Home battery boom: we crunch the numbers to see if it’s worth it
There’s a scramble on to claim a taxpayer-funded battery incentive to help power homes. We ran the numbers to work out whether it’s worth doing.
There’s a gold rush happening on Australian rooftops right now, and it’s not about solar panels any more. In just three months, more households have applied to install battery systems than were installed in the entire previous year.
The catalyst? A hefty discount that’s suddenly made the numbers stack up in ways they simply didn’t before. But with warnings the funding could dry up as early as next year, the question on many homeowners’ minds is whether to jump in now or miss the boat entirely.
The federal government’s Cheaper Home Battery program began on July 1, providing homeowners with a 30 per cent taxpayer-funded discount on the cost of a home battery.
About $2.3bn in federal funding has been allocated. However, industry experts warn this may be exhausted as early as next year if the current level of demand continues.
Throughout 2023 there were 46,127 home batteries installed in Australia, yet in the first three months since the Cheaper Home Battery program went live, the Clean Energy Regulator reports that more than 55,000 applications to install a home battery have been received.
While this is definitely good for the environment, is installing a home battery also a good financial decision now that there is a 30 per cent discount on offer?
How the numbers stack up
In my household, 1000kWh of electricity per month is consumed from the grid at an average cost of 27c per kilowatt hour of electricity under a time of day variable pricing plan. Our monthly bill is about $300 and I acknowledge that this is higher than the average bill due to several things that draw significant electricity – a heat pump for the swimming pool, recharging an electric vehicle, a large ducted air-conditioning system and three young children who manage to turn every single light on in the house at night.
On paper, a home battery makes sense and, having looked at it in the past, the things that ultimately turned me away was the price and evolving battery technology. While solar panel technology is relatively mature, battery technology has been rapidly improving and I did not want to jump in too early.
But my desire to install a home battery remains strong and my household tends to use most of its electricity at night given that we are normally at work or school during the day. Even though I previously installed a 12kWh solar panel system that exports about 1000kWh of energy back to the grid each month, at only 4c received for each kilowatt hour, it barely covers the daily electricity service charge to the property of $1.12 a day.
Another negative of not having a battery that is becoming a problem is the “sun tax”. This is being implemented on a state basis whereby solar panel owners are actually charged a fee for exporting power back to the grid in peak solar production periods. Yes, that is right, solar panel owners are penalised for producing power.
So it makes sense if I could capture the 1000kWh of solar energy that I currently send back to the grid via a home battery, instead of consuming from the grid. In theory, my electricity should drop close to zero and save me about $3000 a year.
To achieve this, I would need to install a 35kWh home battery system to go “off the grid”, which would cost about $15,000 after the federal government’s 30 per cent discount. The payback period would be five years and after that, I would experience a positive financial return each year for as long as the battery survives, which is probably going to be about 15 years. Most battery manufacturers have a warranty stating that the battery capacity will still be at least 70-80 per cent after 10 years.
Going large
But what if I go bigger? There is still space on my roof for a few more solar panels and the maximum home battery system supported under the Cheaper Home Battery program is 50kWh capacity. If I max out panels and batteries, the cost increases to $25,000 but I unlock the ability to become a “virtual power plant”. Several states offer incentives if you sign up and allow energy companies to draw power from your home battery to support the grid when needed. In NSW, for instance, the state government provides a $1500 incentive. The estimated annual income I could generate from being a “virtual power plant” is $2000 and, with the initial $1500 incentive, the payback period is just over four years on going bigger with the solar/battery system.
John Park is a director at Sydney-based Clean Earth Solar, which is an electrical installation company specialising in solar and battery storage systems. He says that, prior to the cheaper home battery program, the return on investment was anywhere between five and 10 years.
“Now with this new rebate, we are seeing some of our systems have an expected payback period of two to three years and in the past, only 15-20 per cent of our installs would consist of a battery. However, post July, 95 per cent of all our installs have a battery attached.”
Another benefit of a home battery is being able to keep the fridge and other appliances running during blackouts, a feature quite valuable for me living in a place where wayward trees topple powerlines on a semi-regular basis.
What is the bottom line?
If I install a home battery system, the payback period will be less than five years and the expected life of the battery will be about 15 years, meaning I will profit from having the battery system for at least 10 years until it eventually dies. This is a sufficient financial return for me and I have now paid a deposit to have a home battery installed.
One thing to be aware of is the differing prices on offer. For the same specifications, I received quotes that varied from $25,000 to $45,000 and, although cost is not the only thing to consider when choosing who to go with, just be aware that some battery installers are riding the wave of heightened demand and charging sky-high prices to the unassuming consumer, so get a few quotes.
James Gerrard is principal and director of financial planning firm www.financialadvisor.com.au
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