I recently wrote an article for the Financial Review (The “Community” Battery Ponzi Scheme) that’s deeply critical of so called “community” batteries, which in reality should be called power network monopoly batteries.
I know a number of people who are deeply passionate about addressing climate change and also keen to ensure that the poor and disadvantaged are assisted in a transition to clean energy.
They are good people who see community energy projects as a way to spread the benefits of clean energy technologies to a wider number of people.
This, importantly, includes those unable to buy this equipment for themselves, in many cases because they rent and landlords as a general rule are utterly hopeless in implementing energy efficiency measures in their investment properties.
But their good intentions are being hijacked by network monopoly businesses who can see that small behind the meter batteries pose an existential threat to their revenue growth prospects.
They are also being taken advantage of by politicians keen to precisely target electorates with ribbon cutting ceremonies that make next to no difference to our energy system but are good at fooling the electorate that they are doing something about climate change.
This has actually become a serious problem because I hear from politicians and also public servants that they don’t believe they should be supporting the roll-out of batteries for homes because this would be “bad for the poor” and would be “rich man’s welfare”.
I used to hear similar things said about solar back in the 2000’s and unfortunately I’ve begun to hear a similar thing on solar pop up more recently (even though the evidence indicates it’s not true).
I find it hard to believe that somehow these policy makers think helping someone buy a battery that represents a pretty poor financial return but will help drive batteries down the experience curve is rich man’s welfare, meanwhile handing money to network companies is helping the poor.
Well OK, I suppose when the money goes to Jemena – who are substantially owned by State Grid Corporation of China – perhaps it is a win for the proletariat workers revolution. But it also goes to network companies whose largest shareholder is Sir Li Ka-shing – one of the richest men in Hong Kong.
Yes industry superannuation funds are also shareholders in these network businesses, but even in those cases the money in the fund is skewed towards those with high incomes. I’m in an industry super fund, as are many other Australians who long ago left their low wage uni job, but kept their super account.
The reason why these network-owned batteries are a bad idea, though, isn’t so much to do with a deception around what is and isn’t good for social equity (by the way, when did people decide that the objective of climate change policy was to fulfil the role of our tax transfer income redistribution system?).
Instead it’s because they cost more than household batteries while delivering less benefits to consumers.
Data that has just recently been published by the Australian government and which I’ve provided at the bottom of this article, has revealed that the average government grant provided to the power networks to establish their so called “community” batteries was $1,372 per kilowatt-hour of capacity.
For that level of government support households could afford to purchase a Tesla Powerwall with a few grand in spare change and they’d capture a far greater saving on their power bill than what networks have indicated they will provide to consumers by installing these batteries.
Unfortunately, in handing out these grants the government has declined to detail what the networks themselves will spend on the batteries, so we don’t have a full picture of their costs.
However there is the odd anecdotal data around that is horrifying and, I suspect, an extreme upper end. With funding support from ARENA, United Energy rolled out 40 batteries representing an aggregate capacity of 2,640kWh at a cost of $11 million. That’s a staggering $4,166 per kilowatt-hour. To put that in context, SolarChoice puts the price of a home battery system at between $1,000 to $1,300 per kilowatt-hour fully installed.
Why so horribly expensive? One possible explanation might be that United Energy thought it would be a good idea to put these battery systems likely weighing around 600 kilograms five metres above the ground on their wooden poles.
Most electricians servicing households meanwhile, usually mount them either on the ground or just a few centimeters above because they are so damn heavy.
Now, the answer is probably more complicated than just that, but this mounting decision is symptomatic of a more fundamental underlying problem that these power networks are monopoly businesses that operate under a cost-plus regulatory environment without competition. If they do something which is far more costly than what others could deliver they don’t wear it, you do. It simply gets past down to your bill in a regulated cost pass through.
So government handing cash to networks to roll-out batteries far more expensively than households is really dumb.
But we’ve still got an unresolved problem here that renters aren’t able to take advantage of the benefits from solar and batteries.
Well, strictly that isn’t true, solar has substantially reduced daytime wholesale power prices which renters can benefit from via time of use tariffs. In addition, it has reduced system wide peak demand and probably reduced the level of heat stress suffered by distribution transformers that should extend their life and reduce network costs.
Widespread roll-out of household batteries will also deliver significant benefits beyond the householder that installs them.
Nonetheless, there’s still a serious problem with the fact that landlords don’t install energy efficiency features that would deliver substantial net benefits to the community and particularly low income households.
But the answer isn’t giving money to State Grid Corporation of China and Sir Li Ka-shing. No it’s a lot more obvious than that – we need to require landlords to provide houses that meet a decent level of energy efficiency which the landlord would consider reasonable for their own home.
This can be done via state governments imposing upgraded minimum standards for rental properties. Alternatively the federal government could ask that, in return for the generous tax breaks that property investors receive, they need to ensure their properties meet a level of performance that ensures renters can enjoy a comfortable home without fearing their energy bill.
This could mean installing solar and maybe batteries, but it could also occur through other options like installing insulation and an energy efficient heat pump heater and water heater.
Those that are concerned about the intersection between energy, equity and climate change must concentrate their effort on achieving decent energy efficiency standards for rental properties. They can not afford to be distracted by politicians and network businesses dangling trinkets that don’t really make a difference.
Yes, real estate agents and people falsely purporting to represent “mum and dad” and “nurses and policemen” investors will fight fiercely against such change. But with sustained focus from the rest of us they should lose this political argument.
Renters vastly outnumber property investors, and astronomical property prices mean many are locked into renting. In addition, real estate agents are one of the least trusted professions in the country. But what’s really in our favour is that neither landlords nor real estate agents have to lose out from rental standards. They will all be in the same boat so they won’t be losing out to someone else, people still need a home to live in.
Yes rents might increase slightly but this will be far outweighed by reduced energy and medical bills (rent should increase only slightly because the efficiency upgrades will cost a few thousand dollars yet most dwellings are worth hundreds of thousands of dollars
…table continued below…
Tristan Edis is Director of Analysis and Advisory at Green Energy Markets.
