Why it is a “no-brainer” to add a battery to your Solar PV system

What are the benefits of adding battery storage to your solar panels?

There are four main benefits to adding a battery to your Solar PV system.

1. Electricity cost reduction and additional revenues

A home battery system can create energy cost savings or even revenues in four ways:

1. Increased self-consumption: Adding a battery to your Solar PV system allows you to consume your own, clean, and “free” electricity even when the sun doesn’t shine instead of importing from the grid (see Figure 1).
2. Cheaper imports: Grid import prices vary widely depending on the time of the day. With an Octopus Flux tariff, grid electricity costs 15 p/kWh between 2:00 am and 5:00 am but 36p between 4:00 pm and 7:00 pm. That means, on days where your Solar PV system produces less than you consume, you can import electricity when it is cheapest (i.e., 15 p/kWh), store it in your battery and discharge at any time of the day – when you would otherwise have to pay up to 36 p/kWh.
3. Arbitrage: If your battery has spare capacity, you can effectively use it to buy electricity when it is cheapest and sell it back to the grid when it is most expensive – e.g., buying at 15p and selling at 26p.
4. Flexibility rewards: Batteries can be used to stabilise an increasingly strained grid, for which grid operators pay a reward. You do not have access to these rewards directly but you can sign up to these schemes via Capture Energy. Depending on your location and size of your home battery system, these rewards can amount up to £300 annually.

The subsequent section will break down and quantify each of these revenue streams in more depth in.

2. Environmental benefits

A home battery does not only enable you to consume more of your own clean electricity but also the remaining electricity you import from the grid (if any), becomes cleaner when using a battery. When charging at the off-peak hours of e.g., an Octopus Flex tariff and discharging during peak hours, a household consumes electricity with a ~20% lower CO2 footprint (see Figure 2). This happens because the UK grid has the lowest CO2 emissions during times of low electricity prices, which is when home batteries are typically charged. During periods of high renewable energy production, such as when wind and solar power are at their peak, electricity prices drop. In contrast, the grid's CO2 emissions are highest when renewable energy sources are not producing much power, and the activation of "peaker plants" is needed, which are generally powered by natural gas.

3. Protection against electricity price volatility

During the recent energy crisis, the "daily spread" – the average difference between the lowest and highest daily electricity prices – surged dramatically from an average of 4p to 10p per day (see Figure 3). This means the benefit of buying electricity at its cheapest and using it when prices are highest became even more important. Although we hope to avoid another extensive energy crisis, the volatility in electricity prices is a natural result of the ongoing energy transition which causes an increase in weather dependent energy generation. This volatility increases the gap between off-peak and peak prices. A home battery can protect you from these market fluctuations.

4. Protection against electricity outages

A home battery can provide reliable backup power, protecting you from power outages. Although the UK has experienced minimal power outages in recent decades, the likelihood of such events is rising. The ongoing energy transition presents a significant challenge, transforming the UK's electricity infrastructure from large, centralised, and stable (yet polluting) power plants to smaller, decentralised, and intermittent (but cleaner) energy sources. Concurrently, the adoption of heat pumps and electric vehicles by homeowners is increasing. This situation requires extensive grid expansion and makes balancing supply and demand more complex, thereby raising the risk of outages. A home battery can act as a backup power source, typically sustaining a home for 1-2 days off-grid. For more information on the rising risk of power outages, take a look at our latest article on this topic.

What are the cost and payback period of retrofitting a battery to an existing Solar PV system?

A retrofit battery typically pays back after less than 6 years. Let me illustrate with an example: Consider a typical 6 kWp Solar PV system for a household consuming ~10 kWh/day and retrofitting a 10 kWh battery system with a 5kW inverter. The household is on an ordinary fixed tariff, paying 26 p/kWh for import and getting 10 p/kWh for export. We modelled this for 17,520 half-hourly intervals throughout the year. However, for simplification, let me explain in terms of an “average day” (see Figure 4).

Adding a battery produces a benefit of about ~£2.3 per day. Let me explain step-by-step how this works, based on Figure 4:

1. The battery charges in the early morning hours when electricity import prices are at its lowest (~15 p/kWh)
2. After the sun rises and as your Solar PV system starts to produce electricity, any electricity that you do not consume is used to further charge your battery until it reaches its capacity
3. As the peak hours set in – when electricity export tariffs are at its highest (~26p) – the battery is fully discharged
4. This means that 12 kWh of electricity are imported from the grid at a total cost of about £2.3 during the early hours of the day and late at night
5. However, on the same day, 18 kWh are exported to the grid, yielding a revenue of £3.8.

This results in an average profit of £1.5 (£3.8 in revenues - £2.3 in costs) from your Solar PV + Battery system. However, the Solar PV system on its own resulted in a negative balance of £0.8. Therefore, the addition of a battery has created a daily benefit of ~£2.3 (£1.5 in profit + £0.8 in savings).

Over the year, this translates into a total benefit of ~£830 (365 x £2.3). A competitively priced 10 kWh battery system including inverter install etc. would come at a cost of £4,900, resulting in a payback period of ~6 years (£4,900 / £830). This makes a home battery retrofit an extremely solid investment: A ~6 year payback is like earning ~20% interest on your investment, which – as you will be aware – is significantly higher than any bank would offer!

But it gets even better: Upcoming flexibility rewards will enhance the attractiveness of battery retrofits (see Figure 5). Recently, UK distribution grid providers have implemented “local flexibility markets” on a large scale. Homeowners can engage with these markets via intermediaries, such as Capture Energy, who consolidate assets to meet the necessary scale and then enter “flexibility auctions” on behalf of the participants. For example, a 10 kWh battery could earn up to £300 annually from these markets. This could reduce the payback period to about 4 years. Capture Energy will introduce its own local flexibility product by the end of the summer. Any battery system installed through Capture will be eligible to join these flexibility markets in the future, assuming your local grid provider offers such auctions.

Who can add a battery to their Solar PV system?

Basically, anyone can add a battery to their Solar PV system. Most likely your system will have a so-called “string inverter installed”, which means that your battery will require an extra inverter. However, the cost for this piece of equipment has already been taken into account in our calculations above.

Even if you are on a Feed-in-tariff, this is unproblematic. Adding a battery leaves your feed-in-tariff intact. In addition, the two components of your feed-in-tariff – generation payment and export tariff – are decoupled from each other. This means that, as your battery allows you to access a wider range of tariffs such as Octopus Flux, you can change to a higher export tariff while leaving your generation payment intact.

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