Have you heard the line recently that grid-based battery storage is “coming”, but is not quite “commercial”, but might be in a few years time, or even a decade or two?
It’s a common misconception. But if you wondered about the overwhelming response to the recent tenders by South Australia and Victoria for the country’s largest battery storage installations, here’s why: The technology is already in the money.
That, at least, is the estimate of Bloomberg New Energy Finance analyst Kobad Bhavnagri, who says that battery storage is not just in the money, it is a long way into the money in states like South Australia, already with a high level of wind and solar and volatile wholesale electricity prices.
“We’ve seen the price of battery packs as fallen by 75 per cent by 2010, and our calculations show that will fall by a further 75 per cent by 2030,” due to technology innovation and manufacturing scale, Bhavnagri said.
That means that large-scale battery storage is already viable in large parts of Australia. In South Australia, it is offering internal rates of return of around 30 per cent (even without new market rules that will further encourage them), and in Queensland they are also profitable due to that state’s price volatility. NSW and Victoria will follow soon enough.
“That is a great story for integrating renewables,” Bhavnagri said. (And we should also point that this value stack for storage does not include network benefits, where battery storage is already seen to reduce cost of upgrades of poles and wires by around 30 per cent).
So, what does this mean for the grid? The CSIRO and the Energy Networks Australia gave some insight into this in their report last week, in which they outlined their pathway to a zero emissions grid based around solar, wind and storage, and why it would be much cheaper, cleaner, smarter and more reliable than the current iteration.
AGL Energy gave its own version of the future this week in a presentation to a Macquarie Group conference. As we reported earlier, the company once known as Australian Gas Light no longer sees gas as a transition fuel.
AGL says the economics of gas-fired generation don’t stack up, because wind and solar and storage are cheaper, and major gas producer Santos this week gave us an insight into why gas has little credibility on the environment front.
In his presentation, AGL chief financial officer Brett Redman provided this graph illustrating what has been presume to happen on the left – renewables with gas filling in the gaps – and what will happen with storage.
Redman describes this as a “game-changer.”
“Fairly quickly, a drive to more renewable energy becomes a conversation about how to time-shift energy using storage,” Redman says. “And once we have the storage capacity to get us to 50 per cent (renewable energy), we will have the technology to go to 100 per cent (renewable energy).
“It is just a question of cost and the rate of adoption.”
Redman even invited his audience to imagine a 100 per cent renewable energy scenario in the year 2050, just a year or so after AGL closes its last brown coal generator, Loy Yang A. (AGL is working on the assumption that its generator is the last one standing, but the reality is – and it knows this – that Loy Yang A will close well before then).
“What we’re starting to think more and more about is, what does such a world look like,” Redman said.
Using this table above, Redman suggested that around 200 terawatt hours of renewable energy would be needed for 100 per cent renewables scenario in 2050, which would require around 90GW of renewable generation – around 75GW more than what we have now. And by his calculations, that would require some 350GWh of battery storage.
The sums he cited are huge – $150 billion of new wind and solar and $100 billion of battery storage. There would be so many batteries that they would fill some 350,000 44-foot storage containers, and if laid end to end would stretch from Sydney to Perth with plenty to spare.
Now, it’s important to note that this is for illustration purposes only. It’s not going to work out like that for a bunch of reasons.
Firstly, as Redman admits, the renewables cost estimate is based on today’s prices (of around $2m per MW installed), and these costs will continue to fall dramatically.
The second issue is that we may not need that much large-scale wind and solar because we are likely to get a lot more “behind the meter” solar on the rooftops of homes and businesses, paid for by consumers who can save on their bills, as well as a lot of “distributed” storage.
Indeed, AGL’s calculations assume only 15GW of rooftop solar by 2050, whereas CSIRO and ENA predict 80GW, providing nearly half of all energy demand. The answer will surely be somewhere in between.
The other issue is that we may not need that much storage, let alone battery storage. Demand is likely to shift to meet supply, as new AEMO chief Audrey Zibelman and others have predicted.
And while batteries might be good for short-term storage, BNEF’s Bhavnagri notes that it is not so cheap for longer time periods, and so that service will likely come from providers such as pumped hydro, solar thermal, or even hydrogen or ammonia storage for longer time frames.
Still, this marks a major turning point in the thinking about the future. Hitherto, the major players were debunking renewables and essentially “talking their book,” which were full of fossil fuels.
The stunning cost falls in solar in particular and storage – and the fact that they are now demonstrably and significantly cheaper than new coal and gas – has put the writing on the wall.
Now we have the network owners and the major generators and retailers working out how to adapt their business to the inevitable – a switch to 100 per cent renewable energy. It used to be only the environmental NGOs and the think tanks that talked about this – now it is the mainstream energy industry.
“The introduction of big storage fundamentally changes the market for electricity and enables the transition to big renewables,” Redman says, adding that the closure of coal will be matched by the building of storable renewable energy.
“The bow wave of that change will be all about the cost of storage,” he said.
And we can bet it will happen much faster than he is saying.