Originally published on RenewEconomy
Leading energy analyst Bruce Mountain says if governments were serious about lowering electricity prices for consumers, they would focus more on supporting rooftop solar and battery storage than seeking to subsidise ageing coal-fired power generators like Liddell.
Mountain, the director of Carbon + Energy Markets CEM says the combination of solar and battery storage is already cheaper than grid prices for most consumers in South Australia, and it would not take much effort or expense to make it so in other states too.
The federal government has claimed that forcing AGL to keep open the ageing and decrepit Liddell power station will lead to more reliability and cheaper prices, despite most analysts and energy companies saying it would do the exact opposite.
“If the federal government is determined to deliver lower electricity prices, it might focus its effort on ensuring that demand is more responsive to short-term price signals, and on making up the narrowing shortfall needed to encourage widespread uptake of distributed batteries,” Mountain says in a presentation to an energy forum in Melbourne.
“Such policies will not be difficult to develop or implement, they will require outlays many times smaller than those needed to build baseload coal plants, and will show results during the term of a government.”
The idea of using rooftop solar and battery storage (part of what is known as “distributed energy”) has been raised in numerous studies – by the CSIRO, by energy networks, and most recently by the Australian Energy Market Operator, which sees 40 per cent of all demand being serviced by localised generation and storage.
AEMO boss Audrey Zibelman sees such resources as critical to not just lowering prices, but also creating a smarter, cleaner and more reliable grid than the system which now relies heavily on centralised generation and extended networks, and is vulnerable to catastrophic failure of equipment, storms and bushfires.
The government knows only too well the benefits of rooftop solar, and battery storage. Many politicians have rooftop solar in their homes and some like Malcolm Turnbull have battery storage. Yet none have ever chosen to champion this, instead promoting the technologies deployed by large corporations.
“One of the few constants in Australia’s energy debate is the fervour of politicians’ and administrators’ homage to the idea that electricity prices should be lower than they are,” Mountain says.
“That electricity prices have reached the level they have, suggests the homage has all too often been a camouflage for other agendas.
“For too long ideology and the protection of vested interests has lurked behind the apparent pursuit of “lower electricity prices”. The obsession with coal-fired “baseload” generation is an enduring manifestation of this malaise.”
He notes that the technology limits of the era required oversized and poorly insulated water heaters to be operated at night to keep inflexible baseload coal generators operating in the dead of night, when there was little demand.
But the viability of the coal fleet relies on its ability to operate continuously, but this is being threatened by the emergence of new cheaper technologies, such as rooftop solar, which cost around one sixth the cost of grid supplied electricity.
“It is no surprise that photovoltaics are now being installed at record rates not just on household roofs but also on farms and in businesses.”
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This is now being accompanied by the plunging cost of battery storage, particularly those with lithium chemistries, whose cost curve is even more dramatic than that of solar PV.
“Rooftop solar PV is clearly much cheaper than the grid, but solar PV typically only displaces around 30 per cent of grid consumption for a typical house,” Mountain notes (see graph above). “Rooftop PV pays for itself in almost all cases with north or west-facing roof. There is also rapid growth in the commercial sector.”
The combination of battery and photovoltaics installed behind customers’ meters now promises to meet customers’ needs more cheaply than grid-only supply.
In South Australia, which suffers from concentrated electricity markets, dependency on expensive gas and structurally high network charges, this is already the case,
This estimate is supported by the local network operator SA Power Networks, which predicts the cost of solar and storage to fall to just 15c/kWh within five years – less than half the current grid cost.
The combination of solar PV and Battery storage allows grid-independence for 70-100 per cent of consumption,” he says, although the optimal sizing of the two technologies would depend on many factors.
And Mountain argues that it soon will be in other states. This graph above compares the cost of a rooftop solar installation with battery storage, and grid only prices. With the costs of battery storage falling quickly, this equation will quickly change.
“The combination of solar PV and Battery storage allows grid-independence for 70-100 per cent of consumption,” he says, although the optimal sizing of the two technologies would depend on many factors.
The issue with a growing uptake of rooftop solar and storage has implications for the grid operators, who have built a network on the assumption of growing demand and “many years of wasteful gold plating”, Mountain says.
They may have no choice but to contemplate write downs. “The biggest adjustment is needed where the networks are partially or fully government-owned,” he says.
“The challenge is not insurmountable but requires governments to take responsibility for their past mistakes. For the privately owned networks, asset write-downs raise legitimate worries about political expropriation and these would need to be resolved.
“If the federal government is really concerned to do something about electricity prices, yesterday’s heroes must be put out to pasture. Those calling the shots must drop the ideology and find the gumption to put the customer first in deed, not just in word.”