Solar Storage - 2023 Update

 A few years back I published a 2 Part post discussing Solar Energy systems.  The discussion focused on all the due diligence and prep work needed and what were some of the key considerations around designing and implementing a solar system.

One of the discussion points was around solar storage or batteries.  What were the use cases for batteries and if they were a good investment and should you incorporate them into your design.

Back in 2020 - the math around batteries said no - that you wouldn't be able to break even on the cost of a storage system over its normal warranty life of 10 years.

So here we are three years later and so I figured it was time to revisit.  

There are two primary uses cases for solar storage.   

First is what's called peak offset or peak shifting.  This is a concept where you utilize stored solar generation to run your home during what many utilities call Peak Periods that are part of a general category of rate plans known as Time of Day (TOD) plans.

I live here in AZ and my solar clients have traditional grid-tied solar systems and their service with APS.  APS most common TOD plan has a peak period from 4P - 7P M-F with the rest of the time at off-peak.   

The Off-peak rate is $0.1079 per kWh and the Peak rate is almost $0.28 / kWh.  The challenge is that most solar systems are not generating peak output during that 4P - 7P window and so your consuming grid power at it's highest rate. And your buying power at 3 times the rate that the utility will buy from you.

AZ has "Net Metering" laws meaning the utilities must purchase the excess electricity from your solar system at a fixed rate based on when your system was first provisioned or "went live" on the grid.  For my clients this is nearly the same as the off-peak rate at $0.105 / kWh.  

And while the "export rate" or the rate at which the utilities must pay you for excess energy has been dropping steadily over the last 3 years for new systems, AZ law provides a 10 year lock in for your initially provisioned rate.  

Now - when you do the analysis of these folks utility bills, about 26% of their total annual charges come from peak charges.  So effectively that 26% comes from just 3 hrs usage a day M-F.  

So the question is this - if you add solar storage - will the savings you experience by running your home off the batteries during that peak period reduce your energy bill enough to justify the expense ?  The short answer is still No.

The current math states that the monthly cost for a installed battery system (i.e. Tesla Powerwall) is effectively double the cost of the peak energy charges - even after federal incentives.  So the ROI is just not there.  For example with one customer their annual peak charges run about $750 / year.  The amortized cost for a storage system over it's 10 year warranty was around $1,400 year.   

With that said - two things are happening in the market.  As I mentioned above - the "export rate" is steadily dropping and if the utilities had their way - they wouldn't be required to by any excess power.  Second peak rates are climbing - so they will become a larger percentage of total utility costs.  

You may have read about Tesla's Virtual Power Plant (VPP) agreements in states like CA, where folks agree to have a portion of their storage feed the grid during excessive usage periods.  That was tried here in AZ and failed miserably.  

Bottom line is - under the current financial models - peak rates would need to more than double to offset the cost of storage systems.  

With that said - The combination of dropping export rates and increasing peak rates will at some point hit a tipping point where storage becomes a very viable alternative.  But for my clients - that's not 2023 or even 2025 - maybe 2030.

The second use case for Solar Storage is backup or outage coverage.  And to be honest - batteries suck at this.  Primarily for two reasons.  

First is most battery systems store somewhere between 10 and 16kWh of power but can only deliver 5kW / hr.  Chances are if you look at your usage - your probably above 5kWh and so now your adding additional batteries to try and cover your usage or you need to think about shutting down things or implementing a dedicated "backup panel" that the batteries feed.

Second - having batteries trying to run heavy energy consumers like HVAC is tough - and even if you size a larger system - you'll still only get a few hours of backup before the batteries are depleted.  

Bottom line here is - if blackout coverage is important to you and you have an alterative energy source like Natural Gas or Propane - a generator is a much better investment.  They can often run a whole house easily for days and cost a  fraction of what batteries cost.

So for me - I cannot recommend batteries for my clients.   Every use case is a little different, but just like with making the decision of going solar in the first place - you need to due your due diligence and make sure you understand all the cost & benefits before making the leap.