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Solar panels and lithium-ion batteries set to transform energy market

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    Solar panels and lithium-ion batteries set to transform energy market



    IN the house of the not too distant future, before the electric-powered BMW pulls into the driveway, the air-conditioning, coffee maker and other appliances will have been alerted by smartphone to prepare for the arrival of humans.

    Inside the garage will be a sophisticated energy management system that co-ordinates the new-generation rooftop wind turbines, the array of solar panels and an unobtrusive bank of batteries.

    The house will be connected to the electricity grid but that will be as much about cashing in when export prices are high as bringing power in to boost domestic supply.
    It is a Jetsonian fantasy that has consumed the minds of the technologically savvy for a generation. But it is a fantasy that is rapidly becoming a reality.

    The game-changer has always been affordable and reliable battery storage and there is enough evidence now to suggest the game is indeed changing. New technology and economies of scale have put hassle-free battery storage on the same downward price curve that has seen the price of rooftop solar panels plummet to a fraction of what it was only five years ago.

    With research being funded by some of the world’s deepest pockets — loaded with cash from disruptive transformations in the computer and IT revolution — innovation is now being married to industrial-scale production. The world’s biggest investment firms are telling clients to get on board. Supporters celebrate the disruption, which will inevitably have dramatic consequences for established electricity industry players — and consumers.
    There was a sense of the coming transformation in this week’s meeting between US President Barack Obama and Indian Prime Minister Narendra Modi.

    The US has pledged financial support for India’s plans to increase dramatically its solar capacity. Tellingly, the US has expanded co-operation to include battery storage and the development of the electronic systems needed to manage “smart grids”.

    On one reading, the emerging storage and control technologies represent a brand new world in which consumers will gain greater control over their lives and the environment will benefit from more efficient and less polluting power generation. Emerging economies will be able to leap frog the centralised energy systems of the developed world.
    For nations already reliant on centralised power generation and distribution there is a risk that, poorly managed, the transformation will be half-baked and magnify financial and social inequities highlighted by the rooftop solar revolution to date. Those with the right property, money and strategic vision will benefit greatly but, done badly, it may be at the expense of those left behind.

    Power utilities have seen the threat coming. In a future planning report, South Australian Power Networks estimated that by 2023 rooftop solar would be on 60 to 70 per cent of dwellings and new network equipment would be required to prevent customers disconnecting from the network.

    A recent final determination by the Australian Energy Market Commission — the rule-maker for energy and gas markets — ushered in a new paradigm for electricity consumers with renewable energy connected to the grid. AEMC said it had “set a new pricing objective for distribution businesses so prices reflect the efficient costs of providing network services to each consumer.”

    In short, this means those with solar panels connected to the grid will pay higher rates for the connection, with bills less reliant on how much electricity they use from it. But it also means consumers who choose to take actions that reduce future network costs, such as by reducing their use at times of peak demand, will be rewarded with lower network charges.

    It is a delicate balance for utilities. Acting too harshly against existing customers with rooftop solar risks strangling what may represent a way of shifting costs off the utility balance sheet on to those of residential customers.
    There are great potential benefits for utilities in encouraging storage because, given the right technology, they will be able to access the stored power from individual households to distribute at times of peak demand.
    This could save billions of dollars of investment in power generation capacity that may be called upon for brief periods each year.

    “Battery storage has the potential to eliminate or pare back infrastructure investment,’’ says John Grimes, chief executive of the Australian Solar Council. “The task is to get beyond the existing business model to where it needs to go.’’

    As things stand, utilities have an incentive to invest in a big distribution network, given they are able to charge a fixed rate of return on investment.
    But Grimes says in the future electricity providers who can sell at the lowest cost should be encouraged to do so. He says battery storage is changing rapidly and, paired with intelligent electronic management systems, it will change the dynamic of how power is used and sold.

    “If the will is there for good policy it could reduce costs for utilities and network operators,” Grimes points out.
    Interest in battery storage has grown to the extent that an industry association has been formed and a sophisticated wholesale network is being established. Several companies are starting trials of intelligent grid-interface technologies.
    Solar360 chief executive Michael Anthony has been watching the battery supply chain gather pace and says the momentum is now unstoppable. “If you look back three or four years ago, the predictions were that electric vehicles would look to take off in a five- to 15-year period,” he says.

    “In China they have built high-production factories that have been working at only 20 per cent capacity supplying lithium-ion batteries to smartphone and other small-appliance manufacturers.
    “At the start of last year, China ordered a switch to electric buses, which saw capacity at the battery plants increase to between 60 and 70 per cent. That saw the first price drop of about 30 per cent,” Anthony says
    The price of lithium-ion battery storage has fallen from about $1000 a kilowatt hour 12 years ago to about $720/kWh today.

    “We think lithium-ion batteries will follow exactly the same path as solar panels,” Anthony says.
    The implications are dramatic. A household system of solar panels and battery storage able to generate enough electricity for average usage currently costs about $21,500, which the industry says can give a return on investment of about 7.6 per cent.

    Citigroup has nominated $230/kWh as the price at which solar and storage become financially irresistible for consumers, and deadly for existing network generators. Another report, by UBS, says a price of $230/kWh will be reached within three years, with an ultimate price of $100/kWh. UBS predicts battery storage will grow 50-fold by 2020 as the purchase of electric vehicles becomes mainstream.

    Anthony believes electric cars that can travel 600km without refuelling and cost between $15,000 and $20,000 are on the way — and 30 per cent of households will have them by the end of the decade.
    “You will be able to fill your car from the in-house storage system and share it back to the grid and the household when needed.”

    The only question for Anthony is whether energy trading will become a household activity or create a new breed of wholesalers, broker representatives or community groups.
    If the transformation happens, it is difficult to judge how things will pan out for large-scale generators. There will certainly still be a need for industrial-scale electricity production. Coal-fired generation will no doubt have the dominant share for a long time to come. But it is difficult to see long-term investment in this area to replace plants as they are retired.

    Wholesale take-up of solar with storage may also pose a threat to wind. Decentralised storage will certainly allow networks to better cope with the intermittency of wind — drawing power from batteries when the wind is not blowing.
    But Infigen managing director Miles George says advances in battery technology to date favour small-scale generation. The company is investing in large-scale storage technology at one site.

    “For large-scale there might be something potentially viable in the next five to 10-year period,” according to George.
    There are sound reasons smart money, and the politics, is shifting to solar. While it has broad headline support, the wind industry also faces vocal opponents who see it as an industrialisation of rural space. Solar, on the other hand, has a million-strong army of direct owners and devotees who are being cleverly marshalled to defend the small-scale renewable energy target.

    The federal government is not expected to change its treatment of solar, largely because feed-in tariffs have been wound back already and other subsidies are on a sliding scale, and they will expire over the next few years.
    It should be considered a success that the price of solar technology has fallen to the point where investment makes financial sense for many without any subsidy. But it’s still a long way to the grand visions of a truly decentralised electricity grid.

    Nonetheless, the smart money is starting to say technology is finally catching up with the long hoped-for electric dream.
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