Would Darryl from The Castle buy battery storage?

Tell ‘em they’re dreaming! That’s what Darryl Kerrigan from the film The Castle would say when knocking back a proposal to pick up a great deal. And it’s what that most networks and utilities would have told you a year ago if you raised the prospect that battery storage would upturn their customers into competitors and threaten to upturn their business models.

Now, though, it is a different story. Tesla, in the stroke of a genius marketing ploy, has not just brought down the cost of lithium-ion battery storage, it has also changed the conversation.

Battery storage is here. We know that, because even the utilities are rushing out battery storage offers to ensure they don’t miss the market, like they did with solar.

But how competitive is battery storage right now? Would Darryl really buy a battery storage system if one was offered?

Well, that would depend on a bunch of things. Such as where Darryl lived, how much electricity he consumed, if he had solar on his roof already, and how many panels, and what sort of tariffs is he getting now, and will get in the future.

Because of that, it is impossible to be prescriptive. Battery storage will, in any case, be adopted by a large number of “early adopters” for a whole bunch of reasons such as wanting to be the first, wanting independence, wanting to save money, or just sticking it up the big boys.

Clearly, battery storage is not quite ready for widespread mass market adoption. It still has some cost falls to come, inevitable as they may seem, and generous tariffs in Queensland and South Australia that will last for more than a decade provide no real incentive.

But to give some idea of the complexity involved, we have been running a series of articles with different views of the economics and how they might apply to households.

The first came from UBS, which predicted paybacks as low as 6 years for battery storage; the second came from Morgan Stanley, which came to a similar conclusion for some states and suggested 2.4 million homes might install them.

We have also published an online calculator that might provide a guide to consumers, given the huge number of variables that can exist from location, roof size, consumption totals and patterns, and the size and position of the solar array.

The next installment comes from Craig Chambers, an energy expert with AECOM, a consultancy with strong links to the utilities industry.

Chambers agrees that while there is not much incentive for existing solar households in S.A and Queensland, there are 160,000 households in NSW that will lose their generous feed in tariffs at the end of 2016.

That, Chambers says, is a potential 1GWh market of household battery storage in that state alone, a number that would have huge implications for retailers, networks, and generators alike.

As an example of how this might work, Chambers uses the example of a “Darryl” in Bonny Doone in NSW. He’s on a tariff now of 66c/kWh for everything he produces. At the end of next year, he will get just 6c/kWh – if he’s lucky – for the energy he exports. So he will have a strong incentive to consume as much of his solar output as he can.

The problem with Darryl is that he has got an oversized system – probably built to take advantage of the premium tariff. It’s 5kW. Darryl will likely use around 2kWh most of the day, occasionally peaking to 3-4kWh.

Would the Tesla system help him? A little bit. But as this graph above shows, those batteries would likely fill up pretty quickly, meaning that in the afternoon, Darryl would still be exporting to the grid, and not getting paid much for it.

(The black dotted lines show the difference from batteries – in the middle of the day Darryl is not exporting to the grid, but he’s charged his batteries by lunchtime.Then uses battery to cover the evening peaks, effectively shifting them to later in the evening).

Of course, this is not to say that battery storage doesn’t pay dividends. Any installer will tell you that whether you install solar or storage, it is best to look at your energy consumption. Find ways of being more efficient, and in Darryl’s case here, he would be best advised to funnel more consumption, via timers, during the day.

And houses with a smaller system – say 1.5kW to 2kW – would likely find most or all their excess solar output absorbed by the battery storage.

But in the case of Darryl and others like him, it’s the peak tariffs that dictate the battery ROI (return on investment). As this graph below suggests, – it applies to NSW only – the return for those in Ausgrid’s area will get a return within 11 years, but for other areas is will be later. (It assumes $7,000 cost of the 7kWh Tesla Powerwall).

Put another way, Chambers argues that battery storage is still falling short in a bunch of metrics, as this graph below shows.

Now, not every analysis shows this because the assumptions about cost, usage and deployment may change. Chris Cooper’s excellent calculator shows a lot more depth about different scenarios for households, and over the next few weeks we’ll have a lot of differing points of view and estimates.

The one impediment that most are agreed on is the glacial pace of regulation. In the time that the regulators have recognised the need for reforms such as Power of Choice, and actually implemented them, more than 3,500MW of rooftop solar PV has been installed in Australia.

Now battery storage heralds another revolution and the regulators will struggle again to keep up. “Regulatory change is not moving far enough,” Chambers said. “The regulatory landscape is not changing as fast as the technology.”