadsheets/d/1Hf-O4Q6v8VLXGnjFP56AFRtVOmd3STBWrCMa0E2KZRA/edit?usp=sharing
And perhaps you can point out what I am missing.
But fundamental issues is that you only have 10.4kWh of solar. In Sydney, you can expect to get an average of less than 15,000kWh per year (some years might be sunny and get a little better and others a little worse but this is the average). But if I take enough solar off which I assume you must be exporting to the grid to get your grid credit of $1150 12.5c + enough to cover your daily supply change which I have estimated at $1, then that leaves only 2684kWh per year which you and your tenant use in your home whether battery or solar or whatever (does not battery for the purposes of this). That seems very small, and very frugal with a usage of about 7.4kWh a day for both of you. But if you are getting $1000 from your tenant at 35c, then that means your tenant is using 2857kWh. So that means you yourself are using negative energy over the year at minus -178kWh per year which makes no sense at all.
Above is all before you even have to think about the battery, and there is nothing the battery provides that changes this equation that I can think of. Remember is it only solar that generates power. The battery only uses it up in efficiency losses. But if we ignore that, all it does is saves solar for later usage, but it does not generate any power itself.
Now maybe you have slightly overestimated your bill credits and payments from the tenant, you you get that number positive. But if if that is true, it still looks like you are a very small electricity user now. My estimate is you and your tenant are only averaging less than 8kWh per day which is very small, and you tenant uses pretty well all of that. This is great for saving on your bills, but it is not going to help you pay off a very expensive battery. So if you really had $4000 bills before the solar and battery, I can only assume most of the savings are going from usage changes rather than the battery (eg item 4 on my list above).
So clearly there is something you or I have missed, and would be interested for you to have a look and point out what is missing from my assumptions. I was going to analyse the battery savings under the most optimistic scenario, but I think that bit pointless as there is clearly something missing. But even if I do calculate the maximum savings base on what you have given that you could have saved from the battey in some theoretical world were were all your actual usage is in peak times and none in shoulder or off peak, the number is only only $1122 per year. Clearly that is going to take a VERY long time to pay off a battery that I can only assume costs well north of $20,000. BUT any power used outside of shoulder will significant reduce that battery payback, and my guess is if you could get half that, it will be doing well.
So again, unless I am missing something, your numbers do not seem to add up. My guess is you are double counting something somewhere, or some other critical piece of the puzzle is missing. Or I have missed something fundamental, in which I would be curious to be set straight.
Hi Tim
For a start I do not assume everyone pays the same rate.
That’s the whole point of the table, to allow anyone to look at their import and export tariffs and see what the battery cost needs to be. Yes this is based on fixed rate tariff, and you might expect people to be on a time of use (TOU) tariff.
For those on TOU tariffs, yes it is a little harder to assess with precision (I do that too with far more sophisticated TOU modelling), so you can use the table as a guide, at the very least it can set the upper limit for battery installation break even cost.
For example you can ignore your off-peak and shoulder tariffs and just use your peak tariff and look that value up. That gives you the most optimistic case for a battery cost to payback in 10 (or 7) years.
Of course the vast majority won’t be able to use their battery capacity only to supply peak tariff period, so the real number will be a weighted average tariff covering energy use over the different tariff periods. And that weighted average tariff will be something less than the peak tariff.
But at least you have an theoretical upper limit for the cost of a battery to break even over 10 (or 7) years. For the vast majority you’ll find this upper limit is still going to be somewhat less than batteries actually cost to install.
As to the more sophisticated modelling, I built a battery simulation model using 5-min energy interval data, battery specifications and behaviour logic. I’ve compared this model with actual users’ data and it faithfully replicates the charging and discharging behaviour of batteries and their performance.
In this way I have been able to identify what would be the most financially beneficial energy retailer plan for use with a battery. Even so, the outcome in my particular case is a battery payback time of 56 years.
Best, Alex
“I don’t throw away money easily, I’m 52 and have been self funded retiree for the pas 2 years. ”
Hi Tim, nice work on this, yes I’m right there with you, and am about to commence being a self funded retiree from next month (age 55).
I modelled my own case in a very detailed manner. That’s the benefit of installer my own smart meter as I now have a detailed dataset of our actual energy use patterns and can make sensible decisions about such things.
