How to Save Money When Buying Solar Energy Storage System

Solar panels are a great way to capture free, clean energy from the sun for yourself or to feed it into the grid for more savings on your utility bill, but it's attaching a battery bank that gives you real energy independence. 

Without solar batteries, even a house covered in photovoltaic panels will leave homeowners literally powerless when the grid goes down.

"Something that people don't consider is that if they're on natural gas and the power goes out in the winter they think their heater is going to work, but most have an electric fan, so if the power goes out you still need something," said Mike Murphy, owner of Utah-based PrepSOS, which sells solar batteries, generators and other emergency preparedness equipment.

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Batteries are the key component that ensures your home can always stay lit and warm and that vital pieces of electronics such as medical equipment continue functioning. Depending on where you live, they might be able to save you some extra money by returning energy to the grid at times when it's more valuable. 

All of these benefits come at a cost, and wading through specifications to find the right match for your needs can be a bewildering task. Here's a concise primer on what you need to know before you go shopping for independence in a box. 

How solar batteries work

The simplest way to think of batteries is to imagine that the electricity in your house flows through wires in much the same way as water through plumbing. Batteries fill the role of a storage tank, making electricity readily available when it's needed, just as indoor pressure tanks and water heaters do with water. When batteries are tapped for energy, their reserve of stored electricity is depleted, but in a properly wired system, they can be automatically replenished by "catching" any excess electricity flowing through the system from sources like solar panels or the grid. 

Depending on your goals for installing batteries, your system might look a bit different.

1. Connect just to solar panels: Batteries connected only to solar panels will fill when the sun shines and will discharge when you use electricity and the sun is down or behind clouds. It's one option if you are off-grid and away from electrical utilities.

2. Connect to solar panels and to the grid: If you have a solar inverter that can temporarily disconnect you from the grid, you have what's known as a hybrid solar system. In such a system, you can charge your battery with your solar panels or the grid and use the energy stored there in your home or send it back to the grid and save some money via rate arbitrage (if you have time-of-use rates). A hybrid system can also keep your house powered during a power outage.

3. Connect just to the grid: While we wouldn't call them solar batteries, you can install batteries without solar panels at all. They would charge from the grid and would be useful for backup power or for enrolling in a virtual power plant.

Pros and cons of solar batteries

The pros and cons of buying a battery largely boil down to savings (and backup power) versus cost.

The extra solar electricity you store in your solar batteries can be used in place of electricity you'd normally have to buy from your utility, or sold back to the grid when it's most valuable. This can save you some money and relieve some pressure on the grid when there's peak demand. (Whether this is a viable money-saving option for you depends on your utility's net metering rules.)

Some companies are starting to allow people to enroll their batteries in virtual power plants, a fleet of batteries, smart thermostats and other household appliances that work together to decrease demand on the grid. Where available, virtual power plants might come with additional perks for the battery owner.

In addition, you'll be able to use your battery bank in the event that the grid goes down due to a failure, natural disaster or even a solar flare.  A backup generator can also help keep the power on in an emergency (and charge your batteries), but it requires burning fossil fuels, usually either gas or propane. 

Batteries do add considerable expense to your home energy system, but federal tax credits and other incentive programs usually can be applied to the cost of storage. 

Different types of solar batteries 

There are several kinds of batteries used in battery backup systems, including lithium-ion and lead-acid batteries. Here's a quick overview.

Lithium-ion batteries

There are multiple lithium chemistries on the market, including nickel-manganese-cobalt, lithium polymer and lithium iron phosphate. The latest lithium technology comes with less danger of fire than older headlines might lead you to believe. They're capable of a deeper discharge than lead acid batteries (you can use up to 90% of a charge per cycle without inflicting much damage) and are much easier to maintain with a longer lifespan. They're also significantly more expensive and sensitive to temperature. Increasingly, they are becoming standard in residential solar applications.

Lead-acid batteries 

The basics of this technology are essentially unchanged for over a century. They remain inexpensive and widely available. For solar systems, it's popular to use somewhat more expensive sealed batteries that require less maintenance and eliminate the risk of dealing with a potential acid spill and hydrogen off-gassing. For a while, sealed lead acid seemed to be the future of solar batteries.

