Victoria, NSW will lead the way in residential energy storage uptake

NSW and Victoria will lead the adoption of battery storage by Australian households over the next two decades, the Australian Energy Market Operator has predicted.

In its first ever analysis of the potential impacts of new technologies – specifically battery storage, but also electric vehicles and “fuel switching” from gas to electricity – AEMO predicts the adoption of battery storage will be rapid, but slow for EVs.

The analysis is driven by the publicity surrounding the release of the Tesla Powerwall, the anticipated cost cuts of battery storage, and the move by major retailers to offer battery storage to consumers.

Forecast Energy Storage Capacity

Broadly, it concludes that while initial pay-back times are high, the take-up rate will still be rapid, with nearly half the forecast capacity by 2034 taken up in the next 10 years.

It notes that this will have a significant benefit for the grid, because it will reduce maximum demand. The vast amounts of rooftop solar in Australia are credited with mostly shifting and narrowing the peaks, but not reducing them.

But it is just the first piece of the puzzle. As AEMO notes, payback and uptake of battery storage can vary immensely, depending on the size and cost of the system (of which little is yet known), assumed cost falls, the size of a solar PV array, and the structure of tariffs. And, for states like Tasmania, the amount of sunshine.

For battery storage, AEMO says three-quarters of households adding solar in NSW will include battery storage, but Victoria will have the most capacity installed by 2034.

The AEMO study, however, does not include battery storage retrofit installations in the 1.4 million households that already have solar. It says this is too difficult to model just now, but it will be its next undertaking.

That explains why NSW and Victoria may lead the market in its estimates. Both have tariff structures and demand profiles (such as time of use metering in Victoria) that would encourage battery storage, and relatively low penetration of rooftop solar to date.

Queensland currently has the most rooftop solar, and South Australia the highest penetration of rooftop solar, reducing the scope of the market within the AEMO parameters.

To put the AEMO forecasts in some context, analysts such as Bloomberg New Energy Finance predict that Australia could have 37,000MW of battery storage by 2040, outstripping the amount of rooftop solar, which it puts at 33,000MW  (that includes commercial installations).

AEMO, on the other hand, thinks that rooftop solar installations will outstrip battery storage. It has previously predicted a five-fold increase in solar PV systems to 21,000MW by 2034, although its high scenario could add another 20 per cent, outstripping the capacity of coal fired generation.

Energy Storage Forecast Reduction

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Giles Parkinson