Game Design, Programming and running a one-man games business…

Economics of solar batteries (big and small)

I’m lucky enough to be the proud owner of a 9.5kwh battery in my cellar. Its a GivEnergy battery (A UK company, although the actual battery is predictably made in China). Its AC-coupled, which means it sits on the ‘house’ side of the fusebox/consumer unit. We got it installed about 5 months ago and its been super awesome. Not flawless by any means, but its just so cool as a gadget for someone like me.

There are many reasons to get a home battery. Its a cool gadget, its also an incredibly strong way to reduce your energy bills (we basically run our whole house 24/7 on off-peak electricity at 75% off), and its also a great thing to partner-up with solar panels to ensure you use all that free power and don’t go exporting it to the evil energy company for a pitiful rate. I have to admit, although I was fully aware that we exported a lot of power on those days we were out, or we were not running much stuff, I had totally underestimated the impact. I’m currently running a big desktop PC/Monitor, router, wifi boosters and a bunch of other stuff, all from solar, on a cloudy day in march in the UK, AND filling the battery slightly…

Obviously the real reason to get a home battery is because you get to obsess over charts and stats:

I’m going to talk a bit more about the economics of the battery though, rather than the coolness of it, or its usefulness in balancing the grid and helping enable more renewable energy.

The economic bonus of my battery is it lets us buy off-peak electricity that costs (currently) £0.12 per kwh as opposed to peak power which costs £0.43 per kwh. In other words, each unit of power we use saves us £0.35. We use roughly 600kwh per month, but I reckon half of that is for the car, and can be done off-peak through charger scheduling regardless of the battery. So that leaves 300kwh a month or a saving of £105 a month, or £1,260 per year at current electricity rates.

There is an additional economic benefit though, which is that we are self-consuming all of our export. To look at how we manage this, I just need to look at the total solar->battery flow for the last month, which is about 40kwh. Thats energy that would previously have been wasted (exported to the grid, but not metered, so the amount doesnt matter). Thats another 40 * 0.43 so £17.20 a month, or a total of £206 a year.

So the income from our battery, at current prices, is 206 + 1260 = £1,466 a year. The installed cost for the battery was £6,720. So the payback period is 4.5 years. Thats really not bad, given the battery will definitely outlast that. This is also with a pretty rubbish old array of terrible 12 year old solar panels. So it seems like the economics of home battery storage are pretty good.


Now lets take a look at grid-level storage, and the size that I was considering. For those new to my blog, I run an energy company that is building a 1.2mwp solar farm here in the UK. Originally we were considering battery storage, but dropped the idea. We were originally looking to add a 500kwh, later increased to 583kwh battery, in a shipping-container enclosure that was AC-coupled to the farm. We are export-limited to 900kw despite peaking at 1.2kw, so this would be a good way to do peak shaving. I blogged about how that works in detail here.

So why are we not doing it? Basically its the economics. They just do not work, for that scale, at the current time, for a variety of reasons. The main one is that the costs have gone up, but also the cost of larger storage systems have gone down. It looks like economies of scale are massively at work here.

From what I understand, a 583kwh battery unit like the one pictured above is basically deployed as a kit. You get a lot of equipment, including pallets full of batteries, and a shipping container enclosure for all the gear, and then its assembled on site to create a finished, grid-connected 583kwh battery. The installation of this is about £28k out of a total installed cost of roughly £370k.

Lets pick apart the finances of this!

Firstly, a 583kwh battery is the same as 9.7 Tesla model 3 standard range batteries. A brand new Tesla model 3 standard range in the UK costs £43,000. 9.7 of those cars costs £417,000. That is MORE than the grid battery…but Jesus Christ its not MUCH more, and the 9.7 cars come with stuff like wheels, doors, touchscreens and…other car stuff. There is NO WAY that the cost to Tesla for making/buying the batteries in a model 3 are anything close to as high as people are being charged for a grid connected battery.

Whats going on?

Actually, the economics seem to be the case that grid-connected utility storage is being manufactured in a grossly inefficient way, and hugely overcharged for, especially by companies not called Tesla. Lets take a look at the real core of the problem by looking at a battery in a Tesla:

The actual batteries are the little cylindrical cells. They are being slowly changed to be a different configuration, but the same design principles apply: pack the batteries in with as efficient a volume-utilization as possible. Note that its actually much more safety critical in a car to prevent battery fires than in a shipping container sat in a soggy field, so if anything, this is the ultra-conservative and inefficient Tesla battery pack. Also…its a car, so weight REALLY matters (whereas with stationary storage we absolutely don’t care about weight), so thats another constraint. What we are looking at here then, SHOULD be the really inefficient way to do things.