However, all lead acid batteries require more careful monitoring of charge levels compared with lithium-ion and can't compete in terms of efficiency, energy and lifespan but are a good and plentiful budget alternative. 

Flow batteries

Flow batteries (or redox flow batteries) are less common in home systems since they're mainly designed for commercial use. The technology appears promising, and it could become more widely used in residential battery backup systems in the near future.

Nickel-cadmium batteries

Nickel-cadmium batteries have a high energy density with double the energy of a lead-acid battery. Nickel-cadmium batteries are very durable, expensive and work well in extreme temperatures making them a good choice for large-scale commercial and industrial projects. Cadmium is toxic and generally not appropriate for residential use.

Buying a backup battery system

In general, a solar battery bank can cost between $10,000 to $25,000 for 10 to 25 kilowatt hours of power. (The US Department of Energy says solar batteries can cost anywhere from $12,000 to $22,000.) 

That said, it ultimately comes down to your budget and energy needs. A small off-grid solar system with enough battery capacity for the basics (no air conditioning or electric heaters allowed) using a pair of high-capacity flooded lead acid batteries can be had for $500 total. Upgrading to lithium-ion costs $1,300 for a system with comparable capacity. 

Adding batteries is a significant expense for any system, but the good news is that nearly a third will come back to you in the form of the 30% federal renewable energy tax credit. Other incentives may also be available from state and local governments, utilities, and even credit unions. 

How to set up a battery backup system

It's best to use a certified solar installer or electrician to install your solar batteries and connect them to your solar array, your home, the grid and an EV charger if you desire. You should expect to spend a few thousand dollars for the labor involved, and there may be additional components like inverters, charge controllers and EV charge stations that can also add hundreds or thousands of dollars in expense. 

If you have confidence in your DIY skills and experience with electricity, it is possible to install batteries yourself. Just be sure to check with local regulations, building codes and equipment warranties. 

If you go the DIY route, make sure all batteries are the same age (ideally new). Don't mix new batteries with older ones to help make sure they charge evenly.

Maintaining a battery backup system

For all batteries, follow any manufacturers' instructions regarding monitoring the depth of discharge. Generally, for lead acid batteries, this means trying to keep them over half charged as much as possible. Many lithium-ion batteries can safely be taken down to only 10% charge. Flooded lead-acid batteries also need to be topped off with distilled water a few times a year.  

Lifespan and warranties

A few years after installation, you may notice that your battery backup system doesn't hold a charge as well as it used to. That's because, like other types of batteries, battery backups lose storage capacity over time. 

To account for this, battery backups include a warranty that expresses how efficient the battery should be by the end of the warranty period. Many of the top solar batteries offer 10 years and 70%, meaning that by the end of the 10-year warranty, the battery should still operate at 70% of its original performance. Lead acid battery warranties typically last for two to five years.

Inverters and batteries 

Inverters play an important role in how the battery stores and converts solar energy. While solar panels generate electricity in direct current, the electric grid and homes generally use alternating current. An inverter can convert AC to DC or vice versa, and most solar batteries include an inverter to store the energy in DC form, as well as an inverter to convert it back into AC to be used in the grid or the home.

Because inversion of current isn't perfectly efficient, battery producers are always experimenting with how to invert less often and increase the efficiency of the battery. As a result, some batteries will not have inverters for both input and output included in the system. Talk to your solar installer about the battery system you're considering so that you can make sure you have all the external inverters you need.

Beware cheap inverters, which are everywhere. To power modern household appliances, a pure sine wave inverter is essential; otherwise, you may end up frying some of the more delicate electronic circuits in your home. 

FAQs

Why do I need a battery with solar panels?

Solar power is available for only part of the day. Adding a solar power storage battery system ensures you always have power when the sun isn't out or during a power outage.

Can I install my own solar battery?

A professional solar electricity system installer can help you select a battery that works well with your goals, whether you want to be entirely off-grid, have an emergency store for outages or minimize your costs from the electric company during peak hours.

DIY battery installation instructions abound online, but beware. Working with electrical equipment is dangerous and doing so without the proper training may also void your warranties and put you out of compliance with codes and other regulations.

