Property and Infrastructure Specialists

Battery energy storage – the way of the future?

Energy storage is dramatically changing the way the world uses energy. As well as offering more flexible, reliable and efficient energy use for consumers, storage is an effective way to smooth out the supply of variable forms of renewable energy such as solar and wind power. It gives consumers much more control over their power use and allows them to take full advantage of the solar energy that they generate themselves.
Battery energy storage – the way of the future?

Electricity storage will also play a crucial role in enabling the next phase of the energy transition. Along with boosting solar and wind power generation, it will allow sharp decarbonisation in key segments of the energy market.

In simple terms, energy storage provides a way to save previously generated energy and use it when required, without it going to waste. That energy can be stored as potential, kinetic, chemical, or thermal energy which is then released in various forms, most commonly as electricity. The ability to bank energy for later use makes energy storage a useful and flexible resource for electricity companies and consumers.

Other than a battery, there are multiple components in a battery storage system that enables the system to function. These include inverters, battery management systems and the installation of the batteries in a secure fire-rated battery room or enclosure.

Battery storage

A simple powerwall battery (example of a Tesla Battery Power wall) is comprised of a fully-integrated AC battery system for residential or light commercial use. Its recharchable lithium-ion battery pack provides energy storage for solar self-consumption, load shifting and backup power.

The Powerwall’s electrical interface provides a simple connection to any home or building. Due to current markets compact size, this technology now yields hughe energy density and is easy to install, allowing purchasers to quickly understand the benefits of battery storages reliable, clean power.

Financial benefits

The primary reason for businesses to implement battery storage is to reduce costs through energy management, especially now in an Australian energy market with electricity prices forecast to rise again.

Energy management begins by identifying how a business uses and pays for energy (Figure 2). Then becoming more energy efficient, optimising the patterns of energy use and considering alternative sources of energy.

The advantage of battery energy storage is that it enables homeowners and businesses to source energy at a lower cost from the grid from renewable sources or both. This may achieve cost savings by reducing the amount of electricity purchased when it is expensive i.e. in peak tariff periods.

Businesses that face difficulties in the reliability, price or capacity of their electricity supply can also benefit from battery storage. Businesses that require on-site generation of energy using diesel or gas can optimise their fuel consumption and reduce maintenance costs.

Future of energy graph

Environmental benefits

Solar power in Australia makes sense – Australia has plenty of sunshine. Electricity generated by solar photovoltaics (PV) can directly offset electricity purchased from the grid, an established method of reducing energy costs.

The downward trend in the cost of solar panels and the increased cost of electricity means that solar PV systems are now more economical than ever. However, the benefits of solar PV are limited by the simple fact that the sun is only available during daytime and is most effective around midday.

The electrical demand profile of a business will not exactly match the production profile of solar power throughout a day. For example, in the middle of the day (particularly in an Australian summer) solar production may exceed electrical consumption and excess solar power is supplied to the grid. On the other hand, early and late in the day (particularly in winter), or in periods of cloud cover, solar production may be less than consumption and electricity must be sourced from the grid. Batteries circumvent this problem by enabling excess energy from solar power to be stored for later use.

Battery storage, in combination with solar PV, enables homeowners and businesses to increase self-sufficiency by enabling solar PV systems with excess energy to meet energy needs outside solar PV generation periods. This also increases the overall amount of energy that is consumed from renewable sources, which in turn decreases carbon output from fossil fuels.

Larger solar PV systems that produce surplus energy during the day can offset a greater component of total daily usage instead of feeding excess power into the grid for a relatively low return. Battery storage makes it possible for businesses to deploy larger PV systems to maximise the environmental benefits of renewable energy in addition to a better financial return through self-consuming more solar power.

Is battery storage a new concept?

The use of batteries for energy storage is not a new concept. Storage systems featuring lead acid batteries have been implemented for over a century in applications that include submarines, telephone exchanges, uninterruptible power supply (UPS) systems and off-grid solar power systems.

In recent years consumer interest in battery storage has significantly increased.

Large-scale investment in the development of this technology by several well-known manufacturers improved the technical performance of batteries, and through extensive marketing transformed a relatively small industry into a highly competitive multi-billion-dollar international market.

What has changed lately is the rapid improvement of lithium-ion based battery technology for mass consumption in personal devices like smartphones and tablets. This has led to investments in increased production of batteries for electric vehicles and stationary battery storage for homes and businesses.

Indirectly, the improvements and adoption of solar PV have increased consumer awareness of renewable energy and provided an incentive to store excess energy rather than feed it to the grid.

This widespread adoption creates economies of scale for a dramatic reduction in per-unit costs, not just in lithium-ion, but also for other battery technologies including incumbent (lead-acid) technologies and other options (flow, advanced lead-acid and others).

Lithium batteries are shaping up to be the most popular battery chemistry for residential applications, with about 80% of the emerging products on the market using some lithium variation. Most of the (good quality) lithium battery banks have a 10-year warranty, and when we talk about batteries here that’s generally what we’re referring to: a lithium battery with a 10-year warranty. (For reference, solar panels usually have 25-year performance warranty, and warranties for solar inverters are typically 10 years.)

Interest in battery storage remains high in Australia

Batteries are in high demand thanks to the promise of energy self-sufficiency and back-up power in the event of blackouts. Battery storage system prices are coming down quickly and the number of households opting to install battery storage has risen dramatically compared to just a few years ago. Accordingly, 2018 ended up being the best year ever for home battery storage in Australia – and there are widespread expectations that 2019 into 2020 will continue this trend.

If we assume that the batteries are charged only with the sun, by our estimates battery storage pricing needs to come down to about $200-$300 per kilowatt-hour (kWh) of storage capacity (for a lithium battery with a 10-year warranty) for it to make sense purely from an investment standpoint. Paybacks could be faster if tactics like tariff arbitrage, selective energy export and spot price trading are implemented. Currently, the lowest prices we’re seeing are about $500-$600/kWh of storage capacity.

Being ‘worth it’ vs ‘breaking even’

We’re getting closer to this much anticipated price milestone, so for the time being we’re mainly looking at whether a solar and battery system will pay for itself before the battery warranty expires, therefore breaking even.

Please note that throughout this blog we refer to solar and battery storage systems as ‘whole’ or ‘battery only’ systems. In fact, the vast majority of the value delivered comes from the solar PV portion of the system, not the batteries. Solar PV systems (without batteries) generally have payback periods as low as 2-5 years depending on the situation; because batteries deliver less value and cost more, adding them to a solar system will inevitably lengthen the payback period for the system as a whole. If your primary goals are greater energy independence and reduced electricity bills, then batteries can help you achieve them – but batteries on their own may not always be fantastic from an investment point of view.

While the batteries will almost definitely continue to perform after the warranty has expired, there are no concrete assurances that they will. Also keep in mind that a battery’s performance may be diminished at the end of the warranty term (read about battery ‘end of life’).  Anyone intent on getting batteries should at least aim for a system that will break even over its 10-year warranty period – or better yet, offer an attractive return.

Whether simply breaking even within the warranty term is ‘worth it’ is a subjective question, but the growing uptake of home battery storage systems indicates that – for many people – it is.