Solar And Storage: How Australian Utilities Are Preparing

Sign up for daily news updates from CleanTechnica on email. Or follow us on Google News!

Originally published on RenewEconomy.

It’s the big question facing energy utilities around the world: How quickly will rooftop solar and battery storage change the nature of the energy market, and how long can those who currently dominate the market hold on to the their incumbent business models?

This week, AGL Energy gave some insight into how it was preparing for solar and storage. It appointed a new CEO, Andrew Veser, who comes with experience in new technology and business models, and the utility’s head of strategy outlined a push into the distributed energy market.

AGL, Marc England says, plans to launch its own power purchase agreement model early next year that will allow solar and storage to be installed in homes at zero upfront cost. It says it aims to have one million “distributed” customers by 2020.

AGL Energy got some headlines in the Murdoch press on how they will be “leading the charge” into solar and storage in Australia. That’s a headline with strong marketing value for a company more associated, in recent times, for leading the charge into coal-fired power, but it is overstating the extent of its ambition.

A closer look at England’s presentation says that although AGL Energy recognises the influence of solar and storage on the energy market, it remains highly conservative in its predictions.

And, critics would venture, AGL seems intent on defining the industry in its current image. It suggests, for instance, that it wants to limit the size of solar systems on rooftops; it seems dismissive of the threats of mass-defection and the emergence of new business models; and – contrary to the predictions of many market analysts – it doesn’t expect battery storage to compete for nearly another decade.

It is a fine balance for companies like AGL. In the face of digital photography, Kodak judged it could hold on to its incumbent model for longer, and not be disrupted by new competitors. It was wrong. Will the utilities be wrong too?

AGL, with its newly purchased coal plants, and Origin Energy, with its huge investment in LNG, will likely make heaps of money in coming years, particularly in the favourable policy environment of the Abbott government. But will that make them blind to how quickly things will turn in the direction of distributed generation?

So here’s a closer look at what England told a utilities conference in Melbourne on Tuesday. It gives an interesting insight.

First of all, on that so-called Kodak moment:

England suggests there won’t be one.

“The disruption we are going to experience in the Energy Utility industry is more akin to that seen in computing, than others such as cameras or telecoms,” he said. “Energy in the home and business will become “ubiquitous”, where consumers have multiple sources to get their energy from rather than a complete swap-out of technologies.”

So, England sees it as an “evolution” rather than a “revolution”, taking comfort in studies from the CSIRO and Accenture that up to two-thirds of customers will remain entirely dependent on the grid, even by 2030. This goes against some predictions, such as from the WA market operator, the IMO, that 90 per cent of businesses and three quarters of residential customers could have solar within a decade.

On the power of energy incumbents:

AGL says it is encouraged by research, also by Accenture, that over 80 per cent of Australians would choose their incumbent energy supplier as their first choice for distributed energy over any other providers. And it is disparaging about its presumed competitors.

“We believe that as the market matures, customers will increasingly reject fly-by-night outfits for this highly technical and personal kit going into and onto their homes – they will want someone they can trust, who will do the job right and who will be with them for the long term,“ England says.

At the same time, he notes, retailers have copped the flak from consumers for the continual rise in energy prices over the last few years, a situation compounded by lack of choice and “misunderstanding which breeds distrust”

“Retailers have, to some extent, held back from pushing their advantages in the solar market. For AGL, this is now changing.”

“Our strong customer relationships, industry knowledge, brand and financial fire power mean we have the ability transform to meet customers’ changing needs. We deliver so much without fanfare, and it is time for us to stand up and be counted in this space. “

On the installation of solar PV:

This is interesting. AGL Energy seems to be concerned that too much solar is going on to individual rooftops, suggesting that 5kW systems are being installed when only 3kW systems might be necessary. (It is true that the average size of systems is now growing to more than 4kW, suggesting more solar panels are being added, despite minimal feed-in tariffs)

“We know more than most about consumer consumption patterns and therefore what system suits them most, so we won’t sell someone a 5kW system if a 3kW system is the right solution for them and the one they actually need. We’ll be honest with them on the amount they will self- consume and what their payback period will be. “

So, hopefully, will its competitors.

It’s true that before anyone should be putting solar on their roofs, they should be looking at their own consumption, how to be more energy efficient, and then design the system accordingly, with an eye to how the tariff is structured and whether some of the output can be stored in a box (battery storage) for later use. But that is not what AGL appears to be saying – as the largest generator of coal, they have and interest in minimising the fall in demand from the grid which is pushing down wholesale prices (hence their opposition to the RET being maintained at its current target, and their call for end to SRES scheme).

On the costs of battery storage:

England says there will be not be a cost benefit advantage for battery storage in the National Electricity market until after 2024, a decade hence. England says commentators often “underestimate the balance of system costs and therefore over-estimate how fast total system installation costs will fall.”

He concedes that it will gradually become a viable mass market product. “However in the next 5 years our forecasts see it remaining a niche product for early adopters.“

That is contrary to the thinking of some network operators, such as Ergon, which is already installing batteries at grid level to avoid the cost of upgrades to poles and wires, and looking to do the same at customer sites. Ergon is even thinking of buying back high feed-in tariffs to change consumer behaviour and make storage more attractive. Others, such as UBS, and some installers, say rooftop solar with storage is already commercially viable.

As for the market being limited to early adopters, perhaps AGL Energy should check their NSW customer base, and see what people are thinking when their gross feed-in tariffs run out in 2016.

The future?

As described by England:

“We see a future where AGL provides consumers with a home energy ecosystem, providing them with the smarts and insight, to have choice, flexibility and control, at as low a cost as possible – and if they still want grid power they will get it at competitive prices, too.

“We are investing in growing our solar business, as well as developing new capabilities that will help us to compete in the future. AGL plans to deliver more “in home” energy services, including those enabled by digital meters and energy storage. This will form part of AGL’s transition from a vertically integrated energy supplier to an integrated energy solutions provider.”

It aims to have 700,000 digital meters in South Australia, NSW and Queensland that will help incorporate solar, efficiency and storage.

“Over the medium-term our goal is clear – Establish a distributed energy presence in 1 million homes and businesses by 2020. We won’t do this alone and recognise we will need strong strategic partnerships, some local and some global, where strategic visions are aligned to our own.

“AGL will however be at the forefront of this transition, as consumers move from passive and unconscious consumption to a more empowered and energy literate consumption.”

Our conclusion:

It’s going to be interesting to see how this pans out. It’s great to see the “gentailers” reacting, and so they should, because they are the most exposed. Their generation assets are feeling the pinch from falling demand, and anyone can come and compete with packaging bills and customer service – if they can get their minds around the billing systems.

That’s where the role of the networks comes in: if they can get direct access to customers, then they will have greater capacity to make battery storage interesting and viable. As the head of one network operator said earlier this year, he would rather be in the network business than the current gentailer model. Which – along with tariff design – is why regulators will have such a say in the outcome of this particular energy (r)evolution.

Reprinted with permission.

Have a tip for CleanTechnica? Want to advertise? Want to suggest a guest for our CleanTech Talk podcast? Contact us here.

Latest CleanTechnica.TV Video

CleanTechnica uses affiliate links. See our policy here.

Giles Parkinson

is the founding editor of, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.

Giles Parkinson has 596 posts and counting. See all posts by Giles Parkinson