The best uses for solar batteries

When you install a solar battery as part of your home solar energy system, you can actually store the extra energy your solar panels produce at home instead of feeding it back into the electricity grid. With solar batteries, you maximize your ability to use the electricity generated by your solar panels on a day-to-day basis. During the times when you need more electricity than your solar panels are producing (later in the day or at nighttime), you can use the solar energy you have stored.

Whether or not you’ll save more money by installing a solar-plus-storage system depends how your electric utility charges its customers. In states with net metering, you will typically receive a credit on your utility bill for every kilowatt-hour (kWh) of solar energy that you send back to the grid. You can use those credits later on when you need more electricity than your solar panels are generating. For homeowners in this situation, installing a solar battery won’t increase their savings: the electric grid is providing the same financial benefit as a solar battery.

However, some electric utilities are changing their rates in ways that make solar batteries a smart investment for homeowners. If your utility’s rate policy includes any of the following, energy storage can help you save more with your solar panels.

How time-of-use (TOU) electricity rates affect solar battery economics
If your utility has TOU rates, the per-kWh rate that you pay for electricity will change depending on the time of day. Electricity will cost more during “peak hours” when demand for electricity is high, typically in the late afternoon and evening. Electricity rates are lower during the daytime when home electricity use is lower and solar panels are at their most productive.  If your utility uses TOU rates, you can benefit from home energy storage by using electricity from your solar batteries during peak hours when utility electricity rates are at their highest.

TOU rates are becoming more common in the U.S., with California leading the way: all homeowners in the Golden State are gradually being shifted to TOU rates instead of a single per-kWh rate.

How demand charges affect solar battery economics
If your utility has demand charges for residential customers, you’ll be charged a fee that changes depending on how much electricity you use. The fee might depend on how much electricity you buy during peak hours when electricity demand is the highest. It may also be determined by the total amount of electricity you use in a month.  If your utility uses demand charges, you will benefit from solar batteries because you may be able to avoid a higher fee by relying on your energy storage system instead.

While demand charges are more common for commercial customers with big electricity bills, some states and utilities are considering the addition of demand charges to their electricity rates to motivate people to reduce their electricity use. Utilities in Arizona and Illinois, among others, are evaluating residential demand charges.

How reduced or no net metering credits affect solar battery economics
In states with true net metering, you’ll receive a per-kWh credit equal to the cost of electricity on your bill for the energy your solar panels produce. For example: if you pay $0.11 per kWh for electricity from your utility, you’ll get a $0.11 credit on your bill for every kWh of solar energy that your panels produce and send back to the grid.

However, in certain states, you will receive a credit for the wholesale or “avoided cost” rate, which is usually equal to the rate your utility would have paid to buy the electricity somewhere else. As a result, the monetary value of one kWh of solar power that you use at home is higher than one that you send back to the grid. As an example, if you pay $0.11 per kWh for electricity from your utility but your utility only offers a $0.04 credit for electricity sent back to the grid, your solar electricity will be worth $0.07 less if you don’t use it at home. In these states, installing solar batteries makes economic sense because you’re able to maximize the value of the energy you generate at your own property.

At the end of 2015, the Nevada Public Utilities Commission (PUC) voted to change its net metering policy to a policy based on the avoided cost rate – one of the first states to make such a change. In Hawaii, where more than 10 percent of homes have rooftop solar, the PUC has also reduced net metering credits in a way that makes energy storage a worthwhile investment.