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What if one third of Australians chose to go off-grid?

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Imagine if one third of Australian electricity consumers decided to take matters into their own hands, and went off-grid – looking after their own production, storage and consumption needs?

Sound fanciful? Well, according to the CSIRO and industry experts, grid operators and generators, it’s actually quite possible, and indeed quite likely. It is one of four scenarios that is painted under the CSIRO’s Future Grid Forum, possibly the most interesting insights into Australia’s energy future that RenewEconomy has come across.

Here’s how it sees the leaving the grid scenario unfolding: “New energy service companies sensing a market opportunity invite consumers to leave the grid, offering an initially higher-cost solution, but one that appeals to a sense of independence. Customers have already become comfortable using small amounts of storage and in their vehicles and a trickle of consumers takes up the offer.

“By the late 2030s, with reduced storage costs, disconnection becomes a mainstream option and the rate of disconnection accelerates. Customers remaining on the system are those with poor access to capital and industrial customers whose loads can’t be easily accommodated by on-site generation.”

And although the report suggests off-grid generation may be the cheapest option in 2050 as a percentage of household income, it may be that its off-grid prediction is extremely conservative. It is based on the assumption that battery storage costs will only halve between now and 2030, and going off-grid will only make economic sense for consumers from 2040 onwards.

This is despite the fact that network operators such as Ergon Energy, in regional Queensland, think that solar and storage could become an economic option to go off-grid and dump the by the end of this decade.

Future Grid Forum project director Paul Graham admits that there is a lot of guesswork involved. “We could be wrong by a decade or more,” he told RenewEconomy. “Battery costs are moving so quickly it’s hard to catch up. We have got them halving by 2030, but others have got them halving by 2020.”

Indeed, still more people – those that predict that battery storage will follow in the footsteps of solar PV, which has plunged in cost by 80 per cent over the past five years – have battery storage costs halving within a few years.

Still, it’s an interesting proposition, and the one big conclusion from the Future Grid Forum is that the future of electricity in Australia will look nothing like the past, despite what some government advisors and middle aged engineers might wish.

Graham said he had no clue about the outcome of the Future Grid Forum when he sat down to organize it. But after a series of workshops with the participants, it was clear that they wanted to explore the “mega-shifts” which are clearly occurring in the electricity industry. (Graham cited the recent passing to the 3GW solar threshold in Australia).

“We wanted to look at more than just high or  low gas prices, or high or low carbon prices.  We wanted to look at every part of the supply chain. The industry recognises that it is on the crossroads …. Nothing will stay the same. For the past 50 years we had centralised generation with three main fuels – coal, gas and hydro and distribution systems that delivered this to the end user.

Even the scenario most likely to suit the fossil fuel industry and incumbent utilities the most, CSIRO’s “set and forget” – relies on three main assumptions – that solar PV costs will not fall much further, that battery storage costs won’t fall much either, and that consumers will be largely apathetic.

It’s a scenario that suggests that incumbent utilities will take over issues such as demand management and other peak load management options, but otherwise their business will remain largely unchanged. The share of renewables extends barely beyond 30 per cent. It seems like wishful thinking.

The other three scenarios are much more interesting, and it would seem more realistic. There is the leaving the grid scenario (apart from the debate over battery storage costs, you can read more about that here).

Then there is the “prosumer” scenario. This is somewhat similar to the off-grid scenario but for one important point – the utilities wake up to what is happening and decide to deal themselves into the game by offering services and other options that encourage consumers to stay on grid.

In this scenario, some 50 per cent of generation comes on-site, due to innovative financing and product packaging from energy services companies. Electric vehicle adoption is also popular, being used by one quarter of households. The use of on-site generation is also strong in commercial and industrial customer sectors, but with a stronger preference for cogeneration or trigeneration technologies.

Graham says there is a big difference in mentality between the “prosumer” and off-grid scenarios. In the former, there is the willingness to trade with the grid (i.e. sell solar electricity back to the network operators, and to use it as back-up).

