The key role energy storage will play in the electricity grids of the future – and the vital importance of investing in and testing the various emerging battery storage technologies – has been highlighted in a major report published by the Australian Renewable Energy Agency on Monday, which predicts a 40-60 per cent price plunge for certain battery technologies by 2020.
The 130-page report prepared by AECOM predicts a “mega-shift” to energy storage adoption, driven by demand – from both the supply side, as networks work to adapt to increasing distributed and renewable energy capacity, and from consumers wishing to store their solar energy – and by the rapidly changing economic proposition; a proposition, the report says, that will see the costs of lithium-ion batteries fall by 60 per cent in less than five years, and by 40 per cent for flow batteries.
“The trend of reducing costs for battery technologies such as lithium-ion and flow battery technologies suggests that there will be a dramatic shift towards these technologies in the next one to two decades,” the report says.
But it stresses that before moving to a market-led roll-out in Australia, we will need to develop demonstration project experience, to inform key stakeholders including consumers, local communities, technology suppliers, financiers, existing electricity asset owners, regulators, retailers and policymakers.
The report notes that supply-side energy storage – energy storage used by network operators to balance supply and demand and to avoid new-build infrastructure – “could be considered inevitable” given current trends in renewable energy uptake, particularly the huge uptake of rooftop solar by Australian households.
But it says the financial drivers for supply-side energy storage are “significantly weaker” than for demand-side applications; installation of battery storage by those same rooftop solar households, keen to use as much of the energy their panels generate, rather than sending it to the grid for little to no financial benefit.
“One of the largest markets for energy storage systems will be the end-user market, which looks to pair storage systems with rooftop solar PV,” the report says.
“PV can be coupled with storage to maximise usage behind-the-meter and ensure that PV generated during the day can be stored and used during the peak periods. This model is currently valuable for consumers because it reduces export of excess solar to the grid. Instead, the locally generated electricity can be used behind-the-meter, offsetting electricity purchased from the grid (which can be three to five times more expensive than standard export tariffs).”
Interestingly, the report uses the recent boom in residential solar PV as a “useful analogy” to what could occur in the energy storage market, as prices fall and technology improves.
“The behind-the-meter market segment of energy storage is widely expected to undergo a similar boom to the solar PV industry, with a tipping point expected within the next 10 years as further cost reductions are achieved,” the report says.
But the report stresses that the risks and opportunities of an energy storage boom would be more complex than for solar PV, due to the multitude of applications and value streams, greater safety risks, and the continued growth of rooftop solar.
The next biggest potential market in Australia for energy storage – as a value proposition – would be the off-grid market, the report finds.
“Off-grid electricity is Australia’s most expensive electricity due to the underlying high gas and diesel prices in remote areas,” it notes.
“As such, the business case for renewables as a means to offset fuel use is strong. Similarly, in order to enable higher penetrations of renewables, energy storage can be utilised to manage the intermittent nature of wind or solar generation.”
The report notes that AECOM has previously forecast that the renewable off-grid market potential could grow to over 200MW in the short to medium term and over 1GW in the longer term.
Of course, ARENA has already been active in supporting off-grid solar plus storage applications, including the DeGrussa mine project in WA – Australia’s largest solar + storage project to date; a hybrid solar PV, wind and battery storage project in South Australia’s Coober Pedy; and a a 1MW portable solar-hybrid plant, designed by construction company Laing O’Rourke in Queensland.
The report finds estimates the value of off-grid storage used for hybridisation of renewables by considering the cost differential between the levelised cost of renewables and the short-run marginal cost of generation of thermal generation. (See chart below)
For example, it says, the levelised cost of electricity for a medium size solar PV plant in remote locations such as the Pilbara is approximately $196/MWh (including a $30/MWh LGC rebate), while the short-run marginal cost of diesel generation is $346/MWh (assuming diesel cost of $1.30 per litre).
Therefore, the report concluded, every additional megawatt-hour of solar that can be used to offset diesel generation can save $150/MWh (plus the value of renewable energy certificates).
“Given that energy storage can help fulfil this role by facilitating higher penetrations of solar PV, $120/MWh is a good estimate of the value of energy storage in this application,” it says.
Among other economic drivers (see table below) behind the coming battery ‘megashift’, AECOM includes tariff avoidance, time-of-use arbitrage, protection against black-outs, and network investment return.
At this stage, the main barriers to uptake of energy storage in Australia are listed in the report as financial, technical and regulatory – currently, it notes, there are no subsidies or other incentives for wide-spread deployment of battery storage; as well as the uncertainty that has dogged the Australian clean energy and technology market under the Abbott government.
The report recommends that ARENA continue to work with industry participants including technology suppliers, electricity networks and power retailers to prepare the market for a future boom, by supporting the demonstration and establishment of sustainable market structures and incentives.
“By supporting the development of an efficient market for energy storage, ARENA will facilitate additional supply of renewable energy by addressing intermittency and power quality challenges that could otherwise stall growth in the market,” the report says.
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