Do solar batteries qualify for the federal tax credit?

Yes. The 30% federal solar tax credit can be applied to the total cost of your solar battery system if your battery can hold at least three kilowatt-hours of energy and is installed in 2023 or later.

How many solar batteries do I need to power my house?

It depends on how you intend to use them. Likely, fewer batteries are required if you simply hope to maximize net metering savings. To keep your home powered during an extended blackout, you will need to calculate your total power needs

When it comes to going solar, most people cite two specific reasons. First, you can help save the environment, which is a great reward on its own. Second, you can often save money by lowering your energy bills thanks to the electricity generated by solar panels. (And who doesn’t love saving money?!)

However, saving money with solar isn't necessarily as simple as installing the panels on your roof and never thinking about them again. Having a long-term plan to make the most of your solar investment can help you maximize your potential savings with solar panels, and lower your monthly electric bill.

How To Save On Electric Bills With Solar Panels

If you've done any research into going solar, you likely know that solar panel systems can be relatively expensive. So, you might be wondering how investing in a solar panel system will actually help you save money.

Essentially, the idea is that the power you get from your solar panels replaces the power that you'd need to buy from your utility, and when you break down the monthly cost of your solar panels and compare that to how much power they produce, the cost per kWh for electricity from your solar panels is lower than electricity from your utility.

The way you can calculate those savings depends on whether you get your solar panels through a loan, or by paying cash upfront.

Save On Your Electricity Bill With A Solar Loan

At first glance, it might seem like you would be paying more if you invest in solar panels, because you are still on the hook for an electric bill in addition to a monthly payment toward your solar panel loan.

While it’s true that you will have a second bill when going solar with a loan, the amount of electricity you can produce with your solar panels should help offset your electricity bill significantly, so that the combined cost is less than your original non-solar electricity bill on its own.

The goal is to find a balance where you have enough solar panels to produce the energy you need to power your home, but not so many that it isn't worth the extra cost. (To calculate this for yourself, check out, “How Many Solar Panels Do I Need On My Roof?”) By reducing the amount of power you get from the utility, you can lower your electricity bill by an amount that offsets the payments you are making on your solar panel system.

Essentially, you have to look at the payment toward your solar panel system as an electricity payment. You can then compare how much you are paying for electricity from your utility company with what you spend each month paying off your solar system.

Here is an example of how you can save money by installing a solar panel system:

• Imagine you spend $200 a month on your electricity bill from your utility company before going solar.
• Your solar panel system can produce enough electricity to cover 80% of your needs.
• Because you need 80% less power from the utility, your monthly electricity bill is now down to roughly $40 per month.
• If your payment on the solar loan is less than $160 per month, then you’re saving money overall, even while paying for the solar power system.
• Once you pay off your system, you’ll no longer have a loan payment, even though your panels are still producing electricity, which increases your overall savings significantly.

Save On Your Electricity Bill When Buying Solar Panels With Cash

Another option is to buy your solar panel system upfront with cash. This option can be beneficial because you know the system is already paid for, and you’re not paying any additional amount to finance the system over time.

Unfortunately, it can be harder to see how much you are saving when you don't have a monthly loan payment to compare your utility bill to. However, you can do some calculations ahead of time to estimate how much you are saving each month.

Let’s look at an example that can give you an idea of the savings with solar panels you can have if you buy your solar power system outright:

• Imagine you paid $25,000 upfront to buy your solar power system, and the average lifespan of a solar panel system is roughly 25 years.
• Take the $25,000 installation cost and divide it by 300 months (25 years x 12 months) to get an average cost of roughly $83 per month.
• Like in our previous example, imagine you normally spent $200 a month on your electricity bill from your utility company, and your solar energy system offsets 80% of your needs. As a result, your electricity bill is now around $40 per month.
• Add the $83 per month that you paid for your system to the $40 per month you pay your utility company, and you’re paying a combined total of around $123 per month for electricity.
• Remember, though, you paid for the system upfront, so that $83 isn't actually coming out of your pocket each month. You can think of it as getting a return on your investment of $160 each month, since you’ll be saving that much on your electricity bill. (You paid $83 per month that your system is functioning, but it saves you $160 per month in energy costs, so you’re saving around $77 per month!)
• As an added bonus, your savings will typically increase over time, because the cost of electricity goes up over time. The amount that you paid for the system is fixed, and the amount of electricity that you save each month will be about the same, but the value of that saved electricity will increase over time. (And you won’t be impacted as much by rising electricity rates.)

