The economics of battery storage

Home Battery Storage is a relatively new concept, but as battery technology has gone mainstream in Electric Vehicles, it has become routine for battery storage to be installed alongside new solar installations. Retro-fit batteries are now also very common, especially since they benefit from 0% VAT. Here we’ll take a look at the economics of battery storage. Also don’t forget to check out our post on the Financial Independence Case for Solar PV.

The principal benefits are:

• Increased on-site use of solar generation – with a correctly sized solar energy storage system, 65%-80% of solar generation should be used on site, thus further reducing the owner’s electricity bill.
• The ability to buy electricity off-peak and store it for use during peak times.
• Harness the opportunities presented by novel electricity tariffs (such as Octopus Flux – this tariff provides financial incentives to sell your electricity at peak times.
• Provide grid balancing services as part of  Virtual Power Plant, earning a premium price for electricity sold
• Emergency power supply in a power cut.

How to calculate the cost of Home Battery Storage.

There are a couple of ways to look at the cost of Home Battery Storage.

On the one hand you need to understand the cost of the battery system in terms of the cost per kWh, set against the expected lifespan of the battery.

On the other hand, you need to consider the saving that this will make you. To calculate this you need to understand not only how much electricity you use on an average day but also at what time of day you are using the electricity.

Let us consider each in turn.

Cost per kWh

This is relatively easy to calculate. The battery will display a “total capacity” which is the headline size of the battery. However, not all of that is usable. The manufacturer of the battery will state a “depth of discharge” that can be expected, because a battery cannot be fully discharged or else it will cause damage to the battery itself. The battery management system will prevent it from being totally discharged, so you don’t need to worry about that.

Look for the “usable capacity”. GivEnergy batteries have a 100% depth of discharge advertised, but in reality they have effectively an “undeclared” capacity which is 20% above that which is advertised. So what this really means is that a GivEnergy of 13.5kWh will have all 13.5kWh available for use, but the actual battery pack is over 15kWh in size.

So a battery costing £5000 with a total capacity of 5.8 kWh, but with a usable capacity of 5.1 kWh will have a cost per kWh of about £980.

The next question is what the expected battery lifespan is, and how many cycles (full discharge & recharge) can it perform. GivEnergy batteries have a 12-year warranty. The battery will continue to function after year 12, but its capacity will decline. The batteries will also be expected to last for a certain minimum number of cycles. GivEnergy guarantee an unlimited number of cycles, but that is subject to a fair use policy of 2 full cycles per day.

One cycle per day for 12 years is 4380 cycles. 2 cycles is 8760 cycles.

You could then divide the cost per kWh of storage by the number of cycles to give a cost per kWh of energy used. So in the example above we divide £980 by 4380 to get 22 pence per kWh, or £980 by 8760 to get 11 pence per kWh.

For example:

Battery	Battery cost	Total capacity	Usable capacity	Cost per kWh	Cost per cycle
Battery 1	£5000	5.8	5.1	£980	16p
Battery 2	£7000	8	7.2	£972	16p

The opportunity cost of NOT buying Batteries.

Over the 12 year warranty period, with 8760 full cycles of 5.1 kWh, we’ll use 44676 kWh of energy.

As the past 3 years have demonstrated, we cannot predict the cost of electricity 12 years ahead.

A variety of analysts have published forecasts out to 2030, and they all envisage that energy prices will remain 3 times higher than they were pre-pandemic. This one from Cornwall Insight is typical Energy prices to remain significantly above average up to 2030 and beyond – Cornwall Insight (cornwall-insight.com)

Looking at the UK Energy Price cap for July 2023, Cornwall Insight say this:

“Currently, consumers are not directly impacted by the price cap due to the Energy Price Guarantee (EPG), which limits a typical household’s energy bill to £2,500 equivalent per year. However, starting from July, household bills will revert to the price cap.

Despite the cap falling from the sky-high prices of the past two years, the figure remains over £1,000 per year more than the price cap levels seen prior to the pandemic. We do not currently expect bills to return to pre-2020 levels before the end of the decade at the earliest.”

And they are forecasting price per kWh as follows:

Electricity	Q3 23 Forecast	Q4 23 Forecast	Q1 24 Forecast
Standing Charge (£/day)	0.53	0.54	0.54
Per Unit Costs (p/kWh)	29.48	29.80	30.65

So the cost of purchasing this 44676 kWh of electricity at the price cap price of 29.48 pence is:

                44676 x 29.48p = £13170

So £13170 is the minimum price we might expect to pay for this electricity. By investing in a Home Storage Battery you are insuring yourself against future cost increases.

With a Home Storage Battery, the more electricity we use, the better the payback.

Smart tariffs and higher electricity usage profiles

The energy price forecast above relates to the standard UK Energy Price Cap. This will apply to most consumers presently.

However, if you are an Electric Car owner, it is highly likely that you have moved onto an Electric Vehicle tariff, which is some kind of Smart Tariff offered by your energy supplier.

This further changes the economics of having a home storage battery.

Electric Vehicles use tremendous amounts of electricity, and they would frankly be unaffordable if dedicated EV tariffs didn’t exist.

Octopus Go is the industry standard EV tariff. With Octopus Go customers receive a low cost of energy period, usually for 4 hours during the night. In the spring of 2024, the off-peak cost of Octopus Go is 9 pence per kWh. The trade-off is that for the remainder of the day, the other 20 hours, the electricity cost that you pay is elevated. Presently the peak rate is about 31.03 pence per kWh.

This means that if your Home Storage Battery is being charged by solar during the day, then you are saving 31 pence per kWh. And if you charge your battery overnight at 9 pence per kWh, you are saving 22 pence per kWh.

Conclusion: The economics of Battery Storage

To make a realistic calculation of the potential savings that you might make from a Home Storage Battery, you need to understand:

• The usage profile of your electricity consumption
  • How much electricity you use overall
  • When you use it
• Whether you have access to a time of use electricity tariff
• Whether your battery is paired with a Solar System

Brimstone Energy know that in the right conditions, a Home Storage Battery makes tremendous financial sense.

A Home Storage Battery could pay for itself by year 5.

After that you can enjoy free electricity from the sun day or night.

GivEnergy batteries

The GivEnergy battery range is comprehensive. The smallest battery is the Giv-Bat 2.6 which is a relatively inexpensive way to install a battery system.

All the GivEnergy batteries can be stacked with additional modules. So whilst you might choose to invest initially only in one 2.6 kWh battery, you can add up to a further 4 modules (for a total of 5 modules) giving a total of 13 kWh.

The largest domestic battery is the All in One which is an AC Coupled battery, delivering 13.5 kWh of storage, and stackable up to 80 kWh.