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Payback period of solar batteries

Last updated 7/6/2021

Although most people install an energy storage system for the resilience benefits first and foremost, there are some financial benefits to be aware of. While storage systems typically have a longer payback period than solar panel systems, there are a few questions to ask when determining the payback period of your battery.

Calculating your energy storage payback period

As is the case with solar, calculating your payback period from storage involves understanding  both the costs of storage and the potential financial benefits. 

energy storage payback period process

How much do batteries cost?

The first question to ask is how much will energy storage cost you? On average, EnergySage shoppers see storage prices between $1,000 and $1,600 per kilowatt-hour stored. Depending upon the size of the battery you install, this means the cost of storage can add $13,000-$17,000 to the cost of a solar panel system.

What rebates and incentives are you eligible for?

To calculate the payback period for storage, you’ll need to evaluate not only the costs but also the financial benefits of installing storage. The biggest financial benefits for energy storage are typically federal, state and utility rebates and incentives. 

Similarly to solar, the best incentive for storage is the federal investment tax credit (ITC), which currently provides a tax credit equal to 26% the cost of your storage system. Notably, there are a few key differences with how the ITC works for storage and how it works for solar: in order to be eligible to receive the ITC, an energy storage system must be charged with a renewable energy resource (like solar!). As ever, check with your tax advisor to see if you’re eligible for the ITC and if the storage system you install will qualify for the full 26% tax credit.

Beyond the federal ITC, a number of states and utilities also provide storage rebates and incentives. While still relatively uncommon nationwide, these types of rebates and incentives can significantly reduce the payback period for energy storage systems.

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What electricity rate plan are you on?

Beyond rebates and incentives, energy storage can also provide financial benefits by helping to defray costs on your electricity bills. If you are on a time-of-use rate, energy storage can help lower your electricity bill by allowing you to charge your battery when electricity prices are low and by pulling from your battery–instead of from the grid–when electricity prices are high. Alternatively, if you’re on a demand charge, storage can help reduce your peak energy demand each month, which can contribute significantly to lowering your electricity bills.

How much do you value resiliency?

We keep saying this, but it bears repeating: most people are not installing energy storage for the financial benefits. In that scenario, the primary benefit of energy storage is resilience - emergency backup power. It’s hard to put a price on keeping the lights on, but that doesn’t mean people haven’t tried! 

In fact, the energy industry has a name for this metric: the value of lost load (VOLL). Understandably, VOLL varies based on a number of factors, from the type of electricity consumer you are–i.e., a home, a business, a hospital or first responders–to the length of an outage–one minute vs. one hour vs. one day vs. one week. Ultimately, VOLL tries to determine how much value you place on avoiding any interruptions in your electricity supply. 

Energy storage payback periods: what can you expect? 

Depending on the rebates and incentives available to you, your electricity rate plan, and the cost of installing storage, you can expect to see a range of energy storage payback periods. On the low end, you can expect storage to pay for itself in five years or so if you have robust state-level incentives available. And when paired with solar, storage can augment the benefits of solar (and vice versa), meaning adding storage to your solar purchase may only change your overall payback period by a year or two in either direction. On the other hand, you may find that there isn’t a financial case to be made for storage in your area, in which case the question of whether installing energy storage is worth it comes down to how much you value keeping the lights on and how frequently you lose power.

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