The Economics of Battery Storage for Residential Solar Customers in Southern California

Abstract

Battery storage coupled with solar panels became a consideration after the original net metering program in California (NEM 1.0) ended and gave way to the current net metering program (NEM 2.0). Under NEM 2.0, battery storage gives customers under time-of-use (TOU) rate plans the ability to store the excess electrical energy generated by their panels during sunlight hours (when electricity usage and resale rates are low) and then use that energy in the evening when rates are significantly higher. This reduces the amount of expensive electricity that the customer would have to purchase from the grid. It is widely expected that the current net metering program in California will be replaced by a more restrictive and much less financially attractive program when NEM 3.0 goes into effect in early 2022. The impending introduction of NEM 3.0 has accelerated the rate at which homeowners are installing solar panel arrays and battery storage. In this paper we examine the economics of installing battery storage for residential customers and examine whether battery storage makes financial sense. We use public data to model the electricity bills for an average sized residential customer in southern California and examine how much money this customer can save using battery storage under the current rate plans.