Every consultant and commentator now has a view on solar and storage. The ATA solar and storage will be economic by 2020, Tristian Edis is downplaying going off grid, and you get the feeling Giles Parkinson sees market disruption imminent (we tend to be in the same camp as Giles). Here are the three common mistakes we see when assessing the potential of solar and storage. Read them, critique them, but please, don’t make them.
Mistake 1 – the grid is efficient, cheap, back up power supply, and so we shouldn’t go off grid. Often, is it argued the grid is efficient and useful, simply because it already exists.
One way to dispel this argument is to ask: “do you use fixed line telephony, in the digital age?” Personally, I don’t have a landline. I’m 100% mobile and most people I know are the same. Why use infrastructure, simply because it exists?
The evidence behind this argument typically goes that even if getting to 90% self sufficiency using solar and storage is cost-effective, the last 10% required to leave the grid altogether will really cost you (that much may be true). Therefore, it is best just to stay grid connected.
However, this analysis assumes the grid will cost the same, whether it is used by customers for 10% of the time, or 90% of the time. If network operators and retailers aren’t prepared to massively cut their revenue or profit per customer, this assumption will hold true. In the real world where energy companies care about how much money they make, it will become expensive for you to use the grid for backup 10% of the time.
The result? The grid is unlikely to end up being cheap back up after all. Time will tell, but it is a brave punter to suggest the grid will be cheap back up, when we only use it 10% of the time.
Mistake 2 – economic rationalism – why would people install solar and storage, or leave the grid, if it doesn’t make economic sense?
This analysis is always done around an average household, that uses an average amount of power, at an average market price. Like the ATA analysis on solar and storage.
However when it comes to real customers and real projects, assessing an average household becomes problematic. For the energy conscious family that doesn’t need heating in winter, the economics of solar and storage, or going off grid, is going to be vastly different to the professional couple that want to charge their EV at home, and live overseas three months of the year.
Stating the obvious, on either side of an average, solar and storage will make sense for some, but not for others. Today, in many market niche’s, solar and storage makes sense. This will allow the market for solar and storage to establish a foothold, come down the cost curve, and eventually penetrate the mass market.
How soon? Hard to say, but solar costs in Australia dropped about 70% in 6 months once the global supply chain kicked into gear. Don’t expect a gradual, steady decline in battery storage costs. The change will be quick and dramatic, and almost certainly in the next three years.
Mistake 3 – going off grid results in all this wasted solar energy in summer, surely I should sell this to my neighbour?
There are two errors here.
The first mistake is subtle. The argument implies the current energy market is efficient. That is, it implies we shouldn’t waste our solar assets, because surely that’s not what happens when designing energy infrastructure?!
In fact, that is exactly what happens when designing energy infrastructure – it is designed and built to manage a worst case scenario, and 98% of the year, energy infrastructure is under utilized, or “wasted”. Roads, rail, and other infrastructure assets all suffer this conundrum to varying degrees.
Of course, two wrongs don’t make a right. We don’t advocate replacing inefficient infrastructure with inefficient infrastructure, just for the sake of it. But inefficiency isn’t the bogey it’s made out to be.
More importantly, the second error is to assume the value of selling excess to your neighbours will be higher than the cost of doing so. At current feed in tariffs, you would need the cost of production to be lower than 6c/kWh for exporting energy to your neighbours to make sense (that is unlikely). Combined with unavoidable charges for being connected to the grid, that are often higher than $400 a year for households, selling your excess might be more expensive than it is worth.
You might be better off running the air conditioning for kicks in summer, or charging your neighbours electric vehicle for free in summer for karma credits, than selling your excess to neighbours. Sad, but true.
So there you have it. Does solar and storage stack up? It depends, and it depends largely on how network companies price their services.
You can download the report we did for Tyalgum to go off grid that unpacks this issue, or sign up for news – we will detail three scenarios where solar and storage makes perfect sense today, coming soon.
Source: Energy for the People. Reproduced with permission.