Solar and Battery vs Solar Only: When Does the Extra Cost Pay Off?

Installing solar panels can reduce your dependence on grid electricity, but adding a battery gives you options for what to do with that energy. Rather than using solar energy mostly when it is sunny, a battery lets you store and use it later.

The main issue here is whether it is worth the extra cost of installing a battery. This will depend on several factors, including electricity tariffs, energy consumption pattern, export rate, among others.

Solar Only: A Simpler Starting Point

The all-solar system produces electricity during daytime only. Your premises consume the required amount of solar energy, but additional production will usually be able to be fed back into the grid, depending on the particular electricity setup that you have.

This solution offers a single significant benefit in terms of cost: the less capital required. Fewer elements mean less cost in acquisition and maintenance.

A solar-only system would be sensible if:

1. Majority of electrical energy usage happens during daytime.

2. The value given for export is decent.

3. The site’s energy needs are somewhat consistent.

4. Maintaining initial costs is important.

5. Backup power in case of grid failure is unnecessary.

As the size of the property/business increases, system design comes into play. For instance, the installation of ground-mount solar panels could be recommended where land space is adequate while roof space is not.

What Changes When You Add a Battery?

The solar panels produce electricity as long as there is sun, but electricity demands do not always coincide with that. The battery compensates for this imbalance by storing additional solar energy when production is high and releasing it when production drops.

This would be especially helpful at night times, when electricity demand remains, but solar energy production is low.

A battery may create value through:

1. Increased solar self-consumption: Higher proportions of the generated energy can be consumed locally instead of being exported.

2. Savings during peak hours: Stored energy can be utilised during peak hours when energy from the grid is more expensive.

3. Increased energy independence: A lesser amount of electricity would have to be bought from the grid.

4. Standby mode: Appropriate systems are capable of feeding the required loads during power failure.

For businesses, this idea will take on much greater significance since energy consumption may be large and occur during costly operating hours.

Solar Only vs Solar + Battery: At a Glance

As indicated by the table above, there is one significant observation that can be drawn, and that is that the mere presence of the battery does not necessarily make solar more profitable.

When Does the Extra Battery Cost Pay Off?

The financial benefit of using the battery increases where the stored electricity is valuable.

Let’s take an example where electricity production from the sun is higher than the consumption for the day; however, most of the electricity is consumed in the evening hours. The exported electricity earns some financial gain, but if stored, it can replace future electricity purchase costs.

The rationale for the calculation becomes even stronger when:

1. Electricity costs on the grid are either high or variable depending on the time of day.

2. Export payment is relatively low.

3. Electricity usage extends late into the night.

4. The property faces many power outages.

5. Battery rebates or incentives are lowering the installation cost further.

6. Battery cycling can be done efficiently, without excessive losses.

In the case of commercial buildings, commercial battery storage Australia has gained relevance where there is a requirement to manage high power usage, operational continuity, or peak demand.

Don't Look Only at the Payback Period

Simple payback is effective, but it is not the complete financial picture. The formula for calculating it is to divide the net installation cost by annual savings. Nevertheless, a thorough evaluation must take into account battery efficiency, degradation, maintenance, financing, changes in electricity prices, and replacement costs.

For instance, when the cost of installing the solar panel is $20,000 and saves $2,000 annually, then the simple payback period will be 10 years. When the addition of the battery makes the total cost to become $30,000 but increases the savings per year to $2,700, the simple payback period is now 11.1 years.

In this case, the battery has taken more time to recoup its initial cost, despite generating higher savings each year. It therefore shows that the quickest payback period does not mean the greatest long-term value.

How Incentives Can Change the Calculation

Both government incentives and utilities can significantly affect the economic factors related to solar and energy storage. Incentives such as rebates lower the total cost of installing solar panels, therefore decreasing the payback period for the initial costs incurred.

It is also wise for companies to look into any commercial solar rebates that may apply to the installation prior to finalizing their choice of system. The criteria and amounts may vary from one jurisdiction to another and may also change from time to time.

The installation of a battery should not only be attributed to the incentives but also to the cost of power, operating hours, and the lifespan of the equipment.

Where Solar + Battery Makes the Most Sense

The use of battery storage becomes more valuable in cases where there is a need for electricity even after solar power generation ceases.

This is especially true for:

1. Factories with long working periods.

2. Office premises with large nighttime consumption.

3. Hotel/retail establishments working after sunset.

4. Locations where continuous electricity is critical.

5. Sites that do not derive much benefit from the export of any excess electricity generated by solar power.

In larger facilities, it would be possible to install both the industrial solar systems and the battery storage. The right combination will depend on various factors, like available space, site’s load profile, operational requirements, and tariff structure.

A Practical Way to Decide

Before making a decision, consider the following aspects:

1. Look at your electricity bills: Discover when and how much energy you use.

2. Daytime usage: More daytime usage means that using solar panels will be even more useful.

3. Check export rates: Find out how much money you can earn from excess solar energy.

4. Review peak tariffs: Differences in tariff rates during peak and non-peak times may make an even more compelling case for energy storage.

5. Include resilience: Think about the cost and disruption of electricity outages.

6. Compare lifetime costs: Do not only consider the initial cost but also other factors, like degradation, maintenance, and potential replacement needs.

An assessment from an energy provider such as Agile Energy will provide businesses with an analysis based on their specific energy usage as opposed to just using payback period estimates.

The Bottom Line

Solar alone tends to be easier and more affordable, whereas solar coupled with batteries offers more control over the timing of power usage. The additional cost of the battery system would be more justifiable in cases where the property has high evening consumption, high-cost electricity during peak hours, low value in exports, or requires back-up power.

For businesses opting to implement commercial solar solutions, the decision should be informed by the relationship between energy production, consumption time, electricity charges, and operating needs.

Agile Energy could be employed to assess the impact of these variables during a site-specific assessment of solar and energy storage technologies. However, the focus of the assessment should be on identifying whether the added capacity would create value sufficient to justify the cost.