Are battery storage costs already beating retail energy tariffs?

The key to the value of battery storage is not just about the basic cost of the technology, it is how it is used within the energy system, either by consumers or energy providers, at home or in a business, or at the network and grid level.

In some areas, it is already economic. Ergon Energy is deploying one hundred battery storage systems around its network to avoid the cost of poles and wires upgrades. It says that will cut the cost of upgrades by one third. And this in turn, will allow more local renewables to be deployed by its customers, because it will add stability to the grid. It says it even makes sense to use battery storage take customers off the grid.

In off-grid areas, inland Australia and on its islands, such as King Island in the Bass Strait, storage is clearly economic because it allows cheaper wind or solar output to be maximized and offset the horrendous cost of diesel.

And new homes in semi-rural areas, or even in some new housing estates, may find battery storage competitive because of the high cost of paying for a connection to the grid.

The cost of storage is clearly coming down. Experts say storage costs are falling at 20 per cent or more per year, a trend that may be accelerated when EV manufacturer Tesla opens its “giga-factory” and enters the home storage market. (An announcement is expected next week).

The big question to many consumers is this: Is storage is already cost competitive with the grid for consumers in towns and cities?

The answer to that is driven by what the storage will be used for – ensuring supply to avoid spoiling of stock, or ensuring that life saving equipment continues to operate. For some, the equation is not driven by pure economics.

Some, like IT guru Simon Hackett, are early adopters. He’s taking his Adelaide office off-grid. Others do it to stick a finger to the big utilities. For some, such as those without power for a week as a result of the Sydney storms, it is about convenience and certainty of supply.

For others, particularly those with large solar arrays about to lose their premium tariffs, or being offered virtually nothing for their exports, it is about maximising investment. For some, it is simply about reducing bills.

At the household level, it is mostly about juggling the complex range of tariffs that differ from state to state, and from major cities to regional areas.

Australian manufacturer RedFlow, for instance, says that its new zinc bromide batteries are competing with grid tariffs in Europe, where it is targeting its initial market.

But it’s not far short of Australian tariffs either, particularly for solar households receiving little or nothing for their exports, and then being asked to pay more than 50c/kWh for their grid electricity at peak times. Some say storage is already competitive for commercial users, particularly those who can use it to avoid high demand charges.

Michael Anthony, from Solar360, says battery storage can already be cheaper than grid power, depending on the circumstances of the customer, the local tariffs and the reason why storage is deployed.

“There is a sweet spot around the balance between self-use and stored capacity that gives an optimum outcome,” Anthony says.

In the city, that means a hybrid system of around 3-5kW, battery storage and a hybrid inverter. Different households will want different amounts of storage – from 2kWh to 20kWh – depending on their usage patterns.

But Anthony says research from his company’s 360Storage project shows the sweet spot is between 4kWh and 6kWh, and getting the household to increase its daytime usage from around 30 per cent of its daily consumption to around 50 per cent.

That might mean timing the washing machine and dishwasher and other appliances to operate during the day. The idea is to use as much of the solar output as possible, saving storage for use later on.

Anthony says this can deliver a cost of energy from battery storage in the low 20c/kWh. For a 10kWh system, the cost is likely to be just below 30c/kWh. On average, we are probably seeing 26c-27c/kWh,” he says.

That is cheaper than most grid prices.

“For many reasons in Australia – with the right energy storage system, allowing for a 15-year investment window – which includes the change over of a lithium-ion battery storage array, it is a proposition where consumers are saving money from day one.”

“If consumers consider what they will spend over the next 15 years on electricity, some may find they will spend over $45,000. That gives a lot of room to move with solar and storage.”

Anthony says there are five key things to think about in addressing storage – installing enough solar, maximising solar use during the day, storing for the evening, getting rid of energy guzzling appliances and fittings, and getting good advice.