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.
This post was published on November 25, 2015 9:48 am
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View Comments
Some good points Tosh.
It’s interesting that in some Microgrid projects, the most
efficient solution is to have excess renewables at some stages that is sent
into a resistor. It feels bad to waste energy like that, but often a more
efficient solution than the other options. Can be hard to get your head around.
Agree on point 2 also. It’s funny when someone proclaims
Technology X is not feasible for 1 reason or another. You can quickly catch
them out by offering a scenario when the technology certainly is feasible.
"Personally, I don’t have a landline....I’m 100% mobile and most people I know are the same." Maybe not for phonecalls. But most people I know rely on the landline (copper/HFC) network to get their internet. And I'm guessing the internet is carrying orders of magnitude more information than the mobile network.
Indeed Finn, perhaps if data came down the grid it would keep us connected
Hi Tosh.
Hi Andrew, I think the modelling work was great but the headline from your work was that batteries would not be economic until 2020, and one of the fundamental assumptions was an 8% reduction in battery price pa from memory. I'm not so sure this should have been the headline?
Hi Tosh yeah it's always going to be tricky to distill complex modelling work into a headline!
Yes we did assume battery prices starting at $5,500 for 7kWh next year, and reducing at 8% pa. Hopefully the prices will dive faster, but it's tough to put a number on that!
Hi Tosh, I would add that many of us are risk averse and this ties us to doing what we did in the past. Going off grid, at this point of time, is a free choice we can make. We can make a second free choice of installing a small backup power source or we can choose to change our behaviour and decide to defer the need for gratuitous energy at any time. Keep gratuitous energy in its place and not let our desires determine rational decisions..
Hi Tosh, Good article.
I'm glad to see you mentioned Economic rationalism. I feel this is one of the most pernicious features of modern society and results in a host of dangerous behaviors. It's efficiency aspect is the driver behind the globalisation that makes our civilisation highly dependent on far away resources, many of which can cause us serious hardship if they are disrupted. This extends well beyond oil.
By not asking "Is it cheaper?", we are free to consider the evironmental and social benefits.
On the subject of Selling the excess to our neighbor, we shouldn't forget is that our neighbor will do the same thing we do, so there will be nobody to sell the 'excess' power to. It's definitely best to think of this summer excess as the reserve for those cloudy winter periods. By not evaluating this on narrow economic grounds, the true benefit can be seen.
This gets me to the herd mentality that drives most people in our society. While moving with the herd makes sense if you're a tasty grazing animal (or fish) avoiding a wall of hungry mouths, but it makes no sense outside this preadator-prey environment.
By staying with the herd, we make collective decisions that can be very bad at times, as the chinese are discovering with 60 million unrentable investment apartments built since 2008, an act akin to stampeding over a cliff.
Another problem is that the herd all compete for resources, so breaking away early puts the individual in front of the feet trampling the greenest grass.
I am also glad to see you mentioning electric vehicles. They are readily 'fuelled' from solar power. I try to charge mine 'for free' all year round, but the useful range is limited in some winter months, something that another kw of solar panel of using the bike more can alleviate. The Li-ion house battery makes most efficient use of the limited winter sunlight.
The private vehicle fleet is another example of the herd making collective dumb decisions. Big, black (why black??), SUVs crowd the roads with EVs virtually nonexistant.
Our transport sector is completely exposed to the world oil supply. The same tiny (1%) oversupply that crashed the oil price will eventually swing the other way causing a host of shocks and supply issues.
On the matter of 'wasted energy', there are millions of homes without rooftop solar!
How about that for wasted energy??
At an average of 1kw per square metre of roof for solar radiation, virtually every rooftop could be self sufficient in energy. And the installation cost of this self sufficient structure has dropped now to the point where this is a reasonable option. To the extent that it it isn't, the problem lies in the horrendously inefficient nature of modern home building in Australia. ABC TV, in their recent Cataylst programme, reminded us that the average electricity demand in Australian homes is between 20 and 40 kilowatt-hours a day. Even at the current low cost of an 'off grid' installation, such a load would be hugely expensive.
As to the 'economic rationalist' element of the discusion it could be worth noting that in the this era, the electricity suppliers are less about supplying energy and more about supplying profits to investors.
40kWh is somewhere between 8kw and 10kw of PV on the roof, on average. Given the $A2.00/watt installed price I am seeing currently, that is between $16k and $20K. Not hugely expensive, given the cost of those electrons in many places.
Now, I will agree that currently going 'off-grid' is expensive due to the cost of the storage system. For my house, i would want two days of storage, which is currently beyond my means, but should be affordable in a few years. A good backup generator can get you electricity at about $0.50/kWh, which would fill in for those times when it is cloudy.