(Update: See also our follow up stories:
At the big clean energy conferences that have been held in three continents over the last two months the major topic of conversation has been clear – battery storage – what it can do, what it will cost, and when it will be here.
It’s a subject that is crucial to everyone along the renewable energy value chain – from customers (residential and utility-scale) looking to get the most out of their rooftop panels or large projects, to the manufacturers of technology looking to future markets, to the operators of grids looking to integrate variable renewables.
The motivation for battery storage ranges from increased self-sufficiency, off-grid applications, smoothing output, and playing an arbitrage game with electricity tariffs, to reinforcing networks and reducing the need for more poles and wires. It is hailed as the next great “game-changer” for the electricity industry because it will help that other great “game-changer” – rooftop solar – increase its appeal to electricity consumers and producers alike.
But at the InterSolar conferences in Europe and North America, and at the Clean Energy Week conference in Australia last week, the conclusion is more of less the same – battery storage is coming, and more quickly than most people think – but for the moment the numbers don’t quite add up.
That, at least, is certainly the case for the market most likely to adopt the technology on a large scale – the residential and business customer who are looking to gain the most from the rooftop solar panels they have installed on their rooftops, and which is reducing the volume and cost of electricity drawn from the grid.
The best example was probably given in these graphs from the newly created International Battery and Energy Storage Alliance. CEO Markus Hoehner gave a presentation at the San Francisco InterSolar that I attended that included these following graphs.
The first is the net present value of solar PV systems and battery prices in Germany. The key is the green line, which shows the return on solar PV only installations. At current prices, installing battery will diminish that return dramatically. It will pay off (over time), but to match the return on investment of PV only, battery storage prices need to at least halve from where they are now (to where the red arrow is at the left).
(Technology and pricing wonks can find the assumptions used in the table at the end of the story. It should be noted that the cost assumptions used a range of products currently in the market. Some products – such as EOS – are advertised as cheaper, but are not yet in the market).
The picture in California is even more bleak for investors, because the cost of electricity to consumers in that state is lower, so the return on investment on battery storage will not match that of solar PV until the battery prices halve again from those required in Germany. Still, it’s interesting to note that these will be the two big markets for battery storage in coming years – California is likely to mandate some 4,000MW of storage by 2020 as it moves to even more ambitious renewable targets, and Germany is also providing the first feed in tariff to support battery storage for the same reasons.
Australia will also be a big market for battery storage – because it has one of the highest levels of rooftop solar penetration, as well as the higher electricity costs, thanks to its relatively huge network and the high costs of poles and wires per capita.
Warwick Johnson, the director of Australian solar research company Sunwiz, came to a similar conclusion for the Australian market as IBESA had for the international markets, saying that adding battery storage to rooftop solar PV would effectively double the payback times of rooftop installations to 13 years.
Johnston’s study presented at CEW looked at a variety of motives for, and sizes of, battery installations– to use as an arbitrage on various tariffs (charging at overnight rates and discharging at peak rates), or simply reducing the amount of (poorly paid) exports back to the grid.
But whichever way it was sliced and diced, Johnston says that at current costs, “batteries aren’t paying for themselves”, but there is additional value for businesses that could use batteries to avoid blackouts and brownouts to avoid spoilage etc.
Storage, Johnston says, will increase self sufficiency and take customers one step close to paying no network connection. And it will also benefit networks who use it to avoid un-necessary upgrades and extensions.
Wilhelm Van Butselaar, from SMA, said “self consumption” and the ability to make the most out of renewables was the hot topic at the moment, whether as a grid operator or a consumer, be they a household with rooftop solar or a whole village.
He cited recent winter storms in Germany which had brought down transmission lines because of the weight of the ice, and had left some villages without power for weeks. Battery storage would give these villages some measure of energy independence. Similar stories were being told in the US after Hurricane Sandy.
Rob Campbell, from Vulcan Energy, had a slightly more optimistic view of the payback period for battery storages of around 9-10 years for residential customers – but noted that it was hard, apart from early adopters, “to get domestic customer to come round to that.”
Campbell suggested that the onus should fall to the customers likely to get the most of storage, which are the networks, but there were significant “cultural issues” within those organisations, particularly the state-owned ones. The “network guys” wanted it, but it didn’t get much traction in the board-room.
He said those companies needed to learn how to make money by dismantling a network, not simply by growing it, as they had done in recent years by expanding the size of the networks. “They have got on a spending habit …. to the point where we have a system where the people most likely to benefit from storage are the least likely to install it because they don’t know how to get dividend out of it, Campbell said.”
This is an issue explored in Oliver Wagg’s accompanying article on how network operators are being urged to get behind battery storage.
Finally, this is the table showing the assumptions used in the IBESA NPV calculations mentioned above.