How Does Solar Battery Storage Work?

This system helps users expand their solar energy options and save money.

Garage with energy storage batteries and electric vehicle charger, with solar panels in the background.
Solar plus storage can make a home less reliant on the electricity grid.

Petmal/Getty Images

Solar battery storage (commonly referred to as solar+storage) is a booming industry. When pairing solar panels with battery storage, homeowners can store excess electricity produced by their solar panels in order to expand their options for how they use their solar energy—and how they can profit from it. Solar battery storage allows them to rely less (or, in emergencies, not at all) on the electricity grid to potentially lower their costs and even to supplement their income.

The Rise of Solar Energy Storage

As climate change increases the frequency and potency of extreme weather, resilience becomes more and more important to homeowners, and they are turning to solar+storage for help.

When the power went out in Texas and parts of the Southeast in February 2021, a homeowner shared how he was able to keep his refrigerator running and his heat and lights on because he had solar panels on his roof and a battery storage system in his garage. Interest in solar and battery storage systems more than doubled during and after the blackout.

In recent years, catastrophic wildfires and blackouts produced a surge in residential battery storage in California and Australia. Climate-driven extreme heat also continues to threaten energy systems with outages, with more consumers turning on air conditioners at the very time that power lines have more limited capacity to carry electricity.

The push for solar+storage has also been accelerated by plummeting prices and government incentives. Lithium-ion battery prices dropped 87% between 2010 and 2019, driven largely by the increasing production of electric vehicles. The federal investment tax credit for renewable energy can be applied to batteries if they are charged using a solar system (rather than directly from the grid). California, Massachusetts, and New York also provide incentives to homeowners for installing batteries along with their solar panels. In wildfire-prone areas, California's Self-Generation Incentive Program pays for nearly the entirety of a battery installation.

Homeowners aren't the only ones realizing the benefits of solar+storage. Utilities such as the Los Angeles Department of Water and Power have been tying utility-scale solar projects with high-capacity batteries at prices far lower than fossil fuel plants. At the end of 2020, a third of all new utility-scale solar projects by capacity were paired with battery storage. In California, the rate was nearly two-thirds.

How Solar Energy Is Stored in a Battery

Diagram of a solar panel system with battery backup.

ser_igor/Getty Images

Pairing batteries with solar panels removes the greatest challenge to the widespread adoption of solar energy: its variability. Moreover, the time of day when demand for electricity is at its highest is also usually around when the sun sets. Solar panels are at their most productive at midday, when demand for electricity is low. 

Most solar system owners use the grid as their battery: when they produce more electricity than they consume, their panels send the excess to the grid. In most states, their utility company gives them credit for that excess electricity through a net metering program. The credit is then applied to the pay for the excess electricity that homeowners use when they consume more than they produce.

When integrated with battery storage, solar panels can send the electricity they generate to the house, out to the grid, or into the battery storage device. Part of that process involves one or more inverters, which convert electricity from alternating current (AC) to direct current (DC), or vice versa.

For new installations, where solar panels are installed at the same time as the battery, only one inverter is needed—to convert the DC electricity coming from the solar panels either for use in the house to send it to the grid, both of which run on AC. Batteries store energy in DC directly from the solar panels. For houses that already have solar panels but are adding storage, the system already has an inverter that converts DC electricity to AC, so a second inverter is needed to turn the AC back into the DC so that it can be stored in the battery—a process that's less efficient.

Types of Solar Batteries

Lithium-ion batteries dominate the solar energy storage industry, providing over 90% of utility-scale storage capacity in the United States. For residential storage, lead-acid batteries have the virtues of low cost, recyclability, and long shelf life with little to no maintenance required, but they are heavy and have longer charge times. Lithium-ion batteries charge more quickly and can hold more energy per mass, making them the preferred choice of most home solar storage systems today, according to the Solar Energy Industries Association.

Considering their cycle life, performance, and cost, analysis by the U.S. Department of Energy shows lithium-ion batteries having the highest cost benefit, one which will only grow in coming years as the technology continues to mature and its prices to decline. The remaining 10% of utility-scale energy storage options—like pumped storage hydropower, flow batteries, sodium-sulfur batteries, molten salts, flywheels, and compressed air—are beyond the scale of homeowners.

Several other battery characteristics also determine the cost-effectiveness and usefulness of solar+storage systems.

Power and Capacity

Two similar-looking metrics—kW and kWh—are measurements of a battery's power and capacity, respectively. A kilowatt is the amount of power that a battery can deliver at any one time, while a kilowatt-hour is the total amount of energy that the battery can store. The average U.S. household consumes just over 30 kWh per day, according to the U.S. Energy Information Administration, while battery systems are generally below that.

Round-Trip Efficiency

Round-trip efficiency is the measurement of how much energy is lost in the transfer and storage of electrons in and out of the battery. The loss is usually around 5%.

Battery Life

Battery life is measured by the number of cycles of charge and discharge it can go through. Eventually, batteries degrade over time and lose their ability to hold the same level of charge.

Can You Save Money With a Solar Battery Storage System?

Historically, diesel generators have been used as a backup energy source in case of power outages. A diesel generator can have a $2,000-6,000 purchase price, depending mostly on their power output. Adding in installation and fuel costs, that number can rise to between $10,000 and $20,000. If homeowners are lucky, most of the purchase price of a diesel generator will merely buy peace of mind and the generator will never have to be used.

