Chapter 3

Introduction

In the previous chapter, we discovered that the greatest financial savings from solar usually come from using electricity as it is generated, rather than exporting it to the grid. But what happens when the sun is shining and nobody is home?

Without a battery, any surplus electricity is exported to the grid. Although this may earn a feed-in tariff, the payment is often much lower than the cost of buying electricity later that evening. Battery storage offers a different approach.

Instead of sending excess electricity away immediately, it stores that energy for use when the solar panels are no longer producing power. 

The question is no longer simply "Should I buy a battery?" Instead, it becomes: "How can I maximise the value of every kilowatt-hour my solar system generates?"

Why Store Electricity?

Solar panels only generate electricity when sunlight is available. Unfortunately, household electricity demand often follows a different pattern.

Many homes consume relatively little electricity during the middle of the day, when occupants are at work or school, but demand increases significantly during the evening when lighting, cooking, heating or cooling, entertainment and electric vehicle charging all take place. Without battery storage, much of the electricity generated during the day may be exported to the grid, only for electricity to be purchased back a few hours later.

A battery bridges this gap by storing excess daytime generation and making it available after sunset. Instead of changing how much electricity the solar panels produce, battery storage changes when that electricity can be used.

Increasing Self-Consumption

The financial value of solar depends heavily on self-consumption. Every kilowatt-hour used directly within the home avoids purchasing electricity from the grid at the full retail price.

By contrast, exported electricity usually receives a much lower feed-in tariff. A battery increases self-consumption by capturing surplus daytime electricity that would otherwise be exported. When household demand rises later in the day, the battery supplies electricity before any additional energy is imported from the grid. As a result, more of the electricity generated by the solar system delivers its maximum financial value.

The battery does not increase the amount of solar energy produced. It simply allows more of that energy to be used by the homeowner rather than being sold at a lower value.

Time-Shifting Electricity

One of the greatest advantages of battery storage is its ability to time-shift electricity. Electricity generated at midday can be stored for use hours later, when electricity prices are often higher and household demand is greatest. This is particularly valuable for customers on time-of-use tariffs, where electricity purchased during evening peak periods can cost significantly more than electricity purchased overnight. Rather than importing expensive peak-rate electricity, the household uses energy that was generated and stored earlier in the day.

Some modern battery systems can even charge from the grid during periods of low electricity prices before supplying the home during expensive peak periods. By shifting electricity through time, batteries increase both the practical usefulness and the financial value of a solar installation.

Backup Power

Although battery storage is often purchased for financial reasons, many homeowners also value the additional resilience it can provide. If the electricity grid experiences a power outage, certain battery systems can continue supplying electricity to selected household circuits.

Critical appliances such as lighting, refrigeration, internet equipment or medical devices may therefore continue operating while the wider electricity network remains offline. Not every battery system provides backup capability, however. Some installations disconnect completely during a grid outage unless they have been specifically designed with backup functionality. For many homeowners, this additional security provides value that cannot easily be measured through electricity bill savings alone.

The Cost of Battery Storage

Unlike solar panels, battery storage remains a relatively expensive investment. Although prices have fallen substantially over the past decade, batteries still represent a significant proportion of the total installation cost.

Whether a battery makes financial sense depends on several factors, including electricity prices, feed-in tariffs, household energy consumption and how much surplus solar energy is available for storage. Households that consume most of their electricity during the day may already achieve high self-consumption without a battery. In these cases, adding storage may provide only modest additional financial savings.

By contrast, households that are empty during daylight hours and use most of their electricity during the evening often gain much greater value from battery storage.  There is therefore no universal answer. The financial performance of a battery depends on how it is used.

The Future of Battery Economics

Battery technology continues to develop rapidly. Manufacturing capacity is expanding, production costs are falling and improvements in chemistry are increasing both battery lifespan and energy density. At the same time, electricity prices, electric vehicle adoption and changing energy markets are increasing the value of storing electricity. As these trends continue, battery storage is expected to become an increasingly attractive addition to residential solar systems.

For some households, batteries already provide excellent financial returns. For others, waiting a few years may produce a better balance between installation cost and future savings. 

The economics continue to evolve. What remains constant is the underlying principle. The more valuable each kilowatt-hour of solar electricity becomes, the greater the overall value of the entire solar system.

Looking Ahead

Battery storage helps homeowners make better use of the electricity they generate, but it also adds to the upfront cost of the installation.

This naturally leads to the next financial question. How long will it take for the investment to pay for itself?

In the next chapter, we'll calculate the complete financial return of a solar installation, exploring payback periods, return on investment, lifetime savings and the factors that determine whether one solar system delivers better financial performance than another.