Should I wait to buy my storage system
At Synergy we have adopted a new design approach of offering storage batteries with each installation. This means we will add storage to existing clients solar and only sell solar when it is combined with storage. Some of the prospects I work with do not understand our approach and often state two primary reasons they do not want storage today. The primary reason I hear of homeowners putting off storage systems is they believe the costs will be coming down in the future. The second most common reason is the belief that the technology is changing and by purchasing later they will get a better, more feature rich product. It is the intention of this blog to look at these two issues in detail.
Will storage costs be declining or increasing?
I do not believe that storage systems will become less expense in the coming years for a few reasons. The first is that the Federal tax credit (which applies to residential storage when paired with solar) will be reduced to 22% in 2023, down from 26% in 2020-2022 and will be eliminated entirely in 2024 for residential. I do not believe prices will be decreasing in the next few years, let alone by 26%. *Update* The Inflation Reduction Act brought the Federal tax credit back to 30% beginning the end of 2022 through 2032, 26% in 2033 and 22% in 2034.
The second issue is that storage systems are competing for rare earth elements in their production. There is an increased demand for lithium batteries in cell phone, laptops, consumer electronics, electric cars and home storage batteries, all of which rely on rare earth elements. A basic concept of economics is when demand increases for a product, so does its cost if the supply of the product stays the same. In the past few years we have seen most major storage manufactures increase the cost of their offerings by roughly 10%, not decrease them.
Manganese Cobalt Oxide (NMC) batteries use cobalt, and it is the most expensive element in batteries. NMC batteries are used in many electric cars and home storage systems. Currently about 60% of all cobalt mined comes from the Democratic Republic of Congo (DRC). It is predicted to be in stable supply and price until about 2022 when demand is going to exceed supply and prices are likely to increase.* As a side note, the DRC has drawn the attention of many human rights organizations because the cobalt is often mined by children hand dug mines. (Synergy does not use cobalt based batteries).
Based on the Federal tax credit reductions and the limited supply of rare earth metals (primarily cobalt), logically I can come to no other conclusion than the costs of home storage systems will increase over time, not decrease.
Will storage technology be better next year?
The second issue that often is raised is that the technology is changing so fast, people do not want to be left with an obsolete product. This is a valid concern and one I have heard most of my life, starting in the early 80’s when I was in the computer industry. I had to get very comfortable saying – yes as soon as you sign the contract for this computer it will be out of date, as its replacement is already in design. This applies to almost all the electronics we buy; cell phones, cars, headphones, fit bits, etc. We are buying a product knowing they will have new versions in the next product cycle.
Home energy storage is not a new technology, but a redesign using existing technologies. Lithium ion batteries have been around for since 1991 when Sony first brought them to market. Most of us have been using these batteries for well over a decade in phones, hybrid and electric cars, and portable electronics. Off-grid inverters are the basis for the inverters in home storage batteries allowing a homeowner to have power when the grid is down. Synergy has been installing off-grid inverters for over 25 years. Off-grid inverters were around long before their grid tied cousins. Paring lithium batteries and off grid inverters to create a grid tied storage system is just a new application of an already proven technology.
And having said that, manufacturing companies are bringing improved storage systems to market and finding new ways to improve them. Some of these improvements are software and can be easily upgraded, others are hardware and require replacement. I do not see the function of storage systems significantly changing, with their primary purpose being to store energy from solar and allowing it to be used when the sun does not shine or when the grid is down. My advice would be to find the best solution available today, knowing you will be able to live with it for many years to come.
The best time to purchase storage is today
Utility rates keep increasing, homeowners are receiving less for exported solar energy as rates change, high cost peak pricing keeps moving farther into the early evening where it cannot be offset with solar. Storing one’s own power gives us more energy independence from our utility company. Here in Sonoma County where transmission and distribution lines have caused so much suffering from fires, storing and using our power locally just makes sense.
I do not see storage coming down in price in the near future and it may take a decade for new technologies to reach the mainstream. Right now, we have great Federal tax credits, a clean renewable way to back-up your house in a power outage, and a way to help future-proof your energy system by storing and using your locally created power. These are the reasons we at Synergy are requiring storage to be a part of each installation. We believe there is no better time to add storage to your home than today!
* Bloomberg New Energy Finance – cobalt supply and demand forecast (assisted by Darton Commodities).