UBS analysis shows solar-plus-storage already viable in Australia

Cost-competitive solar plus storage has arrived in Australia, according to new analysis from investment bank UBS, bringing with it the potential to dramatically reshape the country’s energy industry.

The analysis – carried out by consulting firm GSES – examined the price of current solar plus storage offerings in Australia (5kW of rooftop solar and 5kWh of battery storage) and found that at $18,000, some of these systems were already economic.

It estimates that such systems – which allow households to use all the electricity produced by their solar array by storing it for later use – are already offering a return of capital of 10 per cent a year or more compared to buying power from the grid.

“The cheapest system looked at is already capable of earning its cost of capital,” the team led by UBS utilities analyst David Leitch says.

“Based on this set of parameters the daily electricity bill without solar and battery and also ignoring the fixed annual connection charge is around $5.60 or $2044 per year,” the UBS analysts say. 

“By contrast with the solar and battery the net revenue is around $0.43 per day or $157 per year for a net gain of $2200 per year. “

UBS says that even if 1 million battery storage systems are solar in Australia – there are already 1.4 million rooftop solar systems – that would represent a $20 billion investment, equal to 2/3 of an LNG plant’s cost.

It finds that investment on this scale would be of low risk to consumers, but could have major impacts on utilities, depending on how they reacted.

“The investment is relatively low risk because the investment tap can be turned up or down quickly. An Australian utility might build up its own branded systems, and sell them “zero down-payment”,” it suggests.

“If our numbers are correct someone will likely do it. For the time being we think that incumbent utility management will likely see this as more of an Annual Report photo opportunity rather than a potentially major P&L (profit and loss) line item. As such for incumbents it’s arguably more of a threat than an opportunity.”

The UBS report also flagged clear potential for dramatic cost reductions in coming years, in much the same way that the cost of solar panels plunged so dramatically over the last five years.

UBS says this will happen just by bringing the battery sales price down to those that are already available in the US, scaling production of battery housings, battery management systems and energy monitoring (Australians currently pay four times the price in the US for some battery management systems), and integrated manufacturing of components including inverters.

The study is a follow-up to a report in May, where UBS predicted that households in the major cities of Australia could find it cheaper to go off-grid rather than stay connected. Another report in August suggested the time was right for a solar plus storage plus electric vehicle revolution.

Those reports sparked a huge reaction, and prompted UBS to look a what technologies are available now, not necessarily to go off-grid, but to maximise the amount of self-consumption.

“Solar’s differentiation compared to virtually all other forms of generation is that its generation costs are invariant to scale,” the latest UBS report said. 

“It’s just as cost-effective whether it’s scaled to run a torch or a city. In addition the fuel source is mostly available at the point of consumption. This means the only real constraint on where solar is situated is having enough space for the panels.

“Virtually the only disadvantage of solar is that the sun only hits the panels for a limited number of hours per day. That’s where the storage comes in. The battery’s function is to ensure most of the solar power can be used in the house and nothing is sold back to the grid.”

Top image: Magellan DCSS, via Magellan Power

© 2014 Solar Choice Pty Ltd

Giles Parkinson