Home battery installs hit quarter-million mark under federal rebate. But is the party over?

Australia has now passed a quarter of a million battery systems installed since 1 July  last year, when batteries became eligible for support under the Small Scale Renewable Energy Scheme, also known by its acronym SRES. 

As of 26 February, slightly more than 252,000 battery systems have been installed with a total storage capacity of 6,280 megawatt-hours.

But the benefits of these batteries should spread beyond the households installing them because they are typically far larger than what one household will typically use. In fact 6,280 megawatt-hours is enough to cover the daily consumption needs of almost half a million households (based on the ACCC’s median daily usage of 12.6 kilowatt-hours). 

Back in mid-January we posited that we could get to 450,000 systems by the end of the 2025-26 financial year and around 11,500MWh. That was based on an assumption that we’d manage to install 10,000 systems per week from the remainder of January onwards.

The chart below, derived from Green Energy Markets Solar Report data analytics subscription product, illustrates that we’ve undershot 10,000 systems so far this year until just a week ago.

So that means 450,000 systems by the end of June is now looking challenging. Still, it is reasonably likely we’ll sustain the prior week’s number of system installs over the next couple of weeks.

Then, we suspect there will be a step-up in the rate of installations over the back half of March and April (outside of public holidays), similar to what we saw in December, as solar businesses try to rush to get systems installed before the rebate per kWh steps down in May. 

From May until June we remain optimistic that system installation rates will remain solid, but given the drop down in the rebate is so large, it is subject to considerable uncertainty.

We think that the levels of installs over October and early November are a reasonable guide to what the industry will manage to achieve over May and June.

In terms of the average kilowatt-hour size of systems this has been increasing on average by around 1.1% per week since early January (the Christmas-New Year leap up in size is an anomaly that is a product of a small number of very large systems being registered for STCs).

This is pretty much in line with our mid-January projection, and we imagine the growth rate will hold up until the end of April. After that point we’ll stick with our prior guesstimate that average battery system size will drop to 20 kilowatt-hours, but admit we’re not really sure what will happen.

The end result of these assumptions and adjusting for public holidays lands us at about 425,000 battery systems and 11,000MWh of capacity installed over the first 12 months of the Cheaper Home Batteries Program.

That is a tad short of our mid-January projection but still an extraordinary result. The daily average output of Snowy Hydro is around 12,300MWh, so to get 11,000MWh of battery capacity rolled out within just a 12 month period across so many homes is a significant outcome.

However, it is not a given that the success of this program will continue.

The Australian Energy Market Commission has indicated in its Retail Electricity Pricing Review draft report that it would like most households to bear a fixed charge for the network component of their power bill that is not linked to their power demand. 

This would substantially reduce the extent of power bill savings a battery could deliver to households. 

As analysis by Jay Gordon of the Institute of Energy Economics and Financial Analysis has shown, this shift to an unavoidable, fixed network charge would result in increased costs that would entirely erode the benefit of the government battery rebate (Gordon analysed a 10kWh battery but it would also be true for a 20kWh battery after April this year). 

Clearly such a radical change in power pricing practices, if households catch wind of it, will cause many households to question whether spending several thousand dollars on a battery system is a wise idea.

Even under current electricity pricing structures the payback for some of the premium brand battery systems is close to ten years, so households can ill afford to take a 10 year long gamble that the AEMC, in conjunction with the network businesses, will give up on their pursuit of a pricing structure that neuters competition from technological substitutes.

I would note that the AEMC has been trying to suggest to some media outlets that the shift to a network fixed charge system is not their preferred plan. At the bottom of this article I’ve reprinted the AEMC’s own explanation of what they would like to do and why. I haven’t bothered to also reprint AEMC’s series of vignettes of imaginary poor people who they describe as being hard done-by, due to other, richer people adopting solar and batteries. 

The AEMC will no doubt seek to better disguise its preferred model in the next update of its review. But really this review should be put on ice and, instead, federal energy minister Chris Bowen needs to commission a wholly independent expert review of the entire structure for how we regulate electricity and gas networks (including the regulatory institutions themselves) in an environment where we need to urgently decarbonise the energy system. 

Excerpt from AEMC Pricing Review Report BOX 3 from page 36 (bolding added by author for emphasis):

We have worked closely with a range of stakeholders to build a common idea of what a good network tariff would look like.

Stakeholders generally agree that in the future, an efficient network tariff would have two parts:

1. a dynamic charge – a charge or reward that varies depending on network conditions  
2. a fixed charge – that is, a fixed amount per fortnight, month, or some other period, that does not vary depending on the amount of electricity consumed.

The dynamic charge

The dynamic charge we envisage in the future would be different from what is common among today’s tariffs. The dynamic charges will be zero most of the time. When there is more demand for network use than it can transport, there will be rewards [author’s note – batteries could benefit from a dynamic charge but because networks have gold plated most network area, very few customers will face a dynamic charge above zero for some time to come]  for meeting the needs of the network (potentially payments for exporting or consuming depending on the nature of the congestion). These rewards will be mirrored with charges for the export or consumption that strain the network at that time and place. The dynamic charge could be applied based on usage (kWh) or demand (kW) within the defined window. These will reflect the prices needed to ensure the use of the infrastructure stays within its capacity, and contribute to the network revenue requirement.

The fixed charge

The fixed charge will recover most of a network’s revenue requirement. We expect the fixed charge will recover more of each network’s revenue requirement than it does today. We like fixed charges because they have a limited impact on customers’ decisions. When customers are deciding to heat their home, buy a new television or install solar panels, the fixed charge should not influence their decisions. This helps customers make good decisions [author’s note: in other words – customers make good decisions when they elect to just give-up and stop trying to reduce their network charges by adopting technologies that reduce their demand for power like solar and batteries]. Fixed charges may vary for different customers. Networks can set fixed charges to reflect different types of customers, avoid customers going off-grid and to attract new and exciting types of customers. Transitioning towards network tariffs that have a larger fixed charge component will help ensure that consumers can make the best use of network infrastructure to power their homes and businesses and to send power back to the grid. In the longer-term this will create the lowest cost electricity system.