Australia’s battery pilot on a grand scale

Driving the interest in storage in the Australian market are the fundamental energy economics for households and businesses: Rooftop solar continues to get cheaper and electricity prices remain high. This the opinion of Ric Brazzale the Managing Director of Green Energy Trading who says that tariff structures further accentuate this, playing into battery storage’s value proposition.
“Australia is unique in some ways because there is a low wholesale value of electricity, hence low feed-in prices for [solar] electricity, and very high network charges, which means we have a high retail price,” says Brazzale. “So the gap between what an electricity customer pays at retail and what it receives from feeding PV electricity back into the grid is bigger than anywhere else globally.” Based on a survey of consumer responses to battery price points published in May, investment bank Morgan Stanley concluded that the battery market could be worth AU$24 billion (US$17.1 billion), with 2.4 million households on the major grid, the National Electricity Market, potentially deploying energy storage.
Bloomberg New Energy Finance (BNEF) has put a capacity figure and time frame to its projections for distributed battery storage Down Under. BNEF forecasts 21.4 GWh of batteries to be installed alongside rooftop solar in Australian businesses and homes by 2030, with a further 6 GWh added in large-scale applications.
The Australian government, under the leadership of Prime Minister Malcolm Turnbull since September, has been demonstrating an increasing awareness of storage’s march into the market. Environment Minister Greg Hunt in particular has ramped up the pro-storage rhetoric in a number of media outings. Speaking to the Australian Broadcasting Corporation in October, Hunt said thathe believes it’s “inevitable” that Australian households begin to install battery arrays large enough to enable them to disconnect from the electricity network.
“Already we have about 15% of Australians, the highest level in the world, who have solar power. Increasingly we will see adoption of storage, which is the key thing that allows people to be off-grid,” said Hunt. “This is clearly the future. The debate is about how long it takes and the task for Government is to help bring that forward.” But whether encouraging Australian households to go off the grid is a good idea for individual consumers, for Australia’s electricity network, and for the transition to a low-carbon economy is itself debatable.
“There is always going to be a grid,” says Green Energy Trading’s Ric Brazzale. “I would put to you that in the short term it is likely that Australia will become a good market for battery storage, but in the long term there can’t be 50% of consumers going off-grid while the other half pay twice as much [for provision of the electricity grid].” The death spiral, where customers desert the grid only to drive up costs incentivizing further defections, has been discussed in some detail in Australia and opinions vary as to the likelihood of that outcome. At its center lies a debate about the cost of the provision of the electricity network.

Growing grid costs

Anticipating ever-increasing electricity demand, largely on the back of the availability of cheap residential air conditioning and planned expansions within the mining and resources sector, Australian grid operators invested vast sums in grid infrastructure projects. Some analysis points to as much as AU$130 billion (US$92 million) of grid spending between 2000 and 2020, if planned works go ahead. Described by critics as the “gold plating” of the electricity grid, sufficient capacity was installed to supply a huge peak in demand, essentially caused when householders return home in the early evening to hot houses during, at times, stifling summer months.
These grid expansions have been highly contentious and have seen the dynamic, to which Brazzale alludes, take root in the market: Retail electricity prices continue to rise, while wholesale prices remain flat or decrease, leading to poor solar FITs. Grid operators are guaranteed a regulated return on investment on grid projects, incorporating estimated interest rates often higher than market levels, and there have been accusations that needless investments were made.
Rooftop solar PV potentially has had a positive impact on peak electricity demand, therefore potentially undermining the need for major grid capacity expansions, although this is a contentious point and is disputed by some network operators. Australia’s grids are run by a patchwork of private and state-owned enterprises.
The various Australian network operators have been directed by regulators to implement more “cost reflective” tariff structures, in an aim to deliver a more equitable outcome for consumers. As a part of this push, some have been producing analysis showing what impact PV has been having on networks.
In October, SA Power Networks produced a paper indicating that rooftop solar has had only a marginal impact on peak demand periods, which occur during very hot days. South Australia has one of the highest levels of renewable energy penetration in the form of both wind and rooftop solar. Around 25% of South Australian homes feature a PV array.
The analysis purportedly demonstrates that rooftop solar has pushed peak demand further back in the day and without materially reducing it (see diagram on top left of p. 66). These data are used to support the case for grid spending that has already taken place and new scheduled works. However, the analysis has been questioned by researchers from the University of New South Wales’ Center for Energy and Environmental Markets.
“We have been building online tools with a great deal of transparency, like the APVA Solar Map, and we were struck [by] the very different findings than those of SA Power Networks,” explains UNSWs’ Iain MacGill. “What we have been seeing is that PV has been making a useful contribution to not only knocking down peak but also delaying it to later in the evening.” The UNSW team argues that the SA Networks modeling is not transparent in Springer Solar on storage
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terms of what sampling it has used and that it likely only takes into account residential demand, without factoring in PV electricity that is consumed by household on-site. Furthermore, the data provided are also not representative of demand right across South Australia, and cover only one part of the state’s grid.
“It [PV] knocked down peak demand by around 100 MW or so,” says MacGill. “I think around the time of that peak demand, there was around 350 to 400 MW of PV [installed capacity] in South Australia, so it was playing a useful role.” MacGill also sees value in delaying the peak in that many of the capacity issues that the network operators are dealing with are related to temperature, which is alleviated as the sun sets.

