How Much Does the Cost of Solar Power Increase with Batteries?
23rd Apr 18
Cameron Quin

If you have been following energy industry news in Australia, you are probably aware that a huge utility-scale battery started operating in South Australia in late 2017. Delivered by Tesla, the installation can store 129 MWh and can produce an instantaneous power output of 100 MW. It is officially called the Hornsdale Power Reserve, and it complements the nearby Hornsdale Wind Farm, which has an installed capacity of 315 MW.

The residential and commercial sectors are also showing significant interest in batteries, although a limiting factor has been the cost of the technology. However, Australian electricity tariffs continue to increase while batteries and solar panels both become cheaper, which means the business case for these systems improves continuously.

We are aware that batteries make residential and commercial solar power more expensive, so the next logical step is to ask by how much. If the cost increase is viewed per kilowatt-hour of storage capacity, the three main factors to consider are:

  • Battery storage capacity (kWh)
  • Upfront investment ($)
  • Service life of the system (charge and discharge cycles)

Battery Storage Capacity

The storage capacity of a battery system is determined by the intended application. In addition to storage capacity, a rated power output is normally specified. For example, a battery capable of storing 100 kWh will be depleted in 10 hours if the power demand is 10 kW, but will only take 2 hours to be depleted if it is supplying 50 kW. However, the second example is not possible with a battery rated at 40 kW – it can deliver full output for 2.5 hours, but not 50 kW for 2 hours.

If the purpose is to power a home or business exclusively with photovoltaic panels and batteries, the operating requirements are the following:

  • Store enough electricity for nighttime hours, and also for hours when there is few sunlight and the solar PV system does not have a significant output.
  • Meeting the highest possible demand (in kilowatts) expected for the time period when the battery will operate as the main power supply.

Upfront Investment for Battery Systems

The installed cost of battery systems is an important metric to consider, since it determines how much you pay for each kilowatt-hour of storage capacity or for each kilowatt of instantaneous power output. For example, if you pay $12,000 for a battery that stores 15 kWh of energy and delivers 6 kW of power, the cost can be expressed as $800 / kWh or $2,000 / kW.

Ideally, you will want to minimise the cost that is the most relevant for your application. If you are planning to use batteries for bulk energy storage, such as when you have plenty of surplus production from a solar PV system, the cost per kWh is the most relevant. On the other hand, if you want to use batteries to eliminate short-term and high-magnitude peaks from your consumption profile, the cost per kW takes precedence.

It is easy to focus only on cost per kWh or per kW when dealing with battery capacities, but there is another very important metric: service life, typically measured in cycles.

Service Life of Battery Systems

Two batteries that have the same upfront cost per kWh of storage capacity do not necessarily have the same ownership cost. For example, a unit priced at $800/kWh with a service life of 4,000 cycles offers a round-trip operating cost of $0.20/kWh per cycle. Another battery that only costs $400/kWh may seem cheaper, but if the service life is 2,000 cycles the cost is also $0.20/kWh per cycle.

Some batteries such as the Tesla Powerwall 2 do not specify a service life in cycles in the company webpage, but instead offer a 10-year warranty. If you charge and discharge the battery daily, this translates to 3,650 cycles covered by the warranty.

Not all batteries are made the same in terms of service life. According to the International Renewable Energy Agency (IRENA), most lithium-ion batteries have service lives in the range of 500 to 10,000 cycles; variation is due mostly to manufacturer selection, depth of discharge and operation temperature. Lithium titanate batteries are a subtype that outclasses the rest with a service life of up to 30,000 cycles, where the price to pay is a higher upfront cost – titanium is an expensive metal!

How Does This Apply for the Australian Electricity Sector?

Solar power works in Australia because the total ownership cost of a PV system is much lower than purchasing the electricity it would have generated from local power retailers. A kilowatt-hour consumed just after it is generated only comes with the photovoltaic system ownership cose, but electricity stored and retrieved comes with an added battery ownership cost. Electricity in Australia has become so expensive that solar power with batteries is a cheaper alternative for many electricity consumers.

Many homeowners are now paying more than 40 cents/kWh, while solar power with energy storage offers an electricity cost in the range of 25-30 cents/kWh. In other words, solar PV systems with batteries can reduce residential power bills by 25% or more. In addition, if the energy system is obtained through a Power Purchase Agreement (PPA), the upfront cost is zero and a qualified third party takes over operation and maintenance.

Solar power with batteries is now a viable solution for many electricity consumers, and stand-alone solar power (without batteries) is almost always a great investment. For homeowners paying over 40 cents/kWh and businesses paying nearly 30 cents/kWh, generating their own electricity is a very attractive proposition.

Battery storage comes with the added advantage of providing a backup power supply if there is a blackout, and these events have become increasingly common in Australia recently. Coal-fired power plants are becoming older and more susceptible to faults, leaving thousands of households without power. The grid itself also struggles to keep up with growing power demand, and in addition power lines are vulnerable to extreme weather events.

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Cameron Quin

23rd Apr 18
Cameron Quin

Cameron Quin has been heavily involved in business development from an early age. After founding and selling two online companies, Cameron found a strong passion for renewables and the opportunities it brings for the commercial and industrial sector. Sharing the possibilities of solar and the knowledge from the Solar Bay team is his favourite pastime.