How to Save Even More On Your Electricity Bills When Going Solar

The savings you get by installing solar panels aren't limited to just what you are saving on your utility bill. There are several other ways to save money when you start using solar panels.

Use Less Electricity

The less electricity you use overall, the more likely it can come from your solar panels and not from your utility, which you have to pay for. To use less electricity, you can go room-by-room through your home and find ways to be more energy-efficient. This could mean doing things like:

• Upgrading to energy-saving Energy Star appliances
• Running your HVAC system less often
• Replacing your old light bulbs with LED lighting
• Unplugging small appliances when you aren't using them (power strips can help)
• Running only full loads in your dishwasher, washing machine, and dryer
• Installing low-flow faucets
• Using heavy curtains to help regulate temperatures
• Watering your yard only when necessary
• Keeping your fridge at least three-quarters full
• Turning down your water heater temperature to 120 °F

Install Battery Storage

You can also invest in battery storage which stores any excess electricity your panels generate that isn’t immediately used by your home. Then, if your panels aren't producing enough electricity at any point, you can use your reserves from your battery instead of drawing power from the utility grid.

It does increase your upfront costs to get battery storage installed, but if your panels can regularly produce more power than you need, you can save money by not paying your utility for that electricity.

Shift Usage to Strong Solar Hours

If you want to ensure you will have enough electricity being produced by your solar panels to run all your appliances and other electrical needs, it is best to use your electricity during hours with plenty of sunlight. This way, you know your panels are receiving the sunlight they need to provide the power you are consuming.

Sign Up For Net Metering (If Available)

Net metering allows you to take the extra electricity your solar panels generate and add it to the electric grid. You then receive a credit from your utility company for that extra electricity, which can help lower your monthly electricity payment in the future.

Optimize Your Time-of-Use

A time-of-use electricity plan means you can get lower rates for your electricity by aligning your energy usage with peak and off-peak hours.

For instance, you can:

• Run devices that use a lot of energy, like washing machines, during non-peak hours.
• Invest in a smart thermostat that allows you to set specific times you want your air/heat running, so you don't run it more than necessary during peak hours.
• Turn off any unnecessary power when you're away to reduce peak hour usage.
• Charge your electric vehicle during off-peak hours. (Some electric vehicle chargers allow you to program your time-of-use hours so they charge when rates are lowest.)

Peak and off-peak hours will vary based on your location, the season, your electricity company, and other factors. However, peak hours are usually when electricity demand is highest, and off-peak hours are when demand is the lowest.

Save On Your Electric Bill With Solar Panels

Going solar is not just great for the environment. It’s also great at helping you save money in various ways. The most obvious way to save money is by reducing your electricity bill from your local utility company.

When looking at investing in solar panels, it’s important to consider your long-term savings. You may start seeing some savings immediately, but your savings will often increase as the years go by.

If you choose to invest in a solar power system, you can also take additional steps to ensure you are taking full advantage of your potential savings. This includes being as energy efficient as possible by doing things like upgrading to Energy Star Appliances when yours need to be replaced, or adjusting your HVAC and water heater settings.

On top of being energy conscious, investing in battery storage can help ensure that you will have solar electricity available on days when your panels aren't producing enough energy to fully power your home. This stored electricity means you won't have to pay more to your utility to get the power you need.

You can also maximize the efficiency of your panels by using your electricity during hours with more sunlight.

Two other ways you can save money are net metering and time-of-use plans. Net metering allows you to give excess energy your panels produce back to the utility company for a credit on your electricity bill. Time-of-use plans give you the chance to get lower rates for aligning your energy usage around peak and off-peak hours. 

If you're ready to install solar panels to save on your electric bills with renewable energy, talk to Palmetto today. You can get started with our Free Solar Design and Savings Estimate Tool to see how much you could save by going solar.