In its latest report, business analyst IHS Markit predicts that Australia’s energy storage installations will grow by more than five-fold by 2030.
At present, the nation accounts for 3% of the world’s battery installations and is the world’s seventh-largest market. By 2030, according to HIS, it will be the world’s third-largest market and have 7% of the globe’s battery installations. This boom will, it’s believed, will be fuelled by three market segments – residential, standalone front-of-meter and installations allied to utility-scale generation.
Price hikes are driving residential growth
Households are looking to install batteries alongside their solar arrays because Australia has some of the most expensive electricity in the world. This is combined with expiring or falling feed-in-tariffs and worries over grid stability. Homeowners can use the power their rooftop solar generates even after the sun has set if they have a battery and battery storage is an increasing priority for people wanting to rely less on the grid, whether to save money or to have a reliable supply.
By the end of 2020, around 15% of Australian households had rooftop PV installed and having a PV-plus-battery combo is becoming the new normal.
Grid-scale front-of-meter (FTM) installations will make up around 58% of battery installations for the next decade. These installations will be driven by the need to have storage at the utility end of the grid, where it’ll smooth out dips in the generation from solar and wind, helping to keep the power supply even and stable.
The Australian Energy Market Operator (AEMO) is promoting the installation of FTM batteries, partly because 7GW of coal and gas power generation is set to retire by 2030, with another 6.2GW following suit by 2035.
It’s not all smooth sailing
These so-called hybrid power projects are subject to strict AEMO standards, however, and these standards can bar some projects from entering the market or at least delay them. For many, then, the solution is to operate the storage facility independently from the generation facility, which means the two entities share only a grid connection.
Battery storage can also stabilise prices
Battery energy storage systems (BESS) can make use of the price fluctuations recorded in frequency control ancillary services (FCAS) or in wholesale markets. Most of Australia’s BESSs will be working within merchant markets, focusing on the FCAS and regulating wholesale prices during spikes.
Frequency services comprise 85% of the revenues for the BESSs in operation now, although there are more revenue streams possible from the wholesale markets. The average net return from wholesale price arbitrage is anywhere from $39kW to $211kW, depending on the time of year, alongside other factors.
Summer is always tricky
There’s always increased electricity demand during summer and, combined with generators tripping in excessive heat or even bushfires, prices can rocket, sometimes up to $1,000 per MW. In late January 2020, SA transmission lines tripped due to a volcano and this event created $60 million for the nation’s BESSs.
However, despite this impressive revenue stream, it can be hard to secure the financing for large-scale BESSs as FCAS revenue isn’t deemed bankable enough to figure in the business proposition. Another revenue stream has to be included instead and this has often been government funding or the offering of system security services.
More opportunities for energy storage in Australia
There’s been a growing trend for using energy storage systems to defer investment into and work on existing infrastructure. This applies to both FTM and behind-the-meter (BTM) solutions.
BTM systems are often standalone systems comprising rooftop solar and storage and they’re used in fringe of the grid farms, homes and small communities.
FTM systems are used in this context to help with preventing outages on transmission lines, as well as congestion, which is something that’ll increase as more renewables come online and aren’t necessarily used up all at once.
IHS Markit sees Australia as key growth market
This growth is driven by the need to support a widely distributed power network that’s intent on moving away from thermally-generated power to renewables. There’ll be some bumps on the road, however, as federal policies don’t quite align with the rapid transition that individual state governments are asking for.