News National Canberra is missing the point on renewables
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Canberra is missing the point on renewables

Major parties continue to clash over whether renewable energy is affordable.
AAP
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While Labor and the Coalition trade blows over Labor’s ‘aspirational’ target of 50 per cent renewable power in Australia by 2030, a quiet revolution is underway that will change the debate with or without bickering pollies.

That revolution is via a new generation of energy storage systems for homes and businesses, promising to turn the economics of energy supply and consumption on its head.

In May, high-profile Tesla entrepreneur Elon Musk announced huge forward orders for his range of lithium-ion batteries, which are to be manufactured at his ‘gigafactory’ in the US.

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The Powerwall models, designed to allow homes to store and use their own renewable energy primarily from solar PV systems, are expected to be available in Australia in early 2016.

The modest price of the batteries – which in the US cost US$3500 (AUD$4800) for a 10 kWh system – has led investment bank Morgan Stanley to predict 2.4 million systems will be installed in Australia within a few years.

That is a huge disruption to the way energy is generated, distributed and sold.

Elon Musk announced huge forward orders for his range of lithium-ion batteries.
Elon Musk announced huge forward orders for his range of lithium-ion batteries. Photo: AAP

A 10 kWh system could boil the average kettle non-stop for five hours, or run a typical split-system air-conditioner flat-out for the same amount of time.

Battery storage allows households and businesses to control when they draw power down from the grid, when they supply power to the grid, or in some cases are used to go ‘off-grid’ altogether.

And Mr Musk’s ambitious plan to get his lith-ion batteries into homes around the world looks likely to be undercut within a few years by similar, but cheaper batteries such as sodium-ion batteries being developed in the UK.

That’s terrible news for the existing model of power generation, in which large out-of-town coal and gas generators supply cities over hundreds of kilometres of transmission lines – distances that result in up to half the power being lost along the way.

Customers seizing control of their energy production and consumption undercuts the utilities’ business models because what those companies sell is not really electricity – they are, in effect, selling access to their expensive networks of poles and wires.

If punters try to buy power at off-peak rates to charge their batteries, the loss of peak-power revenue to the utilities is huge.

There are two ways in which the power companies can attempt to stop this erosion of their profits.

First, as Ergon Energy did recently in Queensland, they can apply to energy regulators to change tariff schedules so the consumers pay less for energy, but more as a fixed daily charge.

That means consumers are moving closer just to renting a power connection and further from paying for the electricity generation they demand.

Secondly, as retailer AGL is doing, utilities can try to capture a piece of the storage-system market.

AGL is offering a limited number of lithium-ion based systems, that news site RenewEconomy reports will be at prices “negotiated with customers based on a range of options, including bundling with existing energy supply contracts, leasing, paying for use or buying outright”.

In both these scenarios, the power companies are changing their business models hoping to keep customers on the grids they own and operate.

But will customers stay?

8.2 per cent of households would be prepared to pay $10,000-$15,000 for a solar/storage system
Research showed 8.2 per cent of households are prepared to pay up to $15,000 for a solar/storage system.

A survey by Morgan Stanley, published alongside its forecast for 2.4 million households installing storage systems, found that 8.2 per cent of households would be prepared to pay $10,000-$15,000 for a solar/storage system and six per cent would pay $15,000-$20,000.

In a nation of eight million households, that’s 660,000 and 480,000 households respectively.

At current prices, complete off-grid systems cost around $25,000 for energy efficient homes, or around $40,000 for more typical power loads, and are most popular in regional areas where the cost of installing power lines to properties can be prohibitive.

However, the potential for those costs to come down, and for consumer grumpiness with utilities and politicians to go up, means full off-grid solutions are likely to creep into the suburbs before long.

Investment bank UBS has forecast that off-grid systems could compete with grid connections on price as soon as 2018.

There is also the potential for mini-grids such as the one installed for a new 150-person, strata-titled housing complex just outside Fremantle, Western Australia.

It uses a solar-and-battery system owned by the strata body, to which residents pay their bills rather than to a traditional power company.

The developers boast that purchasers of the complex’s apartments and townhouses will save about $1200 a year on power bills.

As these technologies are rolled out by the private sector, the major parties will continue to clash over whether renewable energy is affordable.

And power companies will fight to retain existing levels of revenue per household, despite predictions that households will eventually generate around half their own power.

With the new wave of batteries almost on our shores, pollies and power companies have a relatively short time to adapt.

If they don’t, voters and customers will start to switch off.

Read more columns by Rob Burgess here

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