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AGL sees no mass market for battery storage before 2020s

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AGL Energy may well have fast-tracked the announcement of its first battery storage products to coincide with the ground-breaking news about the Tesla Powerwall in late April, but despite all the excitement about the falling costs of battery storage, AGL Energy does not see a mass market uptake until the 2020s.

agl storage

In an interview with RenewEconomy on Friday, following the company’s two-day presentation to analysts and investors earlier in the week, the head of the company’s newly established New Energy division, Marc England, said battery storage would remain the province of early adopters for the next few years.

AGL's Marc England

In the interview – you can read the full transcript here – England said rooftop solar was just one of a suite of technologies that would transform the way households and businesses would use energy.

So along with battery storage, that meant electric vehicles, home energy management systems, and even software that would allow households to aggregate their output and sell it to the grid, and a whole bunch of other interesting things.

But England says people are getting a little too excited about the prospects of battery storage. There has been big debate about what value battery storage offers in Australia, with analysts at UBS and Morgan Stanley both suggesting paybacks could be as low as six years.

“Our view is that the payback period for storage is still going to be fairly high,” England says. “It will take time before it gets under 10 years. So it will remain an early adopter product for next couple of years.”

He suggests that while energy storage costs may come down quickly, as they did with solar, two key elements that underpinned the solar boom that led to 1.4 million Australian putting solar on their rooftops are missing from the battery storage market: government incentives and rising electricity prices.

“There are no sign of government incentives to drive it,” England says. “Most predictions are that electricity prices won’t increase. We need to temper our excitement. We are excited at AGL too, but we temper that with some of the fundamentals.”

AGL Energy will roll out its first battery storage products in Queensland this month, with equipment from AU Optronics of Taiwan. NSW and Victoria will follow in coming months, although England points out that not quite as many battery storage companies are ready to roll out in Australia as some may think.

England says there is no doubt that Tesla has had an impact on the market, bringing its weight as a powerful consumer brand, but it was not yet clear if the product was suitable for the Australian market.

England also rejected the idea that the new energy division was competing with existing assets, which include the massive coal-fired generators such as Loy Yang A in Victoria, and the Bayswater and Liddell plants in NSW, along with a range of gas assets and the existing retail business.

Analysts last week welcomed the changes announced by new managing director Andrew Vesey, even though they said it was not clear if retailers such as AGL Energy would win out in the new energy economy, or other players – existing or new.

Still, as Morgan Stanley’s Rob Koh said, it was better to cannibalise than to be consumed. Large utilities such as E.ON have decided that the conflict is so great that it needs to split its business into two.

England disagrees: “I don’t actually see it as competing with the core energy business, I see it as underpinning the value in the growth in that business.

“Some commentators say that some of the technologies such as solar reduce demand on the grid, which is true. But it’s not just about solar, it’s about integrating various technologies, from solar, to storage, to meters, and bringing in home energy management and other control systems as well.”

England also rejects the idea that it was a case of incumbents versus new technologies, or the grid versus distributed energy. “It’s a very binary way some people look at this, one or the other. I see it as both. We are heading for very different future where grid is still important, and distributed sources of energy is very important.”

If the amount of solar panels were trebled, he adds, that would still equate to just 6 per cent of demand.

“So the grid is not going away. The need for low-cost generation is not going away for AGL. What we need to do is to make sure can can offer customers choice. They can get it from the grid, they can get it from their roof, they can get it from their generators …  I don’t buy into this grid vs distributed. I think it is both and that is where we are heading with AGL.”

England has been set a bunch of key metrics, which include $400 million of revenue by 2020 and break-even in the newly established division by 2018. He intends to try to achieve this by installing some 400MW of solar on the rooftops of homes and businesses by 2020, and connecting 1 million of its customers to “smart devices”, be they solar panels, electric vehicles, battery storage or smart meters.

But while England concedes that AGL has started slowly with solar, it sees a couple of ways that it might be able to claw back some of its missing share.

One of those is with monitoring technologies that provide analytics on the performance of solar arrays. It estimates that up to 25 per cent of existing installations are under performing – due to poor installation, faulty inverters, shading, dirt, or just ageing modules. Most customers do not even know this.

AGL is getting together with a technology “start-up” to provide analytics to its own consumers and to others. It is also looking at technology that will allow it to aggregate the output of solar households and trade it on the national electricity market.

He says this is just one part of the technologies that will come into homes and businesses, provide the ability to create virtual networks and link them together perhaps with demand response technologies, virtual power plants, batteries, and allow consumers to share power.

“That is the future … that is where we are heading,” England says. “It comes back to consumers wanting choice, they want to engage in energy. Some will want to have comfort, some will want convenience, some will want more control.”  

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  • Antony Day

    He says “Most predictions are that electricity prices won’t increase” – on this alone, surely he is dead wrong.

    • Mike Dill

      I do believe that the price per KWH will not change, as the KWH cost continues to be pummeled by renewables. That being said, I do expect higher connection charges, which will start people thinking about the cost of disconnection.

    • RobS

      Between falling demand and ongoing surge in solar output I don’t think no increase in NEM power prices is an unreasonable or unlikely outcome.

  • What exactly are his 200 staff doing?

  • Sunbuntu Ltd

    >AGL Energy does not see a mass market uptake until the 2020s.

    He is correct. There will not be a mass market for batteries for years.

    But what is a ‘mass market’ 1% of users, 10% of users or 50% of users?

    Business Dictionary defines a Mass Market

    “Un-segmented market in which products with mass appeal products (aspirin, orange juice, soft drinks, paperback romances, etc.) are offered to every customer through mass retailers or independent stores, and promoted through mass media.”