But how are things done for grid scale utility batteries? Well… let me show you :D. This is a lithium ion battery for grid storage:

Thats an 8.1kwh battery. Not enough? It doesn’t matter because we can put them in groups in a rack!

Thats still not enough though, so we can then put the racks in a box!

And so it goes on, with what seems to be a Russian-doll approach to stacking boxes inside boxes inside boxes, until the amount of casings, handles, surrounds, spacers, racks, shelves and other non-battery components becomes ridiculous. Worse still, it seems that a lot of these are still being *assembled on site*. This is, as I am sure you must be aware, ludicrously inefficient.

This is the Tesla Megapack:

Its still racks-in-a-box, for now, but its not built on-site, or in a ‘room’ where you can walk down an aisle. its a big solid block of batteries (plus supporting equipment) that is manufactured like this at their factory. The whole thing is shipped as a single already-connected block, that you then hook up to your grid connections. No pallets, no wasted space. No lengthy install.

This is just a lot of tech-geek inside baseball until you realize the economics of it. The best way to find out the *real* price for these things is to look at recent installs. There was a recent one in the UK: with 196 megapacks for £75million. That comes out at a per-MWh of installed battery cost of £222k. Thats 42% cheaper than the quote I got for a 583kwh pack.

So the answer is simple right? Just ditch the battery provider you got a quote from and use Tesla? No. The megapack STARTS at 3MW. Thats a £666k installed cost, on top of the solar farm. It *might* make sense if the output of the grid connection was higher, and the farm itself was larger, but nobody would couple a 3MWH battery with a 900kw limited 1.2kwp farm. It would just be idle too much of the time to justify the expense.

We are still in the early days of grid-connected storage. Its accelerating like absolute crazy right now, so we are getting there…but there is a lot of change happening. As an investor in green-tech, I cannot see any other grid storage company surviving after the next 2 years other than Tesla. (The megapack is not surprisingly sold out for the next 2 years). The grid-storage business is VERY price sensitive. You cannot just shrug your shoulders with a 42% cost difference…

So how does that leave me? Well it leaves me building a solar farm with, for now, no battery storage (although with planning permission to add it later if the numbers change). I would love to revisit it when BESS prices drop, and definitely will. I think we are going to see a real push to make those systems cheaper, and thats just based on design optimization and economies of scale, not even considering better battery chemistry or any tech breakthroughs.

For home storage though, its a laughably good deal. If you can afford a home battery, get one.

4 thoughts on Economics of solar batteries (big and small)

  1. So how about getting a bigger battery than needed on the farm, and actually filling it up from the grid when the price is down? I know the price difference between peak and off peak is probably not the same as for consumers, but it might help the battery pay for itself.

  2. Mostly because there are import limitations. I think its limited to 400kw import, so with a 3 MWH battery it would just take hours and hours to fill it, and then 3 hours to empty it. The business case for price arbitrage requires you importing and exporting in no more than 1 hour.

  3. Hi Cliff,
    I’ve really been enjoying your blog posts about the install of your solar equipment, especially your personal SolarEdge and home battery install.
    So much in fact that it was a deciding factor to order myself a solar install including a home battery.
    However, I was hoping to get your opinion on a detail of my ordered installation that worries me a tiny bit: the inverter and battery will be Huawei ones. What is your opinion on this brand’s reputation, both in terms of technical and operational quality as well as the political implications such as possible future embargos limiting servicability. (If I would put on my tinfoil hat I’d even worry about the state sabotage rendering my install unusable due to armed conflicts..).

    If you do not wish to disclose it publicly here I understand and I’d certainly appreciate your opinion via email.

  4. TBH I wouldn’t worry too much about huawei. They make tons of stuff. As it happens my inverter is solar edge, and the ones for the farm will be solis, but thats not a specific decision to avoid huawei equipment. My home battery is givenergy, but the actual manufacturing of it is done in China AFAIK.
    There are lots of companies making inverters and batteries though, and I think most installers tend to source from a variety of manufacturers, so they should be able to give you an alternative if you ask.

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