We
all know that the prices of PV systems and battery storage are coming down at the
same time that the cost of grid-provided electricity is going up. At some point there will be a crossover. Notice I’m not talking about socket parity at
peak output when PV power is already cheaper than grid-provided electricity.

So
when will this crossover point for PV with battery storage be reached, or has
it been reached already?

As
you might imagine, to formulate a model to answer the question involves many considerations
such as your location, your particular domestic circumstances and your
expectations about the future cost of PV systems and battery storage. In the post below, I give my modest
contribution to the debate.

Here
are my assumptions:

- As an investor, you can make 3% per year after tax and inflation.
- You live in a mythical location with an excellent solar resource such that you receive the average amount of sunshine each day.
- The Capacity Factor of your PV system is 0.18.
- PV panels will last for 25 years at rated output, so that a 1 kW system would deliver 24 × 365 × 0.18 / 365 = 4.32 kWhr/day each day for 25 years.
- Your daily electricity requirement is 8.64 kWhr/day, which is exactly the output of a 2 kW system at your mythical location. Further, half of this is required when the sun is not shining, so you need to store 4.32 kWhr/day.
- Battery storage costs $1,000 per kWhr, and the batteries are capable of a complete charge/discharge cycle every day for 25 years. This is a heroic assumption, but hopefully covered by assigning a high price to the cost of storage.
- After government incentives, the specific cost of an installed PV system is $2/W.
- Your annual electricity bill today is $1,000 and will not increase in real terms after inflation.

To disconnect from the grid, the cost to you of PV panels and storage will be $2 × 2,000 + 4.32 × 1,000 = $8,320, which let’s say you have available for investment.

Now
we formulate two options.

**Option 1: Stay connected to the grid**

After
25 years of compounding at 3% after tax and inflation, your $8,320 becomes
$8,320 × (1.03)^25 = $17,420.

**Option 2: Disconnect from the grid**

If
you invest $1,000 each year (your annual electricity bill) for 25 years at 3%
after tax and inflation, it compounds to $1,000 × (1.03^25 – 1)/0.03 =
$36,459. By that stage the PV panels and
batteries would need replacement, a cost of $8,320, which leaves a balance of $36,459
– 8,320 = $28,139.

On
this grossly simplified calculation, Option 2 is 62% superior to Option 1.

Addendum: After this blog post had been republished at RenewEconomy, commenter Derek pointed out that is incorrect to subtract the cost of a new system after 25 years in Option 2. Thus the return in Option 2 should be $36,459, which is a 109% advantage over Option 1. That doesn't cause me to want to change my conclusions below, particularly in view of other comments at RenewEconomy about the costs and durability of battery storage.

Addendum: After this blog post had been republished at RenewEconomy, commenter Derek pointed out that is incorrect to subtract the cost of a new system after 25 years in Option 2. Thus the return in Option 2 should be $36,459, which is a 109% advantage over Option 1. That doesn't cause me to want to change my conclusions below, particularly in view of other comments at RenewEconomy about the costs and durability of battery storage.

Weaknesses
in the assumptions can easily be pinpointed.
For example, I live in Sydney in an all-electric dwelling, and my peak
electricity demand is in winter when the daily output of PV panels is below the
annual average. I would need to buy a
generator set, which would get substantial use in winter, and I’d have spare
power for sale in summer when the utilities wouldn’t pay much for it. I’d need additional assumptions and/or data
about demand, output, the cost of a generator set and the future cost of fuel. Those calculations are for another day!

**Conclusion**

My
conclusion is that to justify going off the grid for financial reasons, you‘d
need to live in an exceptionally favourable location and in an accommodative
lifestyle. That’s my conclusion today,
but it would be worth repeating the calculation in a few years when
circumstances will surely have changed.

Acknowledgement:
Thanks to Anthony Kitchener for the interesting suggestion.