Upcoming Discounts May Lower Solar Battery Costs Starting July 1, but Alternatives Exist

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Homeowners eager to cut down on electricity expenses by adding solar panels are now weighing if recent discounts on solar batteries are worthwhile.

Starting on July 1, the federal government’s Cheaper Home Batteries Program will offer a 30% reduction in the upfront costs of installing qualified small-scale battery systems.

However, residents like Lee Bolger from Victoria, who invested in solar panels several years ago, have witnessed significant reductions in their feed-in tariffs and question the potential advantages of adding batteries.

Feed-in tariffs — credits given by energy companies — let solar users make money from any excess electricity they produce, which is sent back to the grid.

These rates differ depending on the state and energy provider.

Adam Corrigan, a specialist in energy efficiency and the founder of Your Energy Friend, advises that each home is unique, and there are numerous other energy-saving strategies to explore before spending large sums on solar panels and batteries.

Solar disappointment

Bolger, who lives in the Victorian town of Great Western, says he installed 30 panels on his eight-bedroom home in March 2023.

He rents out rooms in his house to boarders and says they use a lot of electricity as they often have the air-conditioning and heating on.

His 12-kilowatt system cost him $12,680 after rebates and other discounts, which he estimated he could recoup in around six years.

But the feed-in tariff at the time was around 12 cents per kilowatt-hour (kWh), and now he only gets around 6 cents.

More drops are expected, with comparison website Finder saying the minimum rate for tariffs in Victoria will drop to 0.04 cents from 1 July, although better rates are available depending on the provider.

Fifteen years ago, they were as high as 60 cents.

A table showing feed-in tariff rates for states and territories around Australia.

Feed-in tariff rates for solar panel owners can vary widely across different states and territories. Source: SBS News

Bolger estimates his original feed-in tariff of 12c per kWh would have saved him around $1,000 a year.

When combined with the estimated $1,000 worth of electricity he saves relying on energy generated from his own system, he receives a total benefit of $2,000 per year from his solar panels.

If the feed-in tariff drops to practically zero, the benefit from his panels will reduce to around $1000 a year, meaning the time Bolger would need to pay off his panels would almost double.

He says the experience has made him “indifferent” about the economic benefits of solar and he won’t be recommending it to others.

Lee Bolger says he’s now “indifferent” to the benefits of solar after his feed-in tariffs were reduced. Source: Supplied

Bolger doesn’t believe installing a battery will make a difference, because his solar panels won’t generate enough excess energy to store — especially in winter when it’s often raining and dark — to make the purchase worthwhile.

“My summer bills were ridiculously low. In winter, you will not generally get enough charge into the battery to make a big difference,” he says.

Battery discounts attractive for some but not others

Corrigan says other households might be in a different position to Bolger, as the average NSW home only uses about 20kWh of electricity per day.

The NSW-based energy expert, who has a 1.5 kilowatt solar system, says he uses less than 10 kilowatt-hours a day, although his cooktop is powered by gas.

“[For] most homes, a 10 kilowatt or 14 kilowatt battery will get you through the night easily,” he says.

“However, if you are cranking your air conditioner and you’ve got ducted air conditioning, it’s probably only going to last you two, three hours.”

Corrigan says batteries will work for some households and the new federal rebate does make the cost more affordable.

A battery can be very practical since it allows storage of the surplus electricity generated around midday, which can later be utilized in the early evening.

Finder has estimated the cost of a 10kWh battery could come down to between $6,713 – $8,904 due to the federal discount.

“In Australia, the average household uses about 15 to 20kWh of electricity per day,” a Finder spokesperson says.

A man in a black jumper stands in a room filled with solar home battery systems.

Energy Minister Chris Bowen looks at home battery systems during a visit to SolarHub in May. Source: AAP / Lukas Coch

“If most of your energy consumption is in the evening and you’re paying a single electricity rate — let’s use 32.34c per kWh as an average based on single-rate plans in our database — then with a 10kWh battery and using 80 per cent of its capacity, you could save about $850 a year,” a Finder spokesperson says.

“However, the actual savings can vary depending on the type of electricity plan you have, the rates you pay, your solar panel setup, your energy consumption patterns, and how much electricity you export back to the grid.”

While the federal battery discount applies nationally, the states and territories also have programs that can be used to further reduce the cost.

Look at other options first

Corrigan recommends considering other options before investing in expensive solar panels and battery systems.

He suggests Bolger should review his insulation and energy efficiency measures to reduce his electricity consumption.

The first thing he recommends for households is to analyse their power bills and shop around to get the best deal.

Making your house more energy-efficient should be the next priority before considering solar panels and, finally, batteries.

If you want to make your home more comfortable, get your insulation sorted and do your draft proofing. That’s your best return on investment. That’s your best bang for buck.

Corrigan says simple changes such as installing heavy-lined curtains and a box pelmet (which goes around the top of the curtain) can be very effective at keeping your home warm, and are much cheaper than double-glazed windows, for example.

Heavy curtains with a pelmet can be very effective in keeping your home warm. Source: Getty / Penpak Ngamsathain

Using a thermal camera around the home can also show gaps in roof insulation where batteries might have been moved.

“You only need a 5 per cent gap in that insulation blanket, and the effectiveness of that insulation — the whole blanket — diminishes by almost a half,” Corrigan says.

“When you get into bed tonight and you pull the doona up, just cut some holes in it, see how well it works.”

Can you afford it?

When considering whether to invest in a battery system, Corrigan says the first consideration is cost, as they are expensive and many people don’t have the money sitting in the bank.

Those who already have a solar system should check whether their inverter is battery-compatible, as this could also raise warranty issues if it needs to be replaced.

Another consideration is what your next car will be.

Corrigan says in one to two years, electric vehicles will be capable of vehicle-to-home and vehicle-to-grid functionality, allowing EV batteries to be used to power your home.

“Some people are already doing it,” he says.

They are an attractive option because EV batteries generally have a huge capacity of around 50-70kWh.

“You could run your home for days on it.”