Energy disruption: Solar plus storage to be cheaper than grid in 2017

Some utilities may think that it will be up to a decade before there is a mass market uptake of battery storage, and the chair of the Australian Energy Market Operator may even try to convince themselves that the technology won’t be commercial for another two decades, but they might be kidding themselves: New research suggests that the cross-over point between the value of solar and storage and grid prices for Australian households may occur within one year.

That, at least, is the conclusion of research from Curtin University’s Jemma Green and Peter Newman, which suggests that the A1 tariff – the standard tariff offered to households by state owned retailer Synergy in West Australia – will become more expensive than the combined value of rooftop solar and battery storage some time in 2017.

The graph was presented on Tuesday by David Martin – Green’s fellow executive in the solar trading start-up Power Ledger, which is using blockchain technology (the software behind Bitcoin) to trial solar sharing business models in Perth.

“That price crossover – the point where the A1 tariff is equal to the value of energy from solar and tariffs happens next year …  next year,” Martin told the Energy Disruption conference in Sydney co-hosted by RenewEconomy.

He said that did not meant that people were going to “leap off the grid” in big numbers straight away. That’s because when that point is reached there are “intangible benefits” of being connected to the network, and it would cost a lot more to install enough batteries to deal with the consumer’s demand peaks, or days of cloudy weather.

“But as soon as these lines diverge by a significant amount – and overtake the benefits of being connected to the network, then what happens?”

The answer, he pointed out in another graph, is a big problem for the utilities that make their money from supplying power to households, because a lot of that demand will now disappear from view, and go “behind the meter.

Martin says a home with a 4kW array might still use the grid for most of the time – meaning that only 45 per cent of the load is “hidden” from the network behind the meter.

But with battery storage, the rate of “load defection” – as opposed to grid defection – was likely to increase to the high 90 per cent levels in some instances (see graph above). Those households will only be tapping into network for a small amount of their energy needs.

This, of course, has major implications for network business models – particularly their revenue source – and for other consumers. Networks, Martin says, will have to face losing $100 million in revenue in West Australia for instance, or load 20 per cent more grid costs on to other consumers to protect their revenues.

Hence, Martin says, the need for completely new ways of thinking about network use, and of sharing solar energy and battery storage. That’s what Power Ledger intends to do with its shared solar model – it allows those with solar and storage to share their power with those who maybe don’t have it – and allows better utilisation of the grid.

It also requires, he says, a completely new way of thinking about regulations. The rules governing the electricity industry had been framed without any consideration for sharing energy, for storing energy, or for the kind of technology that his company proposes.

Martin was not the only person talking of an imminent tipping point in the economics of battery storage. Stefan Jarnason, the founder and head of Solar Analytics, a monitoring company partly owned by AGL Energy, says he believed that even some of the more bullish forecasts for battery storage were too conservative.

These included predictions – from the likes of Bloomberg New Energy Finance above – that some six million households will have energy storage by 2040. Jarnason says that this shows that massive uptake is inevitable, but it is the speed that counts.

He notes there there are already 1.6 million homes with rooftop solar, and around one million of these would soon be paid “visually” nothing for the vast majority of their rooftop solar production that is exported back to the grid. Most premium tariffs end at the end of the year in NSW, Victoria and South Australia.

“We talk to those customers and they are not very happy about that. They love the fact that they have solar, they feel a bit green, a bit financially savvy, even a bit smug, but they already have got their money back on solar and they are now looking to do something extra.”

That estimate is backed up by experience from one of the many battery storage providers moving into the Australian market.

Enphase Energy, which is launching its first battery storage product in Australia, says more than half of the 72,000 units of its 1.2kWh battery has come from NSW, where generous feed in tariffs come to an end at the end of the year.

“The energy storage revolution is going to come much faster than a lot of people imagine and a lot of people are prepared,” Jarnason says. “Residential solar plus storage is going to eat the energy world.”