Here’s an example of the output of the model, showing the impact of adding solar PV system, the impact of moving to a TOU tariff plan, and the impact of adding my virtual battery:
https://i.imgur.com/ek6XjfK.png
As we can see, solar PV accounts for the vast bulk of the savings, and it’ll have a payback of 4.6 years (payback period will come back down to under 4.5 years as I complete the year in November).
In my case moving from the best fixed rate plan the best TOU plan option is also beneficial. That’s an instant payback, with an infinite ROI (except if you count the cost of my time doing the analysis).
Then we can add a battery (using the battery simulation model). And well, the battery would save, on average, $0.84/day. I defy anyone to think spending $10-15k on something to save less than a dollar a day is a good idea.
That’s not to say other benefits of having a battery are worth nothing, but at least one can quantify the real cost of having such benefits (and be able to consider alternatives). For example, in our case we may need a battery to help deal with peak current limits to be imposed on our rural home by the local distributor once we have approval to build a granny flat.
This misses the point. The question of whether or not to install storage isn’t purely an economic one.
There’s not one word in the entire article about how self consuming your own stored solar energy through the night means you’re not importing any power whatsoever from polluting coal and gas fired power stations. For a person who cares about that aspect, the ability to not be reliant on fossil fuel for personal energy consumption may be well worth the $10k it costs to install some batteries. Not everything is about “will I make a profit on this?”.
If we had a 100% renewable grid your argument about the pure economics of the thing might hold more weight. But we don’t yet, so…you’ve missed the point.
Hi aroth
I’m afraid at the moment using a home battery results in greater emissions. Hopefully we won’t have to wait too long for this to change.
I go into it here:
https://www.solarquotes.com.au/blog/does-battery-storage-help-or-hurt-the-environment/
Now that’s just dodgy accounting.
Batteries “emit” CO2 because efficiency losses mean that someone, somewhere doesn’t get to use a fraction of a kWh of exported solar energy? That’s a real stretch. And the electrical grid has efficiency losses too (especially since it wasn’t designed around distributing low-voltage AC input), which you seem to have conveniently ignored.
Besides which, if everyone took your advice and just loaded up on solar with no storage for when it’s dark or severely overcast (odd that a website called ‘solarquotes.com.au’ would advocate such a position, no?) then where would that that leave us? Still reliant upon tons of fossil-fuel fired generation whenever the sun isn’t shining, unless people start doing things like…installing storage.
Aroth – you realise we also provide quotes for batteries? It is absolutely in our best short term financial interest to tell people to go out and get quotes for batteries. Unfortunately that bloody Ronald is too honest by half.
And no – that’s not dodgy accounting – it’s called systems thinking.
As for arguments about efficiency losses in the grid (which are real), they actually mean that batteries further increase the total emissions of the whole system and further support Finns argument. This is because if you have a battery, the is more grid usage in the day, because your neighbour needs to get power from the dirty power station a long way away because he can’t get your clean and local export with almost no grid efficiency losses. Sure, most of these grid efficiency losses, will be recouped at night when your battery usage will reduce total grid usage, and if it was not for battery efficiency losses it would be a zero some game (ie grid losses are irrelevant to the argument). HOWEVER, because of battery efficiency losses, batteries actually add to the problem of grid efficiency losses.
Finns accounting is good. Until we have excess solar power that can’t be used in the grid, batteries will increase overall CO2. That of course will rapidly change when we have excess power and solar output would be curtained without a battery. But for the home owner, that time is not yet.
These facts might seem counter intuitive to a lot of people. But they are facts non the less.
There are many reasons to get a battery, and I don’t think Finn, Ronald and co are trying to talk anyone out of a battery (I believe Finn has 1). They are just trying to educate people so they don’t buy 1 for the wrong reason. There message that is hard to fault is if your reason is to save money, or reduce CO2 emissions today, you probably need to understand this will not be the case once all things are factored in.
The real-world situation is much more nuanced than you’re trying to make it sound. In fact you seem to be making several implications that are flatly incorrect, such as:
– Having a battery means you don’t export at all.
– Not exporting some energy means your immediate neighbor has energy needs that won’t be serviced by renewable sources.
– Neighboring users produce adequate demand to consume all solar exports locally.
– Transmission losses scale primarily based upon distance.
– Timeshifting consumption of renewable energy has no intrinsic value/Generating 1kWh of power from non-renewable sources is equally dirty regardless of the total grid demand at the time of its generation.
