Network polemics: Why ENA is wrong on battery storage costs

John Bradley wrote an emphatic response to my prior article comparing the cost of installing a battery in Queensland with Ergon’s claimed costs per kilowatt of network capacity.

For those wishing to get a sense of things without dipping into the technicalities, the vehemence of Mr Bradley’s response to my note rather gives it away. As the Player Queen representing Hamlet’s mother says, “the lady doth protest too much, methinks”.

Mr Bradley’s main point seemed to be that I had taken the present value of Ergon’s network charge in perpetuity and compared it to the capital outlay for a battery that he said will last for only 10-15 years.

Is this a valid criticism? I don’t think so, but lets first check whether my conclusion would change if we compared the cost of a battery to network connection for 15 years. And lets just look at Ergon’s eastern region where network charges are 2.5 times lower than Ergon’s western region.

In this case, 15 years of network access would cost, as a present value, $2,500 per kilowatt. This is still about 10% more per kilowatt than AGL will sell a battery to you today. And, as we noted, Tesla’s batteries are expected to sell for around half the installed cost of batteries today. So, no Mr Bradley, my conclusion remains unchanged.

But it seems reasonable to consider more pessimistic assumptions about network costs. The analysis so far assumes no increase in Ergon’s costs in future. Yet Ergon has a well established track record of continually increasing costs in real terms.

Even if Ergon is able to get a grip on their expenditure, the prospect of continuing declines in network usage will mean prices rise even if expenditure does not. Even if we assumed just a 1% annual increase in prices, the present cost of connection to Ergon’s network rises to $2,700 per kilowatt for 15 years.

Of course a full pairwise comparison of grid v off-grid needs to consider many factors including access to solar and the cost of buying electricity (excluding network) from the grid.

Here too the picture is strongly in favour of distributed generation. But there is no need to take a categorical line here: in some cases disconnection is likely to be more encouraging and for others less so.

But there can be no reasonable doubt that networks are under pressure. The ENA knows this full well and for this reason is pushing regulators to reduce asset lives, reflecting their response to this asset stranding risk.

Indeed Mr Bradley writes admiringly of Ergon’s investment in batteries in place of network. So he would have us believe that if a regulated monopoly spends its customers’ money on batteries that’s wise, but if customers do the same that’s unwise. Draw your own conclusions.