UBS: Battery storage payback for solar households will be 5-6 years by 2020

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New report predicts ‘mass adoption’ of battery storage by Australian solar households could be just five years away, as costs fall by more than 60%. And household storage could play a key role in a 50% renewables target.

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One Step Off The Grid

The point of “mass adoption” of household battery storage could arrive in Australia as soon as 2020, a new report from UBS has predicted, at which time the payback period for storage systems for solar households would be just five to six years.

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The UBS Utilities Sector report, published on Monday and covered in-depth on RenewEconomy, says that if storage system costs fell at 20 per cent per year (as UBS has predicted, and as they have done over the past 18 months) for another five years – six years for households without solar – households with PV systems could achieve payback periods of between five and six years.

As the table below shows, the UBS estimates are based on AGL Energy’s 7kWh Power Legato (pictured below) battery system. And they show the average price of a lithium-ion battery storage system dropping from just over $9,000 now, to $3,510, or $3,960 for households with PV.
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The table also forecasts that households installing battery storage can save between $585 (without PV) and $660 (with PV) a year on electricity – a proposition, says UBS, that “should make some storage relatively attractive to most households.”

“We don’t expect households to go off grid,” says the report, titled Energiewende: Aussie style. “But we do think that ‘hybrid households’ will be both economic from the consumer point of view and desirable from the grid’s point of view.”

And as the table above shows, this includes those households that haven’t yet – or can’t – installed solar. Because, as the UBS analysts note, battery storage does not require a detached house – solar PV does.

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If utility-scale solar was priced low enough in the middle of the day, the report says, even households without solar would be incentivised to install storage systems, so that they could charge the battery in the middle of the day and consume the cheaper energy in the evening.

“If the consumer sees an attractive storage price (payback periods of 5-6 years) we think they will likely finance that themselves,” the report says.

The report notes that in the hybrid model, households use some storage to maximise self-consumption of their rooftop solar electricity whilst still being connected to, and even dependent on, the grid.

“The grid still has to be paid for increasing fixed costs,” it says, “but its average capacity utilization increases and the investment in storage should mean less investment in the grid in terms of peak and largely unused capacity, but more investment in the intelligence of the grid.”

The report also points out that storage would also help to manage the swing in capacity as utility scale PV output drops in the afternoon, prior to the pickup in wind generation.



And it estimates that one million households – just 15 per cent of the 6.6 million households total in the NEM – with a 7 KWh battery would be capable of providing about 2-3GW of power at any given time.

“This exercise simply shows that household storage and utility storage should be sufficiently economic in 5-6 years to give some confidence that storage will be a ‘tool’ to help deal with the volatility for higher renewable penetration and can also be a great investment theme for retailers,” UBS says.

“Retailers largely missed the initial PV boom in Australia, but are in good position with cheap finance to become the provider of choice in the storage space, in our view.”

This article was originally published on RenewEconomy sister site, One Step Off The Grid. Sign up for the weekly newsletter here.

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4 Comments
  1. Jacob 4 years ago

    Come on UBS, tell us the price of storing electrons in said battery.

  2. Warwick 4 years ago

    This analysis doesn’t really make sense and exaggerates how short the payback period would be. These prices look like the standard AGL tariff in NSW, and the payback would only make sense if you charged overnight between 10pm-7am or weekends and discharged ALL the energy ONLY at peak times of 2pm to 8pm working weekdays. Then assuming the PV comparison is against a similar household with solar then why invest in a battery as you’re already displacing the 50c/kWh energy as you’re consuming the energy in the peak time..i.e. if you’re a solar home with excess energy to store from your PV system that means you’re short energy in the off-peak/shoulder time not the peak time, and the comparison should be against the shoulder (~20c/kWh) or off-peak tariff (~10c/kWh) not the peak price…i.e. benefit is either 6c/kWh or 16c/kWh not 44c/kWh…

    • Rockne O'Bannon 4 years ago

      Excellent point. Someone who actually owns solar has to think it through for the analysis to make sense. I have run various simulations, and particularly considering weather and probability, and depreciating battery capacity from repeated cycling, I can’t get a decent payback period as a result.

      The probability winds up being important too. Basically, for the battery to get savings EVERY TIME, one needs to charge, say, Sunday night to use the electricity Monday evening. But if you do that, you will have to carry a full charge Monday during the day, so you can’t charge it from solar on Monday. Alternatively, if you leave it UNCHARGED on Monday, you might be able to charge it with solar, but what if you can’t? Well, all benefit from that day is lost.

      So what do you do? Use the same policy every day and hope for the best? Or do you gamble and play “guess the weather” every day?

      • Mike Dill 4 years ago

        Rockne, I agree with your assessment.
        I think the weather forecasts are nearly 70% accurate for the amount of clouds that I can expect the next day where I live. I have PV, but the information I get does not get me enough to understand if I will get enough afternoon sunshine to cover the peak, or if there will be afternoon clouds where I would be better off running off a battery.
        Until that information is widely available, I would also need to guess, which will make my transition time to storage further in the future as the costs will need to come down further as my guessing is never very accurate.

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