Three out of four new solar households to add battery storage

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The Australian Energy Market Operator says three out of four households adding solar in the next 20 years in NSW will also add battery storage, but Victoria will lead the way in total capacity. Installations will flow despite slow payback estimates. The net benefit of reducing maximum demand on the grid will be significant.

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The Australian Energy Market Operator predicts that NSW and Victoria will lead the country in the adoption of battery storage by households over the next two decades.

In its first ever analysis of the potential impacts of new technologies – specifically battery storage, but also electric vehicles and “fuel switching” from gas to electricity – AEMO predicts the adoption of battery storage will be rapid, but slow for EVs.

The analysis is driven by the publicity surrounding the release of the Tesla Powerwall, the anticipated cost cuts of battery storage, and the move by major retailers to offer battery storage to consumers.

aemo solar storage predictions
Broadly, it concludes that while initial pay-back times are high, the take-up rate will still be rapid, with nearly half the forecast capacity by 2034 taken up in the next 10 years.

It notes that this will have a significant benefit for the grid, because it will reduce maximum demand. The vast amounts of rooftop solar in Australia are credited with mostly shifting and narrowing the peaks, but not reducing them.

But it is just the first piece of the puzzle. As AEMO notes, payback and uptake of battery storage can vary immensely, depending on the size and cost of the system (of which little is yet known), assumed cost falls, the size of a solar PV array, and the structure of tariffs. And, for states like Tasmania, the amount of sunshine.

For battery storage, AEMO says three-quarters of households adding solar in NSW will include battery storage, but Victoria will have the most capacity installed by 2034.

The AEMO study, however, does not include battery storage retrofit installations in the 1.4 million households that already have solar. It says this is too difficult to model just now, but it will be its next undertaking.

That explains why NSW and Victoria may lead the market in its estimates. Both have tariff structures and demand profiles (such as time of use metering in Victoria) that would encourage battery storage, and relatively low penetration of rooftop solar to date.

Queensland currently has the most rooftop solar, and South Australia the highest penetration of rooftop solar, reducing the scope of the market within the AEMO parameters.

To put the AEMO forecasts in some context, analysts such as Bloomberg New Energy Finance predict that Australia could have 37,000MW of battery storage by 2040, outstripping the amount of rooftop solar, which it puts at 33,000MW  (that includes commercial installations).

AEMO, on the other hand, thinks that rooftop solar installations will outstrip battery storage. It has previously predicted a five-fold increase in solar PV systems to 21,000MW by 2034, although its high scenario could add another 20 per cent, outstripping the capacity of coal fired generation.

aemo storage demand

It notes that battery storage will have an impact on grid demand. Just the battery storage associated with newly installed solar (and not including retrofits to existing solar arrays ) – could reduce maximum demand in Victoria by 720MW, or 6.2 per cent.

In Queensland and South Australia, the reduction is smaller, but remember this calculation does not include the retrofit market. If that was incorporated – Morgan Stanley has predicted half of the battery storage market could be retrofits – the reduction in peak demand in Victoria would be even higher. This could be critically important to the sizing of the grid, because so much money is spent on bulking up the grid to meet those maximum demand levels.

aemo battery costsAs for paybacks, AEMO has taken a more conservative view than most other analysts. That’s because it has been relatively cautious with the costs of battery storage, and it forecasts a flatter cost reduction in coming years. It estimates that an initial decline in costs of 8 per cent in the first year, and an annual decline of 12 per cent thereafter.

Also, it is not including the retrofit market, which could be a big driver for some households, particularly in NSW, where premium feed in tariffs for more than 160,000 homes are due to expire in December, 2016.  This has been a big driver of low payback forecasts for Morgan Stanley and UBS, which focused on areas of high time of use tariffs. Queensland solar feed in tariffs, on the other hand, will last another decade, and will not provide a big incentive for battery storage in that time.

aemo stoage payback now

AEMO suggests that the payback for battery storage added to new systems in most states is very high. But the interesting graph is the following, which shows how those payback estimates will fall, even with its conservative estimates of cost reductions. (We go into more detail about these paybacks here).

aemo payback forecasts

AEMO has adopted a conservative view, expecting the cost curve to decline at a much slower rate than initially predicted by BNEF. AEMO’s projected cost curve was based upon the component costs illustrated above, with manufacturing and technology costs continuing to decrease over time, but at this slower rate.

On the other technologies, AEMO predicts a slow take up of electric vehicles. It notes that only 1,909 electric vehicles were sold to 30 April 2015, and just 0.1% of new vehicle sales in 2014.