While the upfront costs of a solar+storage system are significantly higher, depending on the size of the system, the return on investment is greater. A solar-tied battery backup can buy more than peace of mind: it can save homeowners money and generate revenue.

Different electricity providers have different rate structures: some charge a flat rate per kilowatt-hour consumed; others charge a surplus for high demand customers; still others have time-of-use plans, where electricity is cheaper during off-peak hours. Solar+storage systems can take advantage of any of these rate structures by reducing demand for grid electricity, including during periods of high demand, or store energy from the grid when it is cheapest and draw on the battery when grid electricity is most expensive.

Given these factors, for commercial and industrial customers who have high-demand charges, an analysis by the Rocky Mountain Institute (RMI) found that solar+storage can result in cost savings. For residential customers, an earlier (2015) RMI study predicted that in many parts of the United States, solar+storage systems would be cost-effective by 2025 to 2030. As costs for both solar systems and lithium-ion batteries continue to plummet, however, the cost-benefit equation for residential customers is changing faster than anyone expected.

Virtual Power Plants

What Is a Virtual Power Plant?

A virtual power plant (VPP) is an emerging technology designed to save residential solar customers money. Individual homeowners are able to virtually (but not physically) connect their solar batteries in order to sell energy and grid services to their electric utility.

Utilities must not only always have sufficient electricity supply to perfectly meet customers' demand; they also have to make sure that the electricity flowing through their wires flows at a steady rate of power and frequency.

When supply and demand are mismatched or when power surges or drops, the frequency is thrown off and can damage electrical systems. In conventional grid systems, turning fossil fuel-based power plants on and off to balance supply and demand is expensive and slow, while keeping them running as reserves wastes money. 

In April 2021, 95% of California's electricity came from renewable resources. As more and more variable renewable energy supplies electricity to the grid, too much wind or solar can lead to utilities shutting off available clean, low-cost renewable energy. Otherwise, they risk a blackout.

In virtual power plants, batteries are able to absorb excess electricity that might otherwise be curtailed and nearly instantaneously supply extra electricity when it's needed. That means utilities can cut the cost of keeping a natural gas plant running and pass some of those savings on to the members of the VPP.

VPPs sound like a thing of the future, but they already exist, spurred by Order 2222 from the Federal Energy Regulatory Commission allowing retail customers to participate in energy markets. Outside of Salt Lake City, Utah, a solar+storage residential community runs a VPP in connection with the local utility. Owners of Tesla Powerwalls who are customers of National Grid or Eversource utility companies in the Northeast can join the Connected Solutions program and earn up to $1,000 a year. Tesla also operates VPPs in the United Kingdom and Australia, while leading solar installer Sunrun has VPP programs for solar+storage customers in Hawaii and California. As more and more VPPs emerge, the cost savings of solar+storage increase.

Can Solar Battery Storage Take You Off-Grid?

During recent wildfires, California residents with rooftop solar systems were surprised to find that when electricity from the grid went out, so did their solar system. If a homeowner's solar system is tied to the grid, for safety reasons the solar system goes down as well—otherwise, the electricity sent into the grid would endanger power line workers making repairs.

By contrast, many solar+storage systems can automatically disconnect from the grid, allowing homeowners to continue drawing power either from their solar panels or from the battery itself. While most solar+storage systems aren't designed to completely cut off a homeowner's connection to the grid, they do provide the ability to act independently from the grid for shorter periods, either individually or collectively as microgrids.

What Is a Microgrid?

A microgrid is a networked group of energy producers and consumers that are normally connected to a utility's electricity grid but can also be "islanded" to act independently when grid power goes out.

When the Colonial Pipeline fell victim to a cyberattack in May 2021 and cut off fuel supplies to much of the East Coast, it sent shivers down the spines of grid operators. While the North American Electricity Reliability Corporation has mandated cybersecurity standards for the electricity grid, the grid is not invulnerable. A cyberattack briefly shut down an unnamed utility in the western U.S. in March 2019, the first of its kind.

One defense from shutdowns from cyberattacks, natural disasters, or other emergencies is the creation of microgrids. On the one hand, utility companies have less control over the operation of solar+storage systems, making them potentially more vulnerable to cyberattacks.

On the other hand, compared to a centralized energy grid where a single phishing attack can cause widespread power outages and require the payment of millions of dollars in ransom to return the system to normal, the reward to hackers for disrupting distributed energy resources like solar+storage is smaller and the damage is more locally contained.

In the United States, 1,639 microgrids were operating as of September 2020, generating over 11 gigawatts of electricity for their customers. Microgrids are especially useful for strengthening critical resources like hospitals or military bases. In 2019, a fire station in Fremont, California became the first in the United States to install a solar+storage microgrid.

Should You Purchase a Solar-Plus-Storage Package?

Resilience might mean something different for homeowners than for a business, organization, or public service running critical infrastructure. From a traditional cost-benefit analysis, the ability for homeowners to generate and use their own power is currently uneconomical. Like car insurance or life insurance, most people are fortunate when they do not get a return on their investment.

Yet when factoring in the potential cost of damages incurred without it, a solar+storage system can be a worthwhile investment. When power went out in Texas during its 2021 record cold temperatures, monetary losses were in the hundreds of billions of dollars—and nearly 200 people died. Especially in areas prone to power outages from extreme weather or other natural disasters, the decision to invest in solar+storage has more weight than ever before.

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