Tuesday, 27 November 2012

Energy storage smooths out the peaks but who will own it?

Solar electricity (PV) panels are still a minor player in the UK electricity market, despite the boom driven by high Feed in Tariffs. PV capacity is now about 980 MW which is less than 5% of the UK absolute minimum base load and in 2011 PV supplied 0.25 TWh through the year out of 34.4 TWh from renewable sources and 370 TWh supplied in total [1]. However, in places where it is a lot sunnier PV can have a major impact on the pattern of electricity generation through the day, and cause supply companies considerable headaches. Energy storage systems could even out the load but depending on whether the storage is managed by the supply companies or their customers this could raise or lower grid overheads. These issues aren't just theoretical any more - Australia is leading the way. The problem is not entirely due to PV but large scale PV makes it worse.

Generous Feed in Tariffs (FiTs) in Australia have driven such a massive rollout of PV that in the state of South Australia the electricity demand during the sunshine hours is 8% down on what it was four years ago. However, peak sunshine is midday to 3pm whereas peak electricity demand is about 7.30pm, by which time the sun is going down and there is hardly any contribution from PV.
Electricity demand in South Australia from [2]

Note the false origin on these graphs

The drop in mid day electricity demand is cutting into the supply companies revenues but their costs are driven primarily by peak demand - because that governs the grid capacity needed. There is potential for a 'death spiral' scenario where the drop in revenue triggers price increases which drives more PV take up which drives a drop in revenue ...

However, it seems likely that disaster will be averted by energy storage. Solar energy company Zen Energy Systems will shortly be offering a battery storage system which can be used with PV panels so that households can use their free solar energy all day. The expected price is AU$30,000 (about £20,000) for a 20 kWh system, which is sized to match the average Australian household's consumption, and Richard Turner, CEO of Zen claims the payback time on the storage would be 7-8 years [3]. This seems a little optimistic to me but it obviously depends on your supply contract. Based on an AGL Freedom 3 Energy plan, your overall bill would be about AU$2,000 of which AU$336 is standing charge so you could not possibly save more than AU$1,664 per year [4]. However, that is without factoring in variable electricity tariffs which are being introduced along with smart meter systems and also, at least for the time being, the Feed in Tariffs.

Australian FiTs only apply to the energy you export to the grid, unlike UK FiTs of which the greater part applies whether you use the power yourself or not. In South Australa until recently export earnings (44c/kWh, plus another 7.1 c/kWh minimum retailer tariff, total 51.1 c/kWh) were considerably more than the normal retail electricity price (34-41 c/kWh from AGL) and so you benefit greatly from exporting the electricity you generate. However, these levels have been drastically cut and for systems installed after September 2012 the earnings from exported electricity are such that you are better off using it all yourself. (16c/kWh FiT + 9.8c/kWh minimum retailer tariff = 26c/kWh) and even these tariffs apply only until 2016 instead of 2028. From September 2013 there will be no new FiTs at all although there will still be a minimum retailer tariff [5].

As FiTs are reduced it makes more sense for customers to use more of their own energy, storing it up to use through the day as long as the storage is cheap enough. In the extreme case they could go off-grid entirely or they could stay connected and use the grid as backup, paying only the standing daily connection charge. This reduces grid companies revenues even more seriously. However, if grid companies invest in their own energy storage, they can smooth out their peak demand problem and still charge the customers a reasonable price. Turner predicts that supply companies will team up with storage companies to offer customers a product which is enough to cover the peak but not enough to cover all their electricity demand - perhaps 5-10 kWh. This could benefit customers without PV too, as smart meters are rolled out and Time of Use tariffs offer different prices at different times of the day. Australia is in the vanguard with smart meters;  every home in Victoria and Melbourne should have one by the end of 2013. Here in the UK DECC's schedule for mass rollout doesn't even start until 2014.

Whoever owns the storage, the supply companies have reduced costs from a reduction in peak demand, and hence peak capacity for generation and distribution. Economy of scale ought to make it more attractive for the supply companies to manage the storage rather than their customers - but if they don't want to make that investment and prices continue to rise then at least some of their customers will buy their own storage which ultimately raises costs for everyone else.

Here in the UK most households with PV panels are directly grid connected but some PV installers offer hybrid systems with battery storage (such as Ekland Solar). The UK government has a competition out now for bids on innovation in energy storage - with up to £17 million for grid-scale demonstration systems.

[1] Digest UK Energy Statistics (DECC 2012)
[2] Who's Afraid of Solar PV The Conversation Aug 2012
[3] Energy Storage Systems To Bring Baseload Renewable Energy, But Who Will Benefit? (+ New Energy Storage System From Australia) (Clean Technica)
[4] AGL South Australia Pricing
[5] Solar Feed-in Scheme (SA.gov.au)