Are home battery backup systems worth it?

The average cost of a home battery system runs from $18K to $23K, including installation. While this can prompt some initial sticker shock, we're experiencing a historic shift to incentivize home electrification, which is good news for homeowners.

In fact, you could recoup the cost of your battery system in as little as five years by taking advantage of the newly available federal tax credit and state incentives, and using your home battery for power during peak pricing. It's also worth noting that batteries typically last 15 years and, once installed, have very low maintenance needs.

When assessing a battery system's worth, there are several factors to keep in mind:

• Available incentives If you can get sizable incentives and rebates for installing battery storage, the cost of your system could drop significantly. The biggest of these is the 30% federal tax credit, which we'll get into later.
• Your electricity rate plan Battery storage can help you save money on power, especially if you're on a time-of-use (TOU) rate or have to pay a demand charge. Under a TOU rate, the cost of electricity changes with the time of day. It's most expensive at times of peak demand. If you're a customer of Southern California Edison (SEC), for example, you might be on a TOU plan with peak prices from 4-9pm or 5-8pm. With battery storage, you can draw power from your battery system during those times, avoiding peak electricity prices. A demand charge, on the other hand, is based on the amount of electricity you use. Batteries reduce the total amount of energy that you need to draw from the grid, and consequently pay for.
• Value of lost load This is a fancy industry term for a simple idea: how much do you value not losing power? For many homeowners, energy savings aren't the primary reason to install energy storage – they do it because they want protection during power outages. That peace of mind is part of the battery system's value.
• Value of a lower carbon footprint With battery storage, you'll be able to use even more renewable energy than you could if you only had solar panels. Your battery system will store the solar energy your panels generate so you can use it at night and on days with bad weather, when you otherwise wouldn't have solar power.

Paying for your backup storage system: Cash vs. financing

Once you decide that installing battery backup is right for you, the next step is figuring out the best option for payment. Let's dig in.

Paying cash upfront

Paying for your battery system outright is the best way to maximize your savings. You'll be able to take advantage of all the incentives available, you won't need to worry about interest rates on a loan, and you'll own your system from day one. The tough part? You'll need to be able to cover the $18-23K cost of the system in one purchase.

Financing

If you still want to own your home battery backup system but don't want to pay everything upfront, you can access financing programs. These allow you to spread the cost out over a number of years. You can get a loan for just a battery system (also called standalone storage) or for one with solar panels (also called a solar-plus-storage system). You'll still be able to take advantage of incentives if you finance your system.

When you work with Haven, we'll help you find the best place to get a loan. This might mean working with a solar-specific lender, or looking at a home equity loan through your existing bank or credit union.

Leasing

Storage leases aren't as common, but they work the same way as leasing solar panels. Someone else owns and maintains the battery system, and you pay them a monthly fee. A lease probably makes the most sense if you're leasing your solar system, too. Just know that you will not be eligible for tax incentives or rebates if you go this route because you won't own the battery system.

Want to learn more? Get a quote from Haven

Tax credits for backup power

The federal government recently expanded the tax credits available for battery storage systems under the Residential Clean Energy Credit. A tax credit reduces the amount of income tax that you owe in a year.

Homeowners are eligible for a 30% federal investment tax credit (ITC) on the cost of battery storage and installation. So if you spend $20K to buy and install a battery system, your ITC would be $6,000. That means you would owe $6,000 less in income taxes for the year you installed the battery system.

There's no cap on the federal ITC for battery storage. It covers labor costs, including the costs for battery installation and the associated fees (e.g., permitting fees, inspection costs, developer fees), balance-of-system equipment (e.g., wiring, inverters), and batteries that have a capacity of 3 kilowatt-hours (kWh) or more. Any home battery installed after December 31, 2022 qualifies for the 30% ITC. The ITC even applies if you already have solar but want to add battery storage.

State tax credits

Very few states offer state tax credits for battery storage, but for those that do, the tax credits can be combined with the federal (ITC); they aren't mutually exclusive. Under the Maryland Energy Storage Income tax credit, for instance, the state has $750K to distribute in energy storage tax credit certificates. The funds will be distributed on a first-come, first-served basis.

Inflation Reduction Act benefits for home energy storage

The ground-breaking Inflation Reduction Act (IRA) gave a big boost to home backup batteries. It was the IRA that expanded the federal ITC for battery storage. Previously, the incentive was only available for batteries installed with solar panels. It now applies to standalone storage, as well.

