The distributed energy storage market is accelerating in Australia. Utilities there are exploring ways to ride the trend in order to avoid losing revenue to load defection as growing numbers of households begin to self-supply more of their own energy.
Battery vendors see Australia as a proving ground. As they jockey for a strong position in the residential market, storage vendors are increasingly partnering with Australian utilities to access consumers.
Recent analysis from GTM Research shows that Australia’s energy storage market could grow 37-fold between 2015 and 2020, reaching an annual installation rate of 244 megawatts. The vast majority of this growth is happening behind the meter, predominantly as add-ons to existing residential solar systems.
But utilities and vendors are both trying to figure out the business model.
“Solar-plus-storage in Australia is still a nascent market,” said Tim Robinson, energy and technology expert with PA Consulting. “Everyone is playing at different levels; there’s lots of experimentation happening. It’s quite interesting and exciting.”
There are several ways that utilities might make money from solar-plus-storage. Sales partnerships are one of the first steps. Earlier this year, AGL Energy, a major Australian utility, announced a partnership with California-based storage vendor Sunverge. In a pilot program, the companies will supply storage systems to augment about 1,000 existing residential solar installations.
Australian utilities are offering consumers various options to access storage systems. “There are different purchase options: pay upfront and we’ll leave you alone; pay upfront and get ongoing monitoring and support, or an ongoing lease with no upfront costs. This allows them to attract the widest range of customers,” observed Robinson.
It doesn’t stop there. Utility involvement with deploying storage systems also offers visibility into how these systems operate, and how they interact with power grids -- something that’s currently challenging, due to slow smart-meter rollouts in most of Australia.
Utilities are also starting learn how to leverage residential energy storage and other distributed energy resources to function as a virtual power plant -- something AGL is investigating with its pilot. VPPs are just one of several strategies for electricity retailers to cultivate new revenue streams and service offerings through DER deployment.
AGL’s Solar Command service is an intermediate and revenue-generating step toward this end, offering remote monitoring and support to help consumers optimize the operation of their solar and storage systems.
Similarly, Australian tech startup Reposit is partnering with electricity retailers there to market software that upgrades the “smarts” in residential solar inverters to support more effective integration with behind-the-meter storage.
“Reposit is doing trial programs with retailers to pay consumers to discharge their batteries at times of high wholesale electricity prices,” said Robinson. “This is the emergence of a platform to aggregate residential-level storage in a way that’s useful in real time to wholesale energy markets.”
Why is all this solar-plus-storage action happening in Australia right now?
A mix of high network charges, subsidies and abundant sunshine have been driving strong growth in Australia’s residential solar markets -- and now these factors are driving storage growth, too.
“As economic factors converge in Australia, along with falling prices for storage, the case for storage there just keeps getting better,” said Brett Simon, a storage analyst for GTM Research.
Today, Australian consumers who install new solar PV systems are offered a very low feed-in tariff (FIT). In some regions, they even lose FIT eligibility if they install storage with their solar PV system. And in New South Wales and Victoria, states with especially strong residential solar PV growth, FITs are slated to expire entirely at the end of this year.
“As solar incentive programs phase out, Australians will want new opportunities to monetize their existing investment in solar,” said Robinson.
While exploring their options, a growing number of consumers are learning that adding storage can protect their investment in solar, by enabling them to self-supply a significant portion of their household energy consumption and avoid rising utility bills. While the economic case isn’t yet a slam-dunk -- and uptake is still limited -- the prospects continue to improve.
Beyond serving consumers, other players in the Australian energy industry are eyeing opportunities in behind-the-meter storage. While electricity retailers have been moving into sales and support of these systems, transmission and distribution companies are exploring how storage might supplant investments in traditional wires infrastructure.
“I don’t that think Australian energy providers have quite figured out how to monetize the benefit to the power system,” said Robinson. “What are the best ways that storage can serve as an alternative to stringing more power lines? How can utilities reap localized benefits from using storage they don’t own to manage peak times in particular locations? That’s not easy at the moment.”
Companies can see how to get operational benefits from storage they own and control in their regulated asset base. But it’s much more difficult to unlock the benefits of distributed storage that someone else owns and controls, said Robinson.
Australian wires companies, in particular, are cautious about long-term infrastructure investment due to considerable uncertainty about future demand trends and energy policy. “So right now, wires companies may be more open to making more, smaller investments in shorter-life assets. Battery storage is part of that,” said Robinson.
Currently, Australian energy policymakers are wrestling with strong, opposing forces. Coal production and exports are a huge part of the Australian economy, and most Australian utilities have relied heavily on coal power. Meanwhile, there is widespread public support for decarbonization, especially via renewable energy.
Regardless of policy outcomes, Australian utilities need to move fast on battery storage to capture this market. “If the utilities don’t do it, someone else will. Customers definitely want to purchase storage, and right now there’s really no single entity dominating that market,” said Simon. “The barriers to entry are low, so retailers should be thinking about getting into storage now.”
Australian telecom giant Telstra recently announced plans to offer home energy services, including solar and battery storage, to consumers -- an indication of how these distributed technologies are starting to shift the competitive landscape.
“There’s a lot of convergence of technologies that once had been separate,” said Robinson. “Companies are now bundling products and services across various utility sectors, not just energy.”