The imminent arrival of the Tesla Powerwall in the Australian market is going to spark a huge amount of interest in the merits and economics of battery storage. Thousands of households are going to make inquiries, but there is great debate about how many will actually take it up.
The “early adopter” market is a given, but after that it is a question of economics and the appeal of – and to – the mass market. Bloomberg New Energy Finance suggests that solar and storage in some regions is already cheaper than the grid, but these assumptions are based on certain tariff structures and usage.
UBS suggests that solar and storage will be a mass-market proposition by 2020. But utilities and retailers are downplaying the potential take-up of battery storage, saying it could be a decade or more.
One of the key questions is whether battery storage will be taken up as an addition to rooftop solar, with customers choosing to stay on the grid for back-up, or whether battery storage will lead to a mass exodus, as a CSIRO study suggested was possible. Bruce Mountain, of CME, in this piece we publish today, gives a powerful reason why networks are already pricing themselves out of the market.
Another interesting analysis comes from Charles Yonts, a Hong Kong-based energy analyst for broking firm CLSA.
The Australian market is fascinating for international energy market observers, because it is considered ground zero in the uptake of battery storage, thanks to our high tariffs, excellent sun and high solar uptake. That is what is driving Tesla to identify Australia as its first market, along with the US.
In a report this week, Yonts says that there are “hundreds” of niche markets in the energy industry, but none has captured the imagination like the off-grid market, or the concept of ‘grid defection.’
He notes that it is a more complicated equation than it may seem, depending so much on solar resources, orientation, tariff structure and local regulation, as well as individual household consumption and solar capacity.
But he gives the example of three different Australian families to show just how balanced the equation – of staying on the grid or leaving it – might be. Quitting the grid, he suggests, may not be the economically radical idea that some, and particularly the Australian networks lobby group, like to suggest.
In his scenario, Yonts uses an average household consumption of 7,000kWh a year, and flat pricing through the day of US20c/kWh (Some of his figures may be confusing to Australian readers because he uses US currency).
He assumes that the levellised cost of energy for solar is US$0.10/kWh and the levellised cost of storage is US$0.21/kWh. (He predicts it to fall much further by 2020, see graph below).
Here are his scenarios:
Family No.1 simply buys all its electricity from the grid, for a monthly bill of about US$117, with effective tariff of US$0.20/kWh.
Family No.2 gets one-third of its power from solar and consumes all solar power it produces (good for illustrative purposes; in actuality, quite difficult since most of the family would likely be gone during peak production midday). The remainder is purchased from the grid at the regular cost. The monthly costs (P&L) are US$97, or effective tariff of US$0.17/kWh.
Family No.3 goes off the grid entirely. All of the power they consume comes initially from solar, with an upsized solar installation feeding into the battery bank for consumption in the evening. In addition to producing 7,000kWh each year, the family has to pay for 3,500kWh of storage (or roughly 10kWh per day). The monthly costs work out to around US$120, with an effective tariff of US$0.21/kWh.
“The ideal economic option for our fictional Australian family, assuming they have access to equity and credit, would be to install solar panels and use the grid as a giant battery, saving around US$20/month,” Yonts says.
But, he notes, if the Australian utilities were to put in place an additional network charge for solar households of more than US$20/month and assuming tariffs are expected to be stable, then it no longer makes sense to install panels.
“We suspect all four of these are likely, with cost reductions for both solar and storage almost inevitable.” As Yonts notes, this explains the “panicky” proposal by the energy networks lobby for compulsory grid tariffs for all – even though they do not use it – or allowing the networks to load their costs up front, in fear of grid defection later.