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One of the big debates in the electricity market at the moment is over the economics of battery storage. How quick is the payback on different battery storage systems? And does it really matter?
The answer to the first question is complicated, because it depends so much on individual factors such as location, orientation, size of PV system, domestic usage patterns, type of battery, and the potential for added value such as trading and grid stability.
The answer to the second question is also complicated. But given the anecdotal evidence from inquiries to installers, it seems there is enough demand for early adopters, and others.
Battery storage, thanks partly to Tesla, partly to plunging costs, and partly to the actions of incumbent utilities, is now a desirable household device. Anyone know or care about the pay-back on their fridge, or their sofa?
For many people, though, costs do count, which is why a new study by Energeia consultant Melanie Koerner caught our eye.
It assesses the battery storage offerings made by the Big 3 retailers – AGL Energy, Origin Energy and EnergyAutralia – who are all keen on being seen to “do something” on clean energy. (Yes, many more offerings are on the market. But these are the ones that are being presented to more than two-thirds of customers).
So, how do they rate?
The first question to ask is what is on offer. AGL is is focusing on a 7.2kWh Powerlegato system, EnergyAustralia is about to roll out an Enphase offering, and Origin has tied in with Tesla.
Energeia has used the latest pricing (February, 2016) and modelled this on 10,000 different electricity load profiles.
It says this results in a return on investment (ROI) for the average consumer. “The results provide a clear picture of where the current offerings stand and estimate market size for each offering,” it says.
And these are the results. Using a 10 per cent discount rate, and NSW consumers, the survey finds that the “net present value” of most systems are negative. Some customers do have a positive NPV, but for most it amounts to what economists would call a “non-rational economic investment.”
But not all consumers think in terms of ROI and NPV. Some just like to think in terms of “bill savings”, or the reduction in their future power bills.
This next graph shows that the “mean” result is an annual bill saving of $690 for the EnergyAustralia product, while the AGL and Origin offers would deliver similar annual bill savings with a median of around $825 a year.
This next graph takes that analysis even further, and shows the savings according to consumption patterns – ranging from the Australian average (~3.8 MWh per annum) up to heavy users consuming 14-16 MWh.
“For the vast majority, there is no payback (at current prices),” Koerner says.
But, as she admits, that is no surprise to anybody. What is really interesting about this study is who it’s targeted at – not the consumer, nor the big three retailers – but the potential and actual new entrants to the energy game, such as telcos, retailers, appliance makers, IT firms.
Telstra for instance, has already flagged its imminent push into the residential solar and battery storage market, and has hired Powershop’s Ben Burge to design and implement that strategy. Others will follow.
That’s why these findings will be of little comfort to the big three retailers and the incumbents, who continue to play down battery storage as something “from the future”.
Koerner says the new entrants want to know where the curves are now, and where they will be in a few years. “We and they are seeing a shift to a new future. New businesses need to find out who customers are and what systems look like.”
Energeia describes battery storage as an “enthusiasts” market. And there seem to be an awful lot of enthusiasts.
Giles Parkinson is founder and editor of One Step Off The Grid, and also edits and founded Renew Economy and The Driven. He has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.
This post was published on February 29, 2016 2:56 pm
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It's great that someone has come out and stated the obvious that the payback time is infinite. What we now need to look at is to reduce the margins on these products, and get the cost down.
Home heating is the biggest part of a domestic energy bill and I am planning to store energy as hot water to use in a hydronic wall radiator home heating system.
Hot water stores 65 kWh/m^3 which is about half that for the best Lithium batteries but a cubic meter of water only costs 22 cents compared to about $1000/kWh for the batteries. Of course I will have to pay for the tank and insulation but my storage system will still be way cheaper.
I will be heating the water with PV via a Variable Voltage (not Grid Connect) inverter as the wiring for electric heating is much simpler than all the plumbing involved with solar thermal.
It would be interesting to see the results using a lower discount rate than 10% - many homeowners have mortgages that they could load the cost onto, with interest rates around 5%.
It looks like there are a couple of hundred enthusiasts a week. I'm not sure how long it will take for the enthusiasts' market to be saturated. Then we've got to wait for some serious cost reductions before we 'cross the chasm' to the mainstream. Interesting that the Enphase offer seems easily win on those graphs and the Powerwall seems to lose the most money for the most people of the first graph.
There is ambiguity because the benefit of solar, and the benefit of adding the battery have not been separated.
If that were done, or the benefits of the battery were significant, 'bill savings' should be proportional to battery capacity, whereas it appears to be the contrary. Also, the retro-fit, which concerns only the addition of the battery, shows the lowest bill saving. Then, 'the data seems to show that the bill reductions are less the higher the consumption', because the battery's capacity becomes a smaller percentage of the total consumed. I would conclude that the battery adds more cost, than benefit.
does this analysis assume constant power prices? You'd have to think there is a fair chance they will go up a bit in the future.
Many batteries, including the Powerwall, will retain only 60% capacity at 10 years. If the initial consumption were maintained, then as capacity declines, the deficit must come from the grid.
Batteries do not provide complete protection from rising tariffs.
There are no supporting calculations, so who knows what was included or not in the analysis.
I'm sure there are plenty of people who would be happy with a 5% return on investment, rather than 10%. 5% is still a lot better than what you can do by putting your money in the bank. I estimate using a 5% discount rate would shift those NPV curves a few thousand dollars to the right. Then the analysis would show a lot of customers could now get positive NPVs, with much smaller price reductions required for mainstream uptake.
Nickel Iron cell already are cheaper and last longer!
https://www.youtube.com/watch?v=kT7EOCPAcmo
A 10% roi in the current economic conditions is ludicrous; and the world economy is showing more and more negative signs every day. Stick your money into batteries rather than zero interest rates in the bank and losses in the share market.