A range of media outlets over the past few months have been reporting rumours that at a Federal-level both Labor and the Liberal-National Party are planning to unveil policies that would provide financial support for the installation of home battery systems.
In addition, just recently as part of the WA state election, the WA Labor Government has promised a $5000 rebate for household battery systems as well as provision of a $10,000 interest free loan.
If you believe the pollsters, cost of living concerns are absolutely paramount in voters’ minds right now, and energy bill increases are one of the key sources of cost of living angst.
So given that combining a battery with solar is likely to completely eliminate most households’ power bill for ten years or more, it’s understandable that politicians are looking in that direction.
Also, it’s becoming increasingly apparent that if we’re to address both stubbornly high power prices and also emissions, we need to find some way to better utilise solar energy by either storing the energy and releasing it later, or shifting demand to better align with solar generation
The chart below shows wholesale energy prices by hour of day averaged across the four states of NSW, Victoria, Queensland and South Australia for this year and last year. There’s not much room for solar to push wholesale prices lower during the daytime. Yet from 4pm to 8pm there are huge gains to be made if we can lower demand over this period.
Source: Green Energy Markets analysis using NEM Review
When we look at carbon emissions, while we’ve made no progress in decarbonising gas pipelines (and aren’t ever likely to), we’ve made great progress in lowering electricity emissions intensity, particularly during daylight hours. Although concerningly progress in lowering emissions during night-time has been slower and has almost stagnated since 2022.
There’s a lot more wind that will come online over the next two years that will help here, but given the slow roll-out of transmission to support further expansion of wind, we really need to also make better use of easy to deploy rooftop solar and the cleaner power it is providing in the middle of the day.
Source: Green Energy Markets analysis using NEM Review
Obviously batteries will help here. But they aren’t the only way we could help householders lower their energy bills, nor are they the only option for making better use of increasingly plentiful and cheap solar energy.
If politicians want to help householders permanently lower their energy bills and also help decarbonise the energy system, there are plenty of options available. Many of these are cheaper and more accessible to householders than batteries.
These include things like:
- – Using electric heat pump air conditioners instead of gas for heating,
- – Better insulating homes so they can be heated or cooled during the day and so they don’t need so much energy in the evening to be comfortable;
- – Switching to an electric vehicle and using a home smart car charger to charge it up during the daytime on surplus solar;
– Utilising electric heat pump water heaters which are programmed to heat-up during the day rather than night-time;
– Rolling out AC vehicle chargers in places that people park their cars during the daytime.
Look, I absolutely get it that politicians like to focus on brand new, high-tech stuff that captures people’s imagination, rather than boring old stuff like water heaters or air conditioners or even worse, insulation.
But if we limit our focus solely to home batteries we are passing up so many other ways to help householders lower their energy bills while also lowering carbon pollution.
Also on low interest loans – sorry but the evidence is in, they don’t drive energy saving changes at meaningful scale. Again, I can understand the appeal – by giving people a loan you align the outgoing cost with the incoming bill savings. Plus politicians get to claim it won’t hit the budget.
In theory you’d think this type of tool would address people’s tendency to apply hyperbolic discounting in their decision making- where they have difficulty rationally trading off between extra expenditure now against larger savings in the future.
But we’ve been using finance instruments as a tool to try to drive uptake of energy efficiency for decades across much of the western world. While they aren’t completely useless, they have had limited success in driving widespread market uptake and long-term transformation.
That’s in large part because it complicates the decision-making process and a key reason why people tend to make irrational trade-offs in energy efficiency is because they are trying to save time and complexity in their lives. Low interest loans can help in tipping someone over the line who is actively interested in an energy saving product, but they aren’t very good at getting them to the line.
Budget funded, product-specific rebates are far more effective than loans, but they have two primary problems:
- They rarely last long and businesses know it. Consequently, businesses supplying the product getting the rebate can be reluctant to make long-term investments to lower their costs of provision. These programs’ suspected short lifetime is also less effective in encouraging new entry by additional competitors.
- You ideally want policy to focus on desired end goals rather than the means of getting there. The desired end goals are lowered energy system costs and emissions. Batteries are a means of getting this outcome, they aren’t the desired outcome in themselves.
A legislated program requiring energy companies to achieve a broad-based energy or emission reduction target works better than rebates because they tend to be long lasting. While legislation can always be repealed it’s not as easy to cancel as a budget-program which is reviewed every year through an expenditure review committee.
Also, such programs can be designed to be open to a broad range of technologies that deliver the desired targeted outcomes.
This is why myself and Ric Brazzale have suggested it would be better to utilise the Small Scale Renewable Energy Scheme to incentivise battery uptake.
It’s also worth noting that the SRES also supports the roll-out of heat-pump water heaters, not just solar PV, which have a role to play in reducing emissions from gas and better utilising daytime energy.
However, there is also merit in learning from NSW and Victorian experience with their broad-based energy savings target schemes. NSW has expanded their program to also support technologies that reduce demand during the evening peak period, such as batteries. Victoria meanwhile is investigating how to evolve its Energy Upgrades program to drive lower overall energy system costs as well as lower emissions.
So politicians, if you really want to help households reduce their energy bills, don’t limit yourself to batteries. And if you want to make a genuine, lasting difference then legislate your targets and require businesses to help householders achieve it.
Tristan Edis is director of analysis and advisory at Green Energy Markets. Green Energy Markets provides analysis and advice to assist clients make better informed investment, trading and policy decisions in energy and carbon abatement markets.