“Based on this current level of uptake and the absence of any policy incentives, AEMO assumes the uptake of electric vehicles to continue to be small, with a projected 165,734 electric vehicles across the NEM in 2024–25, increasing to 524,775 in 2034–35.

It also believes that “fuel switching amongst Australian households – from dual gas and electricity systems to electricity only – will stay low and contribute an additional 2,552 GWh (1.2%) to consumption from the grid.

Here are AEMO’s overall thoughts on battery storage installations by state (WA and NOT not included because not part of the National Electricity Market and managed by separate organisations). More can be found here.

Queensland

There is already a relatively high installed capacity of residential rooftop PV in Queensland. Despite 2,046 MWh of battery storage capacity being installed with new rooftop PV over the forecast period, this represents a relatively small percentage of total installed rooftop PV capacity.

New South Wales

The combination of the tariff structure and average household daily demand profile gives consumers in New South Wales economic incentive to install rooftop PV and battery storage. By the end of the forecast period, New South Wales has the largest percentage of installed rooftop PV (72%) that is integrated with battery storage. This will have an impact on grid demand forecasts.

South Australia

South Australia currently has the highest penetration of rooftop PV of all the NEM regions. As in this paper AEMO has only considered uptake of battery storage with new installations of rooftop PV, this reduces the size of the market being modelled in South Australia. In addition, the installation of rooftop PV in South Australia already has a short payback period. The forecasts show that the benefits of installing battery storage compared with rooftop PV alone were limited in South Australia, compared to other NEM regions.

Victoria

Victoria currently has a time-of-use tariff structure that incentivises the uptake of battery storage, as households are able to use electricity from the battery during peak times. Victoria has the highest installed battery capacity (2,774 MWh) by the end of the forecast period, and this results in a sizeable reduction in the summer and winter maximum demand forecasts,

Tasmania

As Tasmania historically has the least amount of solar resource, the payback period is the longest of all NEM regions. However, the percentage of total installed rooftop PV that is integrated with a battery storage system is the third highest of the NEM regions across the forecast period. Despite this uptake, given Tasmania’s maximum demand peak occurs in winter, there is only a small reduction in the 10% POE maximum demand forecasts.

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5 Comments
  1. Barri Mundee 4 years ago

    I will be adding storage sooner or later, if only to stick it up all those who seek to deny solar owners full advantage from their investment.

  2. John Bromhead 4 years ago

    What sort of return are you demanding from your system. The community will already have given you a minimum of $800 for each kilowatt of system you have installed. Surely you are not one of those, “electricity retailer sells the electricity I feed into the grid for 23¢/kWh but only pays me 7.5¢/kWh, what a ripoff” people, are you?

  3. Hugh Butler 4 years ago

    As with any models, be they economic forecasts or climate change, it depends on assumptions and complexity. This article link suggests battery prices could reduce by 5 times or more. Other technologies that increase PV efficiencies from 10 to 40% are already in the labs. Its a new economy out there

    http://qz.com/433131/the-story-of-the-invention-that-could-revolutionize-batteries-and-maybe-american-manufacturing-as-well/

  4. Leigh Ryan 4 years ago

    The predictions by experts on Solar PV uptake were totally out of the ballpark as will be the case with battery storage, people want energy independence because retailers and government have been fleecing them for decades and they want payback, i suspect it will be the same with EV’s if they can get the retail price anywhere close to the cost of current models and we the consumer do make allowances for free charging of EV’s in the cost as we should add the cost of maintaining a petrol guzzler to it’s price tag, eg $5000+ per annum for petrol over 5 years makes the EV an option already.

  5. Humanitarian Solar 4 years ago

    Adding batteries to a solar system really isn’t a big deal if one chooses an inverter/charger capable of managing batteries then beginning with a few batteries to get some of the best benefits. It’s not a yes or no decision to batteries, its a spectrum of what one wishes the batteries to accomplish from being an emergency backup for a few hours to getting the household to off peak electricity rates to being off grid.
    The argument of a yes or no to batteries appears to surface only as there are currently so many grid connect solar systems out there. The first step is going “Hybrid” with an inverter/charger, then the whole discussion becomes how many batteries are cost effective. Yet possibly because the writers of these articles have grid connect systems, on ritzy export tariffs yet to expire, we keep getting the its all happening in the future line of argument, like one day we’re going to do it!
    There are plenty of cost effective battery technologies there now and one doesn’t need to jump to having enough batteries to get through a week of cloudy days and nights in winter. The only people that need to wait to begin learning how to live with and manage batteries are those with subsidised feed in tariffs. Everyone else can have fun and get their first battery bank.

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