The IRA also increased the existing ITC from 26% to 30% for 10 years. After January 1, 2033, the federal ITC for battery storage will start to drop gradually. Storage systems installed in 2033 will be eligible for a 26% ITC. That will drop to 22% in 2034 and be phased out in 2035.

State incentive programs

A number of states offer their own incentives to encourage more battery storage, typically in the form of rebates. California's Self-Generation Incentive Program is one of the best known state rebate programs. With rebates, you get a cash reward after your battery is installed and connected to the grid. Other states with these types of programs include Colorado, Hawaii, Oregon, and Massachusetts.

Rebates from your state do not get deducted from your federal ITC. To see what incentives are available for battery storage in your state — or even in your county or city — check out the Database of State Incentives for Renewables & Efficiency (DSIRE).

Talk with a Haven specialist to see how much you can save through incentive programs

Self-Generation Incentive Program (SGIP)

One of the best-known state rebate programs is California's Self-Generation Incentive Program. SGIP is operated by the California Public Utilities Commission (CPUC) and is a rebate for battery storage. In 2020, the CPUC added $675 million to the SGIP, bringing the total amount of incentives available to $1 billion. The program has been extended until 2024.

SGIP has multiple tiers:

• General market SGIP rebate — The general rebate pays $150 per kWh, which covers about 15% of the cost of an average battery storage system, after the tax credit has been applied. This rebate is for any customer of Pacific Gas & Electric, Southern California Edison, Southern California Gas Company, or San Diego Gas & Electric.
• Equity rebate — This level pays $850 per kWh, which covers about 85% of the cost of an average battery storage system. It aims to make battery storage more affordable for low-income communities, such as people who live in low-income housing or who have participated in solar affordability programs.
• Equity Resiliency rebate — This level pays $1,000 per kWh, which covers close to the full cost of an average battery storage system. This level is designed to help those who have experienced multiple public safety power shut-offs or who live in areas of high fire risk.

If you qualify for an SGIP rebate, you will get paid after your home battery is connected to the grid, although installers may be able to cover the upfront cost. The rebate is also applicable to standalone battery storage as well as solar-plus-storage systems.

It's important to act quickly, however. SGIP has a tiered rate structure, which means that the rebate amount drops as more homeowners install batteries. The sooner you apply, the bigger the rebate you'll receive.

Utility programs

In addition to the federal and state governments, some utilities offer incentives for battery storage. These are often called bring-your-own-battery or bring-your-own-device programs. Under these programs, utilities will pay you and/or provide bill credits if you allow them to draw power from your battery at specific times.

Why would a utility need to take power from home batteries? During times of peak demand — think summer heat waves when everyone is running their ACs at full blast — utilities can struggle to balance the grid and make sure enough power gets to all the places it needs to go. Being able to tap into batteries gives the utility a safety valve. It also helps them avoid turning on peaker plants. Peaker plants are the oldest, typically dirtiest power plants that only get turned on at times of peak demand. Utilities reward you for helping them out and allowing them to avoid using peaker plants.

Bring-your-own-device programs are designed to avoid completely draining your battery so that you can't use it. For instance, the utility won't pull from your battery if there's a major storm on the way because they want you to have backup power if you need it.

One of the biggest bring-your-own-device programs is National Grid's ConnectedSolutions program in the Northeast. Customers who want to join need to install a battery using an approved inverter (inverters take the direct current energy stored in your battery and turn it into alternating current that your appliances can use). When National Grid needs to draw power from the battery, it sends a signal through the inverter.

The program lasts from June to September each year, and National Grid can tap your home battery system between 2pm and 7pm Events will last no longer than three hours at a time, and batteries will be drawn on no more than 60 times. Customers who participate can earn $250 per kW performed per summer for the first five summers they're enrolled.

Another Northeastern utility, Eversource, has its own ConnectedSolutions program for customers in Connecticut, Massachusetts, and New Hampshire. Other utilities with bring-your-own-battery programs include Green Mountain Power in Vermont. Duke Energy ran a pilot program in Florida in 2022.

If you want to earn rewards through a bring-your-own-device program, first ensure that your utility offers this kind of program. You'll also need to verify that the battery you want to install can participate – utilities sometimes require certain battery manufacturers. Lastly, the incentives through these programs are considered income, so they will factor into taxes.

How Haven can help you decide on a home battery

Just like solar panels, home battery backup is a major purchase that can have major benefits for your home. It's important to do your research to get the best quote, figure out how you're going to pay for the system, and ensure you're getting all the incentives available to you.

If you want to learn more about the payment options and incentives available for your backup project, we're here to help. Get a quote on a home battery system or schedule a call with a Haven consultant to ask questions and talk through the process.