The Australian Energy Market Operator has dramatically slashed its forecasts for household battery storage over the coming two decades – because it says that anticipated falls in retail prices will reduce the economics of the technology.
In its latest annual forecasting document – known as the Electricity Statement of Opportunities (ESOO), AEMO says it has reduced its forecast installation of battery storage to just 2.6GW in 20 years time, less than half the uptake forecast in last year’s document (5.7GW).
“This is due to lower forecast retail electricity prices leading to a less favourable payback period, and different assumptions around tariff structures, technology costs, and other household factors in the forecast horizon,” it says.
The forecast is barely more than half the “weak uptake” forecast made just months ago in its March Electricity Forecast Insight Update, which had put the strong scenario of small-scale battery storage at around 7GW by 2038. (See graph below).
It is also significantly below private forecasts for battery storage, such as from Bloomberg NEF, which in June released its New Energy Outlook that predicted more than 15GW of behind-the-meter battery storage by 2038.
It raises questions of just how much of Australia’s energy supply will be met by distributed energy resources.
The latest forecast took advice from the CSIRO, which prepared a report accompanying the ESOO. It assumes that retail prices will fall more quickly than battery storage costs, and appears to suggest that battery storage will remain no more than a niche market for decades to come.
South Australia is the only state where the uptake of battery storage is higher than previously forecast. AEMO cites the new Liberal state government’s undertaking to provide subsidies to 40,000 households, but does not mention the $100 million scheme propose by Tesla to connect 50,000 homes – that may still go ahead.
By the end of the forecast, some 15% of residential PV systems are projected to be integrated with batteries across the NEM, but few – just 28 per cent – are aggregated into schemes such as virtual power plants, which allows them to be timed to discharge to maximise value to the system.
This is a surprising observation. The CSIRO says that initially, no behind-the-meter batteries are initially assumed to be aggregated.
AEMO says that the role of behind-the-meter batteries in helping maintain system reliability depends on the future charge/discharge profile assumed. For those remaining 72% of batteries not assumed to be aggregated, the ESOO 2018 adopted the charge/discharge profile shown in Figure 6 below.
The profile, called ‘convenience charging’, assumes households will consume what they can from PV generation during the day, supplement any shortfall of PV supply with battery discharge later in the day, and consume entirely off the battery after sunset.
“In other words, these households with integrated solar and battery systems will behave like an energy island, operating the battery solely for their convenience,” AEMO says.
“This leaves little or no battery charge to discharge to the grid during times of system peak demand. While it does reduce the household’s demand from the grid at peak times, it is assumed to conserve any surplus battery charge for later rather than export surplus energy to help reduce system peak demand.
“Figure 6 shows that, during times of solar irradiance, the household is meeting their energy needs off the PV system, and then consuming from the battery when the sun goes down.
“At time of maximum grid demand, which is a few hours later than the household’s peak demand due to rooftop PV, the average household with air-conditioners and basic appliances would have demand of approximately 2 kW.”