Origin shifts retail focus to rooftop solar and battery storage

Origin Energy has provided further details of its impending major push into the domestic solar market, saying that it expects rooftop solar to grow five-fold over the next 15 years, and battery storage will also emerge.

As we have reported – here and here – Origin Energy and AGL Energy are both poised to launch a major push into the rooftop solar and battery storage markets in coming months.

Origin, which has boosted its executive ranks on rooftop solar, is about to roll out a new product that will see it own, install and maintain rooftop solar systems, and charge the homeowner a fee to use the solar electricity.

This will require no upfront payment from householders, and will pay the fee  under a power purchase agreement, common in the US and now proposed by a host of different providers in Australia.

In a presentation to analysts on Thursday, Origin Energy noted that the installation costs of rooftop solar PV systems had fallen dramatically, and solar penetration is anticipated to grow from around 4GW now to 18-20GW by 2030, aided by new technologies such as battery storage.

“Our view of electricity markets has changed a little bit,” managing director Grant King told analysts in a briefing. This included the balance between supply and demand, with the influence of the renewable energy target and excessive coal capacity leading to too much supply, and the impact of rooftop solar and energy efficiency reducing demand.

King said the emergence of solar opportunities was part of the company’s “changing views” on the electricity market.

“We are moving very much to the evolution of solar products, and PPA (power purchase agreement) products,” he told the analysts.

Those PPAs will be used at household and business scale, and in the utility-scale sector.

In household solar, Origin has been coy about its intentions, but as RenewEconomy revealed last week, has hired a founding executive from US-based Sungevity (and a former Greenpeace energy activist), and has put the former head of its emerging solar technology business in charge of new solar retail product lines.

Origin expanded a little on those activities in the presentation (see below). What’s interesting is the recognition that consumers are interested in both solar and storage, and that the technologies have the ability to increase “self-consumption”, and that Origin is investigating various deployment options.

Origin may find itself well positioned for this transition, in so much as it remains “short” generation – in other words, it has not got so much coal and gas generation as its rivals, and it has to buy electricity on the wholesale market to meet its obligations to customers. That’s a good plan when wholesale prices are cheap, as Origin expects them to remain due to falling demand (thanks to solar and storage) and over-capacity, thanks to too much coal generation in the market, and the large-scale renewable target.

Curiously, King was less bullish about solar and storage in a subsequent media briefing than he had been in the earlier analysts briefing, choosing to underline the point to the journalists that solar required subsidies, and storage was still some way from being cost competitive. This is a different view from big rival AGL Energy, which says battery storage is already “interesting”, and battery storage developers such as Brisbane-based Redflow, which says the technology is already competing with grid tariffs.

However, King also said the company was looking at opportunities in the utility-scale solar market, and the possibility of using PPAs in that sector too.

This week, Origin was named as the major contractor for a 3MW rooftop solar array on the old Mitsubishi factory at Tonsley, in South Australia. It will be Australia’s largest rooftop array.

Origin has also revealed that, in December, it bought a 40 per cent stake in the 69MW Javiera solar project in Chile, which is being built in the Atacama desert, without subsidies, and will supply mainly a nearby copper project.

“We are working hard to understand economics of utility-scale solar in Australia,” King said.

Origin has created a new business division, Solar and Energy Services, which it says returned a profit of $17 million (up 10 per cent), on revenue of $50 million (up 16 per cent) in the latest half.

In its broader retail market, Origin says its profits rose $51 million, almost entirely due to higher retail margins – in other words, it reduced the amount of discounts it was offering.

However, that has also caused a net loss of 32,000 customer accounts because of continued retail competition. King said Origin had tried to avoid discounting, but had been brought back into the market because of that competition.