But the pricing for both is key, and Graham says, may be difficult to strike, particular for network operators looking to protect their initial investment. If the incentive is not there to trade, then consumers will look to leave the grid, just as they are deciding now that mobile phones mean they no longer need a landline.

“It is within the industry scope to provide a valuable proposition to stay connected to that point,” Graham says. Whether they do so remains to be seen. It is surely one of the biggest issues and challenges for Australia’s network going forward.

The fourth scenario is the high renewables one, the “Renewable thrive scenario.” This is where the delivery of electricity remains largely centralized, but the falling cost of renewables displaces fossil fuel generation, and energy storage is deployed by network operators at grid scale, rather than in homes and behind the meter.

Graham says that if renewables are cheaper than most people think, then renewable ambition can go further.  This scenario envisages 86 per cent renewables by 2050. “If we are really ambitious, and we get to an emission free system, we could have our car powered by that as well, than centralized clean energy becomes a real proposition.”

The implication then is that the pro-sumer and the off-grid scenarios will be made redundant, because green energy is already supplied by the grid. That may come to a relief to some, because it is not yet clear how many consumers really want to bother with their own generation and energy management. “May be we have already exhausted the early adopters and the rest of us aren’t interested,” Graham suggests. In reality, he admits, no one knows.

Another interesting conclusion is that in all four scenarios, the CSIRO believes that there will be only a minor different in costs to consumers by 2050. (See graphs below). They range from 2.3 per cent to 2.9 per cent of household income, compared to 2.5 per cent now (and in the 1960s). As mentioned above, leaving the grid is the cheapest option for households (2.3 per cent of household income), although it involves the higher capital costs – but that may depend on the price of batteries.

Screen Shot 2013-12-05 at 5.07.07 pmThe other conclusion is that consumers, generators, grid operators and suppliers will all face changes. But those that face the most dramatic change are the fossil fuel industry.

Coal is facing abrupt change no matter what happens. interestingly, for gas, the least change comes in the high renewables scenario, supporting a conclusion reached by Citigroup analysts earlier this year, that suggested the future of gas is deeply reliant on the successful deployment of renewables.

Maybe the Australian government should keep that in mind. Indeed, seeing they are doing another energy white paper, perhaps they could base the electricity chapters around these scenarios. It would be a lot more realistic than past efforts.

P.S. CSIRO are hosting a public discussion of the Future Grid Forum on Friday morning at UNSW. We will provide an update.

Meanwhile, here some graphs that illustrate how the scenarios might unfold, and what they entail. The full report is available here.

 

CSIRO

CSIRO_FGF_Renewables_Online_FINAL_v2

CSIRO_FGF_SetForget_Online_FINAL_v2

 

CSIRO_FGF_LeavingGrid_Online_FINAL_v2

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  • barrie harrop

    50% of Industry could go off grid within 3-5 years and save up to 30% in energy costs via http://www.remotenergy.com

  • Rob

    If home energy battery storage becomes technologically and economically viable I would imagine most people with solar systems would consider going off grid. Especially since the utilities are going to be so tight with what they pay for solar energy produced by their customers, ie: 8 cents/kWh. If home battery storage does become viable, this would be a further incentive for homeowners, who haven’t yet, to adopt solar…..and battery storage. So not only would battery storage encourage current solar homeowners to leave the grid it might encourage more people to take up solar….and battery storage…..and go off grid. Energy companies will have to think fast if they want to maintain their current relevance.

    • Chris Fraser

      Possibly theirs is a case of having invested all the money in centralised generators and gas. Tch. Apart from having nothing left to invest, i would like sincerely to know why they appear to be a little stuck in the old paradigm.

