Australia’s ‘Year of the Big Battery’ could be followed by a ‘Decade of the Smaller Battery’

But we shouldn’t forget that the renewables market in the country is largely driven by what happens in behind-the-meter (BTM) settings, the rooftops of houses where the adoption of solar PV is higher than almost anywhere else in the world.

Energy-Storage.news’ coverage of the latest Sunwiz annual report on energy storage in Australia kicked off with the quote that 2023 was the “Year of the Big Battery.” It also seems, according to the Australian Energy Market Operator (AEMO), that the rest of this decade will be about large-scale batteries too, but AEMO sees residential installations rising sharply beyond that.

“The key figure there was the 12GWh under construction as of the end of the year, versus around 1.5GWh energised during 2023. This year is going to blow 2023 out of the water, so there are a couple of years of very intense development underway,” Warwick Johnston says.

As we’ve seen in the past few months, Western Australia, which has an isolated grid without interconnection to other major states or territories, is a “leading proponent of batteries,” Johnston said. In the wider Australian context, batteries are seen as an alternative, or complement, to the buildout of transmission infrastructure.

“Everyone assumes that transmission [buildout] is going to happen and has to happen, and it’s true that it will unlock a lot of low-cost, bulk renewable energy. But you could be putting more and more energy storage in and virtual transmission and all sorts of things a lot quicker than you can build a transmission line,” Johnston says.

“So, from that perspective, I think that we’re going to have many more years of continued battery deployment until some of that transmission comes in and shakes it up.”

The big battery space – which Sunwiz defines as any project over 10MWh – is one with high barriers to entry. The sector was kickstarted largely with government-funded or supported projects a few years ago, then many of Australia’s major utilities started getting involved, and more recently private investors and developers have taken a lead on some projects.

Johnston wonders how long the so-called “big battery bonanza” can last. He notes once the transmission buildout promised by prime minister Anthony Albanese gets going, “transmission could undercut some of the roles that batteries play.”

Distributed to ‘eat the lunch’ of large-scale

Back in 2015, predictions were made that Australia’s small-scale solar would “eat the lunch” of large-scale PV, and that’s what happened, with rooftop solar PV last year surging to new heights and ground-mount solar farms having a sluggish development and investment path at best.

Sunwiz thinks this will be the case for battery storage too.

“It might be that there’s some years of highly stimulated development [of large-scale batteries] coming, and there’s a huge pipeline,” Johnston says.

“But I think there’s going to be a lot more distributed-scale storage because of the economics, the risk is so low, and consumer appetites and benefits from those batteries are even decoupled from the pure financials often. We’ve got a window of time where there’ll be a lot of rollout before it probably settles back more towards swinging back towards the distributed scale.”

Going back to the PV industry analogy, Johnston says the risk profile of distributed solar is what drives it forward: connection agreements are simple and rubber-stamped by distribution network service providers (DNSPs), and there’s “little chance of a default” with the relatively low cost of financing.

The only real risk is that feed-in tariffs (FiTs) are phased out and lower the economic return, but homeowners would’ve known this would be the case when they installed their system: “once it’s there, they’re not going to take it out.”

Meanwhile, the risk of rooftop generation being curtailed from sending to the grid is pretty small, too.

“So, there are risks for rooftop solar, but they’re far less impactful than the risks that are faced by grid-scale solar,” Johnston says.

Certainly, when it comes to batteries, grid-scale battery energy storage system (BESS) assets can perform multiple applications front-of-the-meter (FTM) that home batteries can’t do.

On the other hand, households are installing batteries to give themselves energy independence and security from grid outages. That’s a key advantage to home batteries, while the phasing out of the FiTs across Australia gives those with rooftop solar an economic reason to add a battery system.

In Germany, according to official government statistics, the attachment rate of batteries to solar PV systems has gone up to an estimated 80%, driven largely by that desire for energy independence and security, and accelerated by the gas crisis sparked by Russia’s invasion of Ukraine.

Sunwiz finds Australia’s attachment rate to be much lower for new systems, around 17% in 2023, but up from 15% the year before. There is also an increasing trend of retrofits at existing PV systems, where the attachment rate is much, much higher, which Johnston says is a result of Australia’s “longstanding success in residential solar”.

Some states with gigawatt-scale solar markets in Australian states now have 100% of their electricity generation needs covered by rooftop PV at certain times of the day.

While Australians don’t have the same energy security concerns as Germans do today, what Australia does have is a “long, skinny grid,” with wires traversing long distances of the country. That means electricity is expensive, with big gaps in price between daytime price of electricity, export prices and nighttime prices.

“Those are the kind of things which lead towards home energy storage systems, and grid-scale storage as well.”

Subsidies still needed to drive scale-up

In fact, Australia’s cumulative installed capacity is weighted towards residential battery storage, with about 46% of the market to 44% for grid-scale storage.

With such a big installed base that’s set to grow, with payback times of around eight years for solar with storage versus about six years for solar on its own, Warwick Johnston believes more of the installed home batteries should be aggregated into virtual power plants (VPPs) than the roughly 14% that already are.

“The challenge there is that people, having invested all this money in their own power independence, are reticent to hand it back to the network,” Johnston says, given that independence was very often the homeowner’s motivation for going solar in the first place.

Johnston argues that for distributed PV to play a greater role in stabilising the network’s operation, more storage should be “orchestrated” into VPPs.

Getting to that point is challenging in today’s market, and while vendors should do a better job of communicating the benefits of VPP participation, the consultant says it seems likely that government incentives may be needed to stimulate this part of the market.

Perhaps it will depend partly on the experience of the 14% of customers who have already enrolled in VPPs and the feedback they offer.

Johnston notes that some time ago, an Australian Renewable Energy Agency (ARENA) programme surveyed VPP enrollees and found that: “people don’t really know what’s going on in their VPPs, it’s like they opt into it and then hope or trust that it’s operated well, and they don’t lose out from it.”

“That’s not really enough.”

Sunwiz’s report outlines the subsidy programmes that exist in Australia today for home batteries, and Johnston says that these, too, are inadequate, as things stand.

“Because it’s going to take so long to remove the impediments to the roll-out of large-scale solar and wind and build the transmission to connect it, the social licence for the transitional transformation to be upheld will require the heavy lifting to be done by or carried for the next year by distributed scale.”

“If we’re going to hit our objectives, then we’re going to need to go faster. The government can play a role in accelerating that.”

Johnston says that the Australian solar industry is “in a bit of pain at the moment.” This is less pronounced than in other markets where solar adoption isn’t as high, but revenues are down due to lower average selling prices (ASPs), and although installation volumes are rising, this isn’t commensurate with those falls in price.

“So, the solar industry itself needs to be doing more batteries, and if we’re going to be getting on with this energy transformation, then it’s probably time for some external drivers to be created.”

Energy-Storage.news’ publisher Solar Media will host the 1st Energy Storage Summit Australia, on 21-22 May 2024 in Sydney, NSW. Featuring a packed programme of panels, presentations and fireside chats from industry leaders focusing on accelerating the market for energy storage across the country. For more information, go to the website.