Panasonic says its battery storage system will offer Australian utilities – both retailers and networks – the opportunity to develop new business models. But effectively, they have no choice.
The arrival of cost-effective battery storage in Australia is offering huge opportunities for consumers to manage their home energy systems, leverage their investment in solar panels, and reduce their demand from the grid – both during the day and during peak periods.
That presents the incumbent utilities – retailers and network operators – with a choice: either resist and seek regulatory and tariff protections against consumers and now potential competitors, or embrace the change.
So, it’s not much of a choice at all. As noted by Paul Reid (pictured), the head of Panasonic Australia, the local subsidiary of a global monolith with $62 billion of annual revenue, a paradigm shift is coming to Australia’s energy system, which will be at the cutting of world developments.
“We are a big sprawling country with lots of sun and wind. The energy infrastructure is ageing, and consumers are embracing renewables,” Reid said.
To many in the industry, battery storage is, or will be, a no-brainer – as much for the 1.4 million solar households who will look to storage to leverage their investment in solar, as for the retailers and network operators who need to embrace the technology to avoid losing their consumer base.
“We are in the midst of an energy revolution,” says Ivor Frischknecht, the head of the Australian Renewable Energy Agency.
“Most homes will have solar and storage within the next few years,” he said, adding that this would be in the form of saving money, providing emergency back up, supporting the grid, or for energy trading.
“Solar is already cheaper than the grid, even without subsidies. Storage will increase the adoption of solar, because it unlocks the value in solar. And the cheaper the storage gets, the faster the revolution will be.”
The utilities appear to have got that message. AGL Energy has announced it will come in at ground level, rolling out a battery storage option this month. Origin Energy is expected to follow suit quickly.
The utilities in the deal with Panasonic announced today acknowledge they were late to the solar game, and simply cannot afford to be late to battery storage.
“We sat back on the solar PV explosion,” says Ramy Soussou, the head of regulatory affairs for Red Energy, the retail offshoot of Snowy Hydro. “This is a fundamental change in the market, we have to play in the storage market.
“No one (forecast) the uptake of solar PV. We believe customers will embrace the battery storage technology. It might be initially a slow uptake, but we think that most customers will embrace this.
“It will change our model,” Soussou told RenewEconomy later. “We can’t afford to miss out. We have been experts at selling to the meter, now we have to learn how to sell beyond the meter.”
Michael Costello, the chairman of ActewAGL agrees, both on missing the solar boom and the importance of engaging on storage.
“If we don’t supply what they want, they will ask another retailer to supply it. We have to be in it. If we are not good enough, we will lose customers.”
Soussou says the big four retailers, which now includes Red Energy after its purchase of Lumo, will drive competition, and the price of the storage systems will come down to “where anyone can afford one.”
The key, however, may lie in regulation. Regulators – both pricing and policy – have been hopelessly slow in adapting to new technologies. Partly that has been due to the big utilities themselves, who underestimated the uptake of solar PV and then tried to throw out regulatory and policy anchors to slow it down.
Now the utilities need to be ahead of the game, and need to drag the regulators with them. This will be crucial in framing tariffs that may make it helpful to encourage people to stay on the grid, or use storage to defect.
ARENA’s Frischknecht says tariffs are key. “They could be changed to encourage the uptake of battery storage, or stand in the way,” he said. “If they stand in the way, that could encourage people to go off grid. That makes no economic sense for them to do that. They’d be mad.”
But that is exactly what many customers are threatening to do, and may do anyway.
It is interesting that two of Panasonic’s early partners are utilities that operate both as retailers and network providers in their areas. This may make it easier for those companies to extract the value in introducing storage, which will be used as much to defer network upgrades as to play arbitrage with tariffs. The competition between network operators and utilities in markets where their roles are separated will be fascinating to watch.
That makes it an interesting ploy by Panasonic to go via the retailers and utilities, rather than via the direct consumer market. Panasonic’s Reid says his company won’t be the cheapest in the market, but it can deliver the value in the middle – for consumers, retailers and networks.