To illustrate the impact of battery storage on the electricity network in Australia, Prof Guoxiu Wang likes to compare it to the invention of refrigeration.
“Before people invented the fridge, we produced food, we consumed food immediately,” says Wang, director of the Centre for Clean Energy Technology at the University of Technology, Sydney. “With the development of appropriate electricity storage technology, the electricity is like our food – you can store it and whenever you need that electricity, you can use that immediately.”
Batteries as a means to store electricity are nothing new. But with solar photovoltaic units now found on 16.5% of Australian residential roofs, battery storage has stepped into the big league. What was once viewed as an add-on to solar photovoltaic is now driving a revolution in the energy sector and turning the concept of a national electricity grid upside down.
The chief scientist Dr Alan Finkel’s report on the future of the national electricity market gives a glimpse of how profound this change will be. The report cites data suggesting that by 2050, 30% to 45% of annual electricity consumption (pdf p62) could be supplied by consumer-owned generators; namely, rooftop solar photovoltaic and battery storage.
This represents a huge opportunity for consumers, and a huge challenge for electricity providers.
For consumers, rooftop solar and battery storage combined are now affordable enough that the electricity industry is seeing a rise in what a McKinsey & Company report calls “partial grid defection” (pdf). This is the scenario where, instead of rooftop solar owners selling their excess solar power back to the grid, they are using batteries to store that power for later use. This creates a new opportunity for households and businesses to effectively play the electricity market, says a senior expert at McKinsey & Company and report co-author, Amy Wagner.
“In a classic net energy metering environment, where you get paid the same dollars per kilowatt hour if you’re using it in your house or if you’re exporting it to the grid, you’re paid all the same price; you don’t need storage – the grid is your storage,” Wagner says.
But as these feed-in tariffs change – and they vary from state to state in Australia – a new opportunity presents for rooftop solar owners.
“Then you start creating a market for storage that didn’t exist before, because it has an arbitrage opportunity; you arbitrage between the retail rate for what they get to reduce their own consumption and the retail rate that they get to export.”
That means excess energy can be sold back to the grid during peak demand – and therefore peak dollar. Equally, batteries can be charged directly from the grid during low demand, when electricity is at its cheapest.
This could also change the playing field for industries – particularly those that use a lot of electricity during peak periods.
“Those industries with high demand charges and peaky loads can be very attractive for storage because you can move those hours to another portion of their day,” Wagner says.
This partial grid defection model of combined rooftop solar and battery storage also offers an insurance policy against future electricity price rises; something that Emlyn Keane – the chief executive of the energy services company Evergen – says is motivating a significant number of customers to invest in rooftop solar and battery storage.
“Our highest take-up is 55+ years, and that’s because … power prices are the number one concern as to whether my super’s going to be adequate,” Keane says. “We’re saying you can invest now while you’re still working, pay it off, and your bills will be 80% less than they would otherwise be.”
The chief scientist’s energy blueprint referenced the scenario of partial grid defection, saying that consumers – both residential and industrial – need to be financially rewarded for managing demand and sharing their energy resources such as solar panels and battery storage.
Does this mean a full grid defection scenario – in which households rely entirely on rooftop solar, battery storage and a small generator – is likely? Do grids even have a future?
Some electricity providers are already looking to this question. Ergon Energy Queensland, with funding from the Australian Renewable Energy Agency, is trialling a new model of centrally controlled residential rooftop solar and battery storage to create what it calls a “virtual power plant” at three sites in Queensland. The idea is to see whether such a system can be used to manage the supply of renewable energy into the grid, manage demand and therefore manage the periods of peak load on the network.
The McKinsey & Company report suggests full grid defection is not now economical, and Wagner believes the grid will continue to have value.
“But there will need to be changes made by the utilities to make the grid leaner, modernisation technology that they need to put in to optimise against the distributed generation profiles; a different way of operating the grid.”