    The most successful mass market consumer device of all time is the “boombox”, (large portable radio cassette player) over 75% of households had one within 7 years of launch.

    I predict that more than 20% of all regional commercial buildings before 2020 will have some form of storage. That is not a mass market but a big niche.

    • john

      On that point some 30 minutes ago I spoke to a business person and asked ” Have you put PV on the roof yet” his answer “No it does not work”.
      Seems there is a pretty big disconnect out there in the market place.
      I will go see the bloke when he is not busy and give him the figures from actual instillations and he can do the maths which will show of course that it is a no brainer to install PV.
      As to battery back up he is a 9 to 5 business so not really useful

      • Miles Harding

        This sort of prejudicial meme is part of the human condition. Very likely, this opinion was formed many hears ago, when PV was $10 per watt, at which time it was true. It is a major problem to overcome this sort of prejudice, because the conspiracy card is usually played when contrary evidence is presented.

    • Jacob

      The richest 1% should be getting storage ASAP not matter what the economics are. The upper crust of society surely cannot bear to be without power for even 4 hours per year?

      If 10% of the voters get storage, that makes things interesting and gives the storage industry some scale. The scale will cut costs further.

  • john

    I am of the opinion that we do have a problem looked at from the distributors perspective they need to get the same return on investment as they have been and with lowering amounts of transmission the only way to achieve this is to raise the cost per MwH charge which translates to higher retail cost for connection fees.
    From the retailer point of view once again lower sales volume so they have to raise the price per KwH to the consumer.
    This is not to mention the Generators who have an investment and if FF they are just idling along not getting those high peak demand periods that in 4 days make the profit so they have to try to reduce their operating cost by closing down plants.
    If vertically integrated they can from an accounting point of view load up the end cost to consumers of the shut downs.
    Now we have this energy storage situation that is able to once again take some skin of the duck curve of energy supply.
    Just remember before RE the energy supply curve was a bell curve no longer does this happen.
    So yes the cost of power will rise and because of the price is so high against the alternate supply mechanisms to consumers PV and Batter back up will only cause more angst for the industry.
    AGL are well advised to get into providing PV and Battery Storage they are at least are realising that this is a very sensible direction for the business outcomes for them.

  • mad dog

    England also didn’t even mention climate change once…we may be small in number(?) but some people are interested in battery storage for reasons other than just money saving.

  • Sober words from one of the major retailers will maybe cool down the hysteria about the impacts of solar PV storage. I doubt many customers will be leaving the grid in the next few years. The reports of grid death are greatly exaggerated.

    • Mike Shurtleff

      I think you’re clueless. AGL themselves recommended two different town get off their grid and form their own micro-grid for the benefit of both.
      I read all kinds of comments and articles about Australian utilities implementing punitive charges for Solar PV owners and their electricity prices are already three times what ours are in the US. At 3x, with a large solar resource, new lower-cost batteries, and a small generator to be rarely used, going off grid is making good sense. Add punitive charges for Solar PV (the way out of high electricity costs) and it makes even more sense to go off-grid. Increasing prices to compensate for customers leaving the grid. Even more sense to go off-grid. Charges or taxes just to run electricity wires past your house? Get rid of the bastards anyway you like. Only a coward would put up with that kind of abuse.
      Grid death? no. Grid shrinkage and major re-organization of operations? Oh yes, it is definitely coming. The economic forcing factors are very clear. Open your eyes to the obvious.

  • Ken Dyer

    Of course AGL is going to try and hose down expectations about battery storage. because it is in their interests to do so. The longer people stay in ignorance, means more profits for them. In 2008, Australia had hardly any solar all. In 4 years , by the end of 2012, over 1,000,000 homes went solar, and since then, installations have been ticking over in excess of 10,000 per month.

    What is also happening is that prices are dropping and the size of installations are increasing. http://pv-map.apvi.org.au/analyses

    Battery installations will follow the same trajectory. AGL is wrong.

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    • RobS

      I don’t quite understand your point, you acknowledge it took 4 or so years for solar to reach mass market levels once the economics became justified. AGL is saying they believe home storage won’t reach mass market levels until the 2020’s which is only 4.5 years away. Seems like a perfectly reasonable timeframe to me and completely in line with what occurred with solar’ progress

  • Graham Dunlop

    Hi All, Does anyone know what ever happened to the “laser cut” solar panels [developed by RMIT, } and bought by Origin or AGL about 8 years ago? I’m Interested because if they were put on the market , what a boost for Solar and Storage. They were shown on Catalyst [ABC]

    • Are you thinking of Sliver? Bought out by Origin, got it to commercialisation, had a joint venture plant in US, and then closed it cos its major trump card, low use of silicon, rendered irrelevant by plunging cost of silicon. Re-bought by original developers i believe to develop what it intended to become – flexible solar applications for military – soldier’s clothing etc.

  • Graham Dunlop

    Hi Giles, I am fairly certain that these panels were according to Origin , in “development” stage and that they[ panels] would be on the market in 3-4 years , that was as I said about 8 years ago. Catalyst had a test on them compared to a standard panel and they were simply outstanding in generating power, shaded or not , as long as the sun hit some of the panel it generated .Probably not unlike those with micro inverters they have now a days

  • neroden

    Sure, but the early adopters number in the *millions*.

  • halslater

    Look up “tautology” in the dictionary. Of course batteries are for early adopters since there are very few batteries out there now.

  • Roger Brown

    Tesla should build a Toyota style cab Ute or van for the transport industry . They would know how far they can go and organise the runs to suite . Most workers only do the go to work and home run & would be bringing home the Battery storage and plug in garage. 85 kwh would run a home for a week , in a lost power event ?