  • Stan Hlegeris

    “By the late 2030s, with reduced storage costs, disconnection becomes a mainstream option.” Oh, please–more than twenty years from now? I know the spokesman admitted he could be “off by a decade,” suggesting that going off-grid could be a practical choice in maybe fifteen years. Nonsense.

    Disconnection is an option right now. Solar PV gear is cheap as chips. Batteries seem not so cheap, but compared to what? They’re already cheap enough. People are held back only by the expectation that battery prices will fall by another 50% or 75%.

    At the moment, PV systems plus storage are mainly for the early adopters. That was true of grid-connected PV systems just a few years ago.

    • patrickg

      Well >35k for off-grid is pretty pricey, and there is real ambiguity about how quickly battery prices will fall – if at all (they have not substantively fallen in the last 5 years very much if at all). I think the caution in predicting is well-placed.

      • Stan Hlegeris

        You can’t quote a price without specifying how many kWh/day and how many days of reserves. $35,000 sounds like an awfully big system.

  • Zvyozdochka

    I think that’s a “sell” recommendation if you hold electricity utility shares, or you’re a state govt with a soon-to-be-failed baseload business model.

  • Motorshack

    I’m a retired software designer with significant network management experience, and it strikes me that there is yet another variant on the straight off-grid option.

    The article quotes one source who suggests that many people might not want to manage an off-grid system, even if it were otherwise an attractive proposition. However, given the existence of the Internet, it would seem very plausible to have home systems remotely managed by a company that would send around maintenance people whenever their sensors detected a problem in a system. So, the homeowner would have the advantage of professional management and maintenance, but still be in a position to produce their own energy from their own capital equipment.

    Obviously this is a business that the existing grid operators could move into, since they have exactly the right expertise, but they would also have a lot of competition, since the capital investment to start such a service company would be relatively low. In particular, there would be no need for their own GW-scale generators or wide-area distribution networks. Rather they would just need a roomful of cheap computers that were connected to the existing Internet.

    They would also need the right software package, but the size of that investment would not be all that large either. There are already solar PV inverters that have their own little embedded websites, and all you need to track them is a browser. In general, stuff like this is now very routine in many industries.

    • Bob_Wallace

      Existing utilities could rethink their relationship with consumers and enter into more of a partnership with them. Treat those with extra power as suppliers and offer them installation/financing/maintenance services.

  • Coaltopia

    Don’t forget about us poor renters!

  • Tim Buckley

    Telsa and Solarcity have rewarded their shareholders and staff enormously delivering
    products sceptics said could never work. An NYT article overnight (link below) details
    their latest offering, a fridge sized battery storage pack to complement rooftop solar. Leveraging the economies of scale Telsa brings, Solarcity will revolutionise the industrial and home energy storage market in California in a similar way KfW is trialling this year in Germany. I doubt we will be waiting decades for this product to be commercialised.

    http://www.nytimes.com/2013/12/05/business/energy-environment/solarcity-to-use-batteries-from-tesla-for-energy-storage.html?_r=0

  • Tim Buckley

    Sorry, it might just be easier to read Giles’ other great article today on Solarcity!

  • Anthony Szatow

    Energy for the People have been doing research and analysis with the Alternative Technology Association, with funding from the consumer advocacy panel, exploring when off grid will be viable in a range of market context.

    Our modelling has involved detailed bottom up modelling of scenarios, overlaid with forecast electricity, gas and off grid technology costs, across a range of scenarios including regional, suburban, greenfield etc.

    Results will be available within a fortnight. Safe to say the comment “we might be out by a decade” is about right according to our work.

    The report will be available from http://www.energyforthepeople.com.au

    I would be interested to know why CSIRO used the broad brush scenario approach rather than doing the bottom up modelling?

  • Gary

    Electric Vehicles make it easy. They have 20kWh of storage already and if your panels aren’t generating much you can drive to town and pick up some more electricity when you are running low.
    EV – $30,000
    10kW Solar Panels – $15,000
    Small amount of at-home storage – ?
    Car + electricity supply – sorted.

