Australia has one of the highest rates of rooftop solar penetration in the world. This fact (combined with a few other factors detailed below) has arguably made Australia the biggest hot spot for home battery storage in the world — both in terms of hype as well as actual technology uptake.
If you live in Australia (like I do) and have been listening as the battery storage volume knob has been cranked up year-on-year since about 2012, you might think that nearly every Aussie and their neighbour have battery storage already. In fact, out of the nearly 2 million grid-connected solar homes in the country, only somewhere between roughly 25,000–35,000 (under 2%) have a battery bank to go along with them. (We note that the actual numbers are especially difficult to track due to a lack of official reporting, but here are some fairly reliable ones for 2017).
Why batteries are looking good down under
There is a perfect storm of factors that make home battery storage look attractive in Australia — at least on paper. The most important moving parts in the “should I get batteries?” internal debate are:
¤ Solar is affordable (close to $1AUD per watt – or about $0.70USD – on average for a 5kW system in most parts of the country)
¤ Solar is commonplace (with the “more panels than people” milestone reached back in 2016)
¤ Solar feed-in tariffs are less than half of retail electricity prices (about 10c/kWh vs 25c/kWh)
¤ Aussies really don’t like their electricity retailers (and hate their electricity bills)
So, there you have it. This is why Tesla & Enphase decided to launch their home battery solutions here instead of elsewhere. Since then, quite a few other companies have piled on as well, including LG Chem, Pylontech and BYD, to name just a few.
What’s the holdup?
So, why aren’t Australians rushing to install battery storage? There’s no question that — despite all of the above — it’s still mainly a matter of capital outlays and financial viability.
Despite some improvements, batteries for grid-connected homes (by which I mean lithium batteries — the most common battery type on the market) are still a bit pricey on a dollar-per-kWh basis.
This has two major implications:
1. The capital cost of installing a battery is often more than what most households would consider reasonable or tenable, especially if they’re already spending a few thousand on a solar PV system. While they could opt for a smaller battery bank to reduce those costs as much as possible, smaller battery banks tend to have a higher cost per kWh. From what we can tell, the lowest reasonable cost (for the smallest commercially available battery) is about $2,000–3,000 for a single, 1.2kWh Enphase AC Battery.
2. Financial returns on a battery bank improve with scale, where larger batteries tend to cost less per kWh and offer shorter payback periods than smaller ones (provided, of course, that they’re not oversized for the home’s energy needs). That being said, larger batteries also come with a bigger price tag, conversely making them prohibitive for households with a budget to work within.
In a nutshell, many of the Australians who want batteries can’t afford to purchase (or are unwilling to splash out on) a battery bank large enough to provide the most favourable returns.
Australian battery (plus inverter) system prices per kWh across 3x system size ranges since November 2017. While gradually working their way downwards, they’re still a far cry from the sub-$1,000/kWh we’d like to be seeing.
In what situations does battery storage make the most sense?
Wanting to know where things are at and get a clearer picture of what’s going to make sense for Australians interested in grid-connected battery storage, Solar Choice has been mining its network database for battery pricing data since November last year in a monthly Battery Storage Price Index.
There are basically two situations where Aussies might be considering battery storage:
- Retrofitting batteries to an existing solar system; and
- Getting batteries installed with a new solar system.
Generally speaking, the financial prospects of a retrofitted battery system are not as appealing as for a brand new solar + storage combined system. The main reason for this is equipment costs; a retrofit generally requires an inverter replacement, an additional inverter, or an all-in-one battery + inverter device. In many cases, because older systems were smaller (1.5–3kW as opposed to the 4–6kW that is standard today), additional solar capacity may be required or desired. All of this drives up costs.
(I also note that “easy” battery retrofits onto a modern-sized solar system that has a battery-ready inverter are still fairly uncommon, as these types are still few in number and most likely only installed in the last couple of years — during which time battery prices have shifted, but not dramatically.)
By contrast, with a brand new solar + storage system, the customer is already paying for a solar inverter and upgrading to a “hybrid” that handles batteries as well may be a question of just a few hundred dollars. In this case, batteries can be plugged into the system without the need for additional equipment and labour. This is where battery storage uptake is going to accelerate the fastest.
Discerning between “battery only” & “battery + inverter” pricing
Specifically, new solar + storage systems that use a hybrid inverter approach will be the smartest thing to do financially going forward — especially with network solar system size limits being increasingly dictated by inverter size. This means that dual-inverter (or “two box”) solutions like Tesla Powerwall 2, sonnen eco, or Enphase AC Battery (actually “multi-box”) will almost always look less attractive than “one box” solutions for new solar + storage systems, with higher price points and longer payback periods. Conversely, two-boxers may make just as much sense or possibly even more sense in a retrofit scenario.
So, the ultimate point is that it makes sense to separate the two options when examining pricing — which I’ve done in Solar Choice’s Battery Storage Price Index.
“Battery only” pricing: Are we there yet?
Let’s now hone in on the best-of-best case scenarios for grid-connected storage in Australia. The chart below tracks low-end pricing and payback periods for “battery only” systems (i.e., batteries installed alongside a solar system with a hybrid inverter) on time-of-use billing (which is the best option if you have batteries). The chart excludes the costs & benefits of the solar system itself (besides, of course, the solar energy that is stored & discharged via the battery).
Although the “lows” for battery pricing for this type of system hasn’t changed significantly since I started keeping track, we can already see that payback periods are close to 7 years, and prices already under $5,000 for some products around 5kWh in capacity. In this sense, we could say that battery storage is more or less “there” — at least in the “best case scenarios,” which can vary dramatically by city.
(I note that while we’re only including “low” prices for the time being — mainly to keep the chart from getting too cluttered — we will replace them with averages prices decrease.)
The “Are We There Yet?” Meter for May 2018. (More details & explanation here.)
It’s actually a bit more complicated
What I’ve attempted to do here is give an overview of some high-level trends in battery pricing in Australia. There are actually a lot of things that — for simplicity’s sake — I haven’t delved into in this article. These include things like tariff arbitrage (e.g., smart battery pre-charging based on the weather) and ancillary benefits of like those provided by Reposit Power and their partners (like Powershop and Diamond Energy). All of these make the case for getting batteries a bit sweeter, and are only going to become more commonplace with time, as the grid gets smarter & more decentralised.
The key takeaway here is that distributed battery storage is on the cusp of having a major impact on Australia’s household electricity infrastructure, driven by consumer demand. All it’s going to take is a bit of a drop in lithium battery prices — which may be on the horizon.