What Are Solar Batteries? How Do They Work?

Solar panels can now produce electricity at a lower cost than traditional power stations burning coal and gas. However, fossil fuels can be used at any time, while solar panels are only productive during the day. To remove this limitation, solar panels can be equipped with battery systems, converting them into a 24/7 power source.

The basic principle behind a solar battery is simple. During the day when sunshine is abundant, a battery can be used to store surplus electricity from solar panels. That electricity can then be used at night when solar panels are inactive. Without some form of energy storage, meeting 100% of your electricity needs with solar power is not possible. 

  • You can export surplus solar power to the grid, getting a credit that is subtracted from your nighttime consumption.
  • However, even when solar power decreases your energy costs at night, the electricity used during those hours is not from solar panels strictly speaking.

With a battery system of the right capacity, you can use solar power day and night. You only need to have enough solar panels to meet your daytime consumption, while generating enough extra power to charge the battery.

Large-scale energy storage also makes the power grid more stable, since it helps balance generation and consumption. This can be accomplished by installing utility-scale batteries in strategic locations, and an example of this is the Tesla big battery in South Australia. However, another possibility is using a smart platform to coordinate large numbers of smaller batteries in homes and businesses, and this concept is called a virtual power plant or VPP.

Understanding the main types of solar batteries

There are many types of batteries, and they can be classified based on their chemical composition and applications. However, two battery types are the most commonly used in the solar industry: lithium-ion and lead-acid.

Lithium-ion batteries are the most recent technology, and they are characterized by their high round-trip efficiency when storing and supplying power. Li-ion batteries also have a longer service life, simpler maintenance needs, and some products can last for over a decade. However, when you compare costs per kilowatt-hour of storage capacity, Li-ion batteries are the most expensive of the two. This is the technology used by popular home batteries like the Tesla Powerwall, LG Chem RESU and sonnenCore.

Lead-acid batteries have been in the market for a longer time, and they have lower costs per kilowatt-hour of capacity. However, lead-acid batteries have a lower round-trip efficiency, wasting more power when they charge and discharge. They also have a shorter service life than Li-ion batteries, especially when they are not recharged to full capacity after each use.

Due to their higher efficiency and longer service life, Li-ion batteries are a better option for home solar systems. In this case, batteries are charged and discharged daily, and a lead-acid battery will need to be replaced in a short time. If you only plan to use batteries for backup power, without daily charging and discharging, lead-acid is a more affordable option.

How a solar battery increases your power bill savings

To understand how a battery can increase the savings achieved by solar panels, first, we must discuss how home electricity tariffs work:

  • The most basic electricity plans charge you a fixed tariff for all the energy consumed in the billing period. In Australia, electricity prices of over 30 cents/kWh are common.
  • There are also electricity plans that charge you different prices depending on the hour, and these are called time-of-use tariffs (TOU). Generally, electricity is cheaper when there is surplus production, and more expensive when there is high demand.

You may find variations and special conditions depending on where you live, but many electricity plans follow one of these two formats. However, the rules are different when you install a home solar system, and you start sending surplus power to the grid. In this case, electricity providers use a feed-in tariff to calculate your credit for solar electricity, and this amount gets subtracted from your power bill.

Getting a power bill credit for unused solar energy sounds like a good deal, but feed-in tariffs are normally much lower than the electricity prices charged to you. For example, an electricity plan may charge you more than 30 cents/kWh, while paying you less than 10 cents/kWh for surplus solar energy. As a result, the savings achieved when using solar power are higher than the power bill credits obtained when exporting solar power.

  • Assume you have a solar power system that produced 1,000 kWh last month, but you only consumed 500 kWh and the other 500 kWh were sent to the grid. 
  • If your electricity provider charges 25 cents/kWh, you have saved $125 for the 500 kWh of solar energy consumed.
  • However, if the feed-in tariff is 8 cents/kWh, you only get a $40 credit for the 500 kWh exported to the grid.

If you have a battery to store unused solar electricity, you can consume 100% of your production, and this will increase your savings. In the example above you save the full value of 1,000 kWh, which is $250 with the tariff assumed. Thanks to the battery, the savings from 1,000 kWh of solar energy have increased from $165 to $250.

If your electricity provider charges time-of-use tariffs, the potential savings of a solar battery are even higher. You can use the battery exactly when the highest tariffs are being charged, avoiding the most expensive kilowatt-hours from the grid, and this will maximise your savings. To demonstrate the concept, we can use the 1,000 kWh example again:

  • Assume your electricity provider charges 15 cents/kWh during off-peak hours, and 35 cents/kWh during peak demand hours.
  • If you configure your battery to only supply power when the 35 cents/kWh tariff applies, 1,000 kWh of solar energy will save you $350.

In this example, even greater savings are achieved with the smart use of a solar battery. Stored electricity is only consumed when you will save the most expensive kilowatt-hours from the grid. Using stored energy during off-peak hours leads to lower savings since each kilowatt-hour is only worth 15 cents at this time.