Grid case for storage

Distributed storage would further assist with the smoothing of demand peaks, with householders drawing on its solar energy in the evening. But it would also impact the wholesale market significantly, with major profits being derived by generators in peak periods.
It would also significantly affect retailers’ revenues, decreasing consumption. These customers will still rely on the grid for electricity, but it is arguable whether that would be at periods of peak demand, and a push towards increased fixed targets is taking place in various parts of the country. Fixed charges would considerably diminish solar’s value proposition to the household and Green Energy Trading’s Brazzale notes this would not be a good thing if it further incentivized consumers to go off the grid.
“I think it would be a tragedy in some ways if we saw a failure to properly price networks, driving a lot of battery storage, making more networks redundant and then there is a vicious cycle,” says Brazzale. “I think ultimately we have to fix up our network pricing and the network business needs to take a hit on equity because the value of their services can’t compete with PV and batteries.”

Grid edge applications

Where the role solar+storage can clearly support the grid is beyond the major population centers, where the grid is less robust making its upkeep expensive and on island grids, where diesel plays a significant role as a fuel for electricity generation.
“Australia also has a really long and skinny grid and a lot of network businesses will move towards distributed batteries as a solution before they expand and augment their grids anymore,” says Brazzale. And they are.
A number of Australian utilities are rolling out distributed or centralized battery pilot programs, investigating ways in which storage can buffer the grid, reduce costs and enhance reliability. In Queensland, utility Ergon Energy is partnering with SunPower to roll out distributed solar+storage in 33 Queensland homes. The trial project is being supported with an AU$400,000 grant from the Australian Renewable Energy Agency (ARENA).
The distributed storage will allow for remote access to aggregation, to buf INfinite energy on storage
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fer the grid in times of strong demand, along with providing customers with the Sunverge Solar Integration System for a level of demand management. SunPower reports that installation is currently underway. “This is an important step towards more efficient ways to run electricity networks and also towards giving customers greater choice and control in how they manage their electricity needs,” said Ergon CEO Ian McLeod in August, in announcing the program.
In Western Australia utility Synergy is working with ARENA on a solar+centralized storage project in a new suburban development north of the city. Located in Alkimos Beach, the project will see a 1.1 MWh battery array added to the grid supplying the new suburb with more than 100 rooftop PV systems installed on houses.
Synergy will trial a number of new tariff structures as a part of the project. Major construction companies Lend Lease and Landcorp are also project participants. “Combining storage and renewables has the potential to deliver significant savings to both consumers and developers by reducing grid connection costs for new homes,” ARENA CEO Ivor Frischknecht noted.
SA Power Networks will partner with Enphase on a project that aims to “help utility providers improve their load management and develop business models for residential storage.” Enphase’s AC Battery will be deployed in the project, with Australia as the global launch market for the product.
There is clearly a sense that Australia is proving somewhat of a test market for a large number of storage offerings. Its unique tariff structure, high irradiance and large areas essentially on the edge of the grid are acting as powerful drivers of battery uptake. Its uniquely high residential rooftop penetration coupled with an electricity market in flux is also making for a fascinating case study in the disruptive power of distributed renewable energy technologies.
“I believe Australia is a test case,” says Bloomberg New Energy Finance’s Logan Goldie-Scott. “It stands out and is further ahead than some other markets largely because the retailers and the regulator seem more willing to explore the opportunities around storage. So in that sense other countries will be looking at what regulation or what monitoring comes out of Australia.” What remains unclear is just what they will find.