In many Australian neighborhoods somewhere between one third and one half of the neighboring houses are also going to have panels. With typical installation sizes ranging from 5-10kW (inverter capacity, often “overclocked” with additional panels), on a typical sunny day each one is producing enough energy to cover the needs of 10-20 houses. Especially with most of them sitting mostly empty/idle during the day while people are at work/school/etc..
So excess solar energy doesn’t all go straight to “your neighbor”. It can’t; there’s not enough demand from neighboring houses to consume it. A lot of it has to go further. Outside the neighborhood/local distribution area, almost certainly. And transmitting energy at low voltages (such as the ~230V output by your standard solar inverter) is significantly (as in, literal orders of magnitude) less efficient than high-voltage transmission.
If you want to do systems analysis and accounting then do a proper systems analysis. Figure out how far exported solar energy has to actually travel during the day when houses in residential areas are exporting more energy than neighboring houses need. Figure out how much energy is lost in that process. Work out the extra emissions needed to service the increased grid load that occurs at peak 4:00-8:00pm times if nobody stores clean energy during the day. Balance that against what happens if you’re able to get through peak hours without having to spin up additional (and potentially less efficient) fossil-fueled generators. And so on.
I don’t know what the outcome of that would be. Though it would be interesting to see, and would almost certainly not conclude that every kWh of efficiency losses in battery storage equals an extra kWh of CO2 emissions. And it will probably vary by region.
Hi aroth
The article was about addressing the Minister’s claim that batteries will save people money, and not about other reasons why one might choose a battery. Clearly this Minister’s claim is highly misleading and when ministers mislead the public, well they need to be called out.
That people may wish to pay to have a home battery for other reasons is fine and no one argues that.
Except the point that a battery will reduce use of fossil fuels.
Keep in mind that to charge a battery you have to divert your solar PV output from being exported to the grid, and that diverted energy is now no longer offsetting daytime fossil fuel electricity production. Worse, because of the round trip energy losses of the battery, it results in more fossil fuel being used overall than otherwise would have occurred.
This will be the case unless and until we have an energy grid where at least the daytime energy supply is dominated by renewable energy, and that’s still a long way off from happening. The other possible scenario is where a significant proportion of your solar PV output cannot be exported due to export restrictions.
Best, Alex
Ronald, what are your thoughts on VPPs (Virtual power plants), and how do they influence payback? What are the pros and cons?
I recently received an offer from my retailer (Simply Energy) with a VPP offer that they stated would have out-of-pocket costs of ~$4900 after 5 years on a PW2 after estimated installation of $10k. Now pinch of salt of course, but that sounds much more like a “saving money for the average South Australian family” figure.
Thoughts? Perhaps a topic for a future blog post?
I think VPPs have a lot of potential:
1. A lot of potential to make home batteries pay for themselves, and…
2. A lot of potential for companies to rip battery owners off.
Making sure things are kept fair and rip off merchants aren’t allowed to write the rules is the current challenge.
I wrote a little on VPPs a while back:
https://www.solarquotes.com.au/blog/virtual-power-plants/
I would say that getting a battery as part of a VPP trial is by far the most cost effective way of getting one at the moment. If I could get a Tesla Powerwall 2 for $4,900 I’d be interested, but I’m not going to be relying on it to make me money.
During the last full moon to my surprise I could hear my solar invertor start to wake up, it did not get to the stage of producing power but made me think was this a fault or can the fullest of moons and clear skies produce enough light to enable a trickle feed to the system. Or is my system faulty.
A 6.6 kilowatt solar system could, under ideal conditions, produce nearly a watt from bright moonlight. So if your inverter is really good it could be gathering up that moonlight and converting it into AC. More likely your inverter was just running a diagnostic or something, but it’s not impossible for a solar system to get a tiny amount of power from moonlight.
Depending on your latitude, you can get more than a watt. It’s happened with my system more than once when there’s a combination of a full moon, clear sky and the moon is almost at right angles to your panel surfaces.
I’ve got 6.44 Kw of panels, and have found 2 -6 watts at times. Unfortunately the overall combination of circumstances needed doesn’t happen very often during a year, and doesn’t last that long. ‘Moonlight’ is just reflected sunlight from the moons surface, so its not so surprising that it occurs at various times.
Looking at the spectrum of moonlight I’ll bump up my estimate of how many watts PV could generate from it, as it is mostly visible light, but if you can get 6 watts continuous power that’s pretty amazing.