A battery-powered nation

Liam_Thomas_New_Energy_SolarLiam Thomas2 February 2018

A rise in energy prices, coupled with the falling costs of battery technologies1, have prompted Australians to seek more cost-effective resources to complement grid electricity and cut soaring energy bills. In the wake of Australia’s tightening gas supplies, higher gas prices and coal generators exiting the market, some have highlighted the importance of developing additional gas supplies to meet consumer demand.2 However, more gas doesn’t necessarily mean lower power prices. As the cost of developing gas reserves increases due to lower cost fields being exhausted, some industry insiders have suggested that additional resources could require an export-competitive price to access them.3

Gas dynamics are complex, but essentially, the price of gas in a domestic market that is not connected to export markets is driven by supply and demand in that market alone.4 When domestic markets become connected to export markets, either through the development of LNG-export plants or pipelines, domestic producers also have the option of selling to those export markets if the “world netback” or “export parity” price (LNG price minus the cost of processing and transport) is higher than the current domestic market price.5 In a supply-constrained market this can, over time, drive the domestic price up to, or above, the export parity price. This is particularly the case when long export contracts are written, further constraining supply and potentially increasing the domestic price of gas.6

This situation has consequently resulted in power and market instability, as well as higher energy prices for Australian consumers. As a result, household battery storage uptake has surged across the country.

According to the SunWiz 2017 Mid-Year Battery Report, there was “extraordinary growth” in the Australian battery industry following 7,000 installations which occurred during the first half of 2017 (up from a total of 6,500 over the 2016 calendar year) – a number which is expected to increase again in 2018.7

While many of those installations were for existing rooftop solar consumers, batteries continue to remain at the heart of consumer sentiment. Last year, a nation-wide survey conducted by ReachTEL for the Climate Council found that almost three quarters (74 per cent) of Australians expected household batteries to become commonplace within homes over the next decade.8

And the number of Australians boarding the renewables train is only set to rise, as various state governments, organisations and large-scale energy companies declare their support for the renewables sector.

One such company, AGL Energy, announced that it would replace its aging Liddell power station with a number of renewables in an effort to address carbon risk and offer high quality jobs to existing employees. Chief executive Andy Vesey proposed a plan that would build thousands of megawatts of renewable generation in time for the plant’s closure in 2022 – 250 MW of which would be produced from battery storage, onsite grid-scale batteries and residential batteries alone.9 In addition, Snowy Hydro last year announced that it would commit to a large-scale renewables project, involving a $200 million solar farm that will later be supplemented by batteries.10

Around the country, the Victorian Labor government announced a $25 million large-scale battery storage scheme last year which hopes to see the deployment of two 20 MW battery storage installations to create a fit-for-purpose system supporting energy trading, supply management and power stability.11

Meanwhile, the Australian Renewable Energy Agency has said that it would provide $12 million toward the total $30 million cost of a battery storage installation to be located in South Australia. Yorke Peninsula will be home to the 30 MW large-scale battery, which will add to the Tesla battery to deliver both network and market services to consumers.12 Since the successful commissioning of its battery last year, Tesla has proven its technology by providing backup power and other grid services – the most notable instance of which was when the battery responded within 140 milliseconds to supply emergency power when the Loy Yang plant experienced a loss of power in December.13

Finally, Darwin will play host to the country’s first solar-powered “giga-factory” – a 1 GWh lithium-ion battery manufacturing plant due for operation later this year. The result of a partnership between Energy Renaissance and the Northern Territory government, Renaissance One will have seven production lines and will manufacture products with customisable capabilities, long life cycles and the “lowest cost of ownership in the market” – making the resource even more accessible to Australians than ever before.14

The popularity of battery technology continues its momentum as rising electricity prices and resource scarcity prompt Australians to consider new ways of consuming energy. News of battery technology initiatives mark an exciting time for the renewables sector and suggests an opportune time for investment in renewable resources – particularly as batteries could represent an ideal complement to small and large-scale solar generation.

Liam serves as Chief Investment Officer for New Energy Solar. He has 15 years’ experience in M&A, corporate and business development, projects, and commercial management in the energy, infrastructure, mining and agribusiness sectors.

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