  • JohnRD

    Part of the problem here is that poor decisions will be made because the distributing system owners insist on making it more and more expensive as they try and protect their profits from the effect of past poor decisions.
    A more logical approach for the future may be to retain the grid and keep connection charges low enough to discourage complete disconnection.
    Complete disconnection means a lot of storage or a back-up genrator is needed for rainy days. It also means that excess power is wasted.
    Some storage allows excess power to be used, rooftop solar power to be used during grid blackouts and helpes avoid the need for future grid upgrades.

  • juxx0r

    Say you’ve got a small business drawing 12kWh/day. You’ve got 4kW of solar on the roof averaging 18kWh, so you’ve got 6 to spare. Of the 12kWh, you use 9 whilst you’re producing power and use 3 the rest of the time. Your friendly utility is charging you 80 cents a day to be connected and 41c/kWh for the power you use.

    That’s $2/day to fund 3kWh on average of storage.

    Using CSIRO’s numbers in the bottom graphic this gives you an IRR of 111% on 6kWh of storage.

    So using todays numbers, there’s instances in Australia where this is no brainer.

    • Bob_Wallace

      You need to add in the cloudy day backup cost.

      • Concerned

        Cloudy, raining fortnight,as is SE Qld regularly.

  • Wind Pacific

    Consideration of the uptake of EV’s may require greater attention and may be one reason that consumers stay connected to the grid and be a savior for the grid operators. Look where solar PV has come in 10 years and apply that to EV’s meaning in 10 years the majority will be driving EV’s.
    http://www.windpacific.com

  • nicephotog

    Looking beyond it, as always the “scenario” is how to make a profit and hold onto or lock in customers with a system. This article: http://www.abc.net.au/news/2013-12-02/252c000-signature-solar-petition-urges-feds-27don27t-tax-sun/5129522
    about refusing or penalising people whom have off grid equipment who want grid electricity also is no different in tactic at causing trouble to consumers by interrogating and invading consumer privacy with a potential restriction. Its only reasonable chance and only allowance is what makes business viable and profitable and excused, “user pay”. So connection costs should be charged to the consumer to have the grid whether they have off grid or not. One important feature of off grid however, is that small off grid systems up to 3Kw hybrid can be used for running a fridge and freezer to prevent loss of food stuffs whether domestic or kept in a domestic area(home) as much for blackout. If any penalty were against a consumer to have the grid connected it best have a ceiling placed on it of 3kw so hundreds of dollars of food can be kept safe and not lost to blackout or line work when away for a week or two. A small 600w max. wind turbine and 150w solar and a 2500w inverter can run two standard upright white goods i.e. a freezer and a fridge.
    http://wild-canidae-conservation-forum.netne.net/austhouse15kw.html
    Also, for around $8000 AUD(e.g. 80 x 80ah 12v deep cycle 30 celsius long life) to Sydney port BATTERIES(ACCUMULATORS) CAN BE OBTAINED for a satisfactory off grid system size such as a 10Kw power system with 5Kw wind and 5Kw solar PV . The ability is there to have twice the power consumption in 10 years and if the rig lasts 14 years , at present cost on grid whether the cost lowers a little it will have been cheaper after 14 years(around end of off grid system life).

  • KenFabos

    Which is likely to be more cost effective; centralised storage at large scale integrated into the grid or having your own without the grid?

    We are beginning to see some incentive for the incumbent energy sector to invest in storage, but I think the biggest disincentive remains; politics enabling and assisting them to not have to.

    • Bob_Wallace

      If the same storage is used on both sides of the meter utilities should be able to purchase in greater quantities and get better prices.

      Our two current least expensive storage technologies, pump-up hydro and flow batteries aren’t suitable for behind the meter.

      The grid will be able to access cheap wind and hydro generation. Off the grid backup generation is likely to be expensive. It’s now expensive and ‘dirty’.