Payback period of solar batteries

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.

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.

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.

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.