AGL’s view on solar and storage markets – in many slides

How the big incumbents respond to the growing influence of rooftop solar – and the impending boom in battery storage – is of major concern to major utilities, technology providers and consumers.

Which is why we thought we would share the AGL slide pack on its distributed generation strategy made at its 2-day invitation only investor presentation in the Hunter Valley this week.

Unfortunately, there was no accompanying text to go with it, so we will have to fill in the gaps. But these graphs do provide some insight into their thinking, including the idea of providing an energy trading platform for its customers.

In our main story today, we provide a couple of graphs into the bigger picture – AGL’s view of the likely market growth, and how much the market can stand before the utilities have to dump their current business model and trade it in for another. These slides provide more detail.

The first is on the size of the current market. At 1.4 million installs, it ranks as the biggest market for rooftop solar per capita in the world.

As tariff changes, the system size has also changed. From averaging 1.5kW in 2010, solar systems now average around 4.5kW. The vast majority are now in the 3kW to 5kW range, with a large residual capacity of 1.5kW to 3kW from the days of the generous feed in tariffs.

System costs have fallen 80 per cent in just five years. The biggest fall has been in the cost of the module, which is a fraction of its cost in 2009, but balance of system costs (inverters, installation, maintenance) have also fallen by more than half.

The installation rate has been helped by a high up front Commonwealth subsidy – through the small scale component of the renewable energy target – which once accounted for more than half the cost of the system, but now for just over one quarter of the cost.

The state-based feed in tariffs have also helped, although they are now reduced by the closure of the premium schemes, and their replacement with tariffs for exports only – ranging from zero to 8c, depending on the state.

Even with the removal of subsidies and the change in tariffs, AGL argues that the solar market should be resilient, with the return on investment quickly falling in the 2020s if cost reflective tariffs are removed, and if the small scale RET was removed. Is this a renewed policy push to have this done?

AGL says it is pushing hard to boost its share of the rooftop solar pie. As we mention in this story, it is aiming for 400MW of installed rooftop solar by 2020. This graph purports to show recent efforts, but note the lack of numbers.

There is a reason for that. As this next graph shows, AGL has virtually no market share up to now, which have been dominated by smaller players and aggregators. Part of AGL’s New Energy strategy is to redress that, take market share to ensure that the retailer has some skin in the game in a decentralised future.

It says solar will remain attractive, because as the subsidies close, this will be offset by further cost falls. There will be more innovative financing, and increasing consumer benefits, particularly with energy storage.

Here’s how AGL sees those various business strands emerging

But this is interesting, because it seems to suggest that the decentralised model could include trading with its consumers, a concept developed by the likes of Reposit Power, and maybe developed in partnership with the likes of Tesla.

Which takes us finally to energy storage. As we have revealed, AGL Energy is to roll out the first of its energy storage offerings in the next few weeks in Queensland, beginning with a 7.2kWh machine produced by AU Optronics.

Apart from that, we know little. AGL Energy reckon the battery pack accounts for less than half of the total system costs, the rest being hybrid inverters and installation and overheads. And clearly, storage is a complex idea, given as it is to changes in economics depending on the household consumption, solar array, positioning, and tariffs.

Finally, there is this. No, we don’t know either, but we do invite speculation on what it might mean.