Note: This is a very simplified example, and the exact savings of a solar battery can only be estimated after a professional assessment. However, this quick calculation shows how a battery can increase the savings achieved by solar panels.

Other ways to save with solar batteries: Demand response and virtual power plants

Some electricity tariffs not only charge you for energy consumption in kilowatt-hours, but also for your maximum demand in kilowatts. This is called a capacity charge, and it applies regardless of how long your peak consumption lasts. Capacity charges are normally charged to medium and small consumers, while homes and small businesses are only charged for their measured consumption. However, depending on where you live, you may also find capacity charges in residential electricity plans.

  • Solar battery systems can lower your capacity charges, by providing electric power exactly when your consumption is high.
  • This will reduce the kilowatt demand measured by the power meter, which is the value considered for calculating a capacity charge.
  • For example, if you were previously charged for a peak demand of 200 kilowatts, but you have a battery system with an output of 50 kW, you can reduce the net demand measured by the power meter to 150 kW.

You can achieve a further reduction of your capacity charges by changing the operating schedule of your devices. You will want to avoid using many types of high-powered equipment at once, since this adds up their consumption within the same time interval.

In some parts of Australia, energy companies are developing virtual power plants (VPP). Instead of having a centralised power station, a VPP uses a smart management platform to combine the capacity of multiple smaller systems.

  • For example, if you aggregate 10,000 home solar systems with a capacity of 8 kW each, you reach 80 megawatts of solar power.
  • If each of these systems has a 15 kilowatt-hour battery, the total storage capacity is 150,000 kWh.

If there is a virtual power plant project in your area, there may be incentives for connecting your solar battery to the system. For example, the VPP owner may offer you a monthly power bill credit for giving them access to your storage capacity, or you may get upfront incentives to reduce the cost of a new solar battery system.

VPPs can make power grids more stable since their generation and storage capacity is distributed in thousands of properties. When using conventional power plants, a single fault can bring several megawatts of capacity offline within seconds. On the other hand, when one of the smaller systems connected to a virtual power plant has issues, the capacity lost is only a small fraction of the total.

How are solar panels and battery systems connected together?

As mentioned above, you can use a battery to store solar electricity during the day and use it at night. However, when it comes to the actual electrical connections between solar panels and batteries, there are two main configurations:

  • DC-coupled solar battery
  • AC-coupled solar battery

Solar panels and battery systems are both direct current (DC) devices, while your home appliances run with alternating current (AC). This means you need an inverter in both cases: when using electricity directly from solar panels, or when using energy that was stored in a battery earlier.

  • In a DC-coupled system, the electricity produced by solar panels is supplied to the battery in DC form. This means both devices are behind the inverter, and electricity is only converted into AC when it will be consumed or exported to the grid.
  • In an AC-coupled system, all the electricity generated by solar panels is converted to AC regardless of where it goes: to your appliances, to the battery, or to the grid. However, since the battery is a DC device, it must have its own inverter.

To summarise, a DC-coupled solar battery charges directly with DC power from solar panels, and both devices are connected to a hybrid inverter. On the other hand, an AC-coupled solar battery has its own inverter, while the solar panels have a traditional string inverter.

DC-coupled batteries can achieve a higher round-trip efficiency since electricity is only converted from DC to AC one time. AC-coupled batteries are less efficient, since there are two additional power conversions when charging: from DC to AC at the solar inverter, and back from AC to DC at the battery inverter.

When to use a DC-coupled solar battery?

A DC-coupled system requires a hybrid inverter since you need a power conversion device capable of managing solar panels and batteries together. If you don’t have solar panels yet, and you want to have energy storage from the start, a DC-coupled system is an ideal choice, offering you the following advantages:

  • You can purchase a single hybrid inverter, instead of having a solar inverter and battery inverter as separate units.
  • You can take advantage of the higher efficiency achieved by a DC-coupled system.

You can also upgrade an existing solar panel system with a DC-coupled battery, but the project becomes more complex. Traditional solar inverters are not compatible with batteries, and you must upgrade to a hybrid inverter if this is your plan.

When to use an AC-coupled solar battery?

An AC-coupled battery is easier to set up when you already have solar panels with a dedicated inverter since there is no need to modify the existing system. However, an AC-coupled battery requires extra steps in a new installation, since you use separate inverters for the solar panels and batteries. For this reason, AC batteries are often recommended as upgrades for existing solar panel systems.

AC-coupled batteries can also be used as stand-alone systems without solar panels since they have their own inverter. However, with the high electricity prices found in Australia, it makes more economic sense to charge a battery with solar panels.

You can also use an AC-coupled battery to increase the storage capacity of a DC-coupled system. If you have a hybrid inverter that is already managing its maximum solar panel and battery capacity, you can simply connect a second battery with its own inverter.

Next Steps…

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