Jun, 2014

The role of storage for PV systems

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Storage is a hot topic at the moment. It’s the new black, the new toy.

The solar we see on rooftops, and 99% of all the solar in Australia is grid connect and has no storage functionality.

Electricity is an instantaneous thing – use it or it’s gone. There are two main implications of this – firstly, you still buy power from the grid when solar electricity isn’t generated, or not enough (so you are still dependent on an electricity retailer) and secondly, because you’re generally not  paid well (or at all) for power that you export back to the grid, it is not worth exporting solar electricity and you can’t eliminate your bill.

Batteries tackle both these aspects – allowing you to store and use later what would otherwise be thrown away, and giving you back some control over what you purchase.

The topic is heating up because batteries are getting better and less expensive, and people are ‘productising’ battery solutions. Off grid solar for example, still (correctly) relies very heavily on individual system design. Grid connect with battery backup (hybrid) needs lower design input in a sense because every premises is already connected to the grid – the solar system isn’t the sole source of power as it is with off grid. This will eventually lead to pre-configured solutions. It hasn’t yet happened here in Australia but in Japan there are many “plug and play” battery systems that can be retrofitted to an existing PV system. These are modular, so the more storage you need, the more you buy.

We are asked many times on storage… people are suggesting and reading things… and getting excited.

However, as numbers people, we have to say “slow down”. Look at the numbers around storage.

The initial attraction of storing power rather than exporting it, and wrestling back independence on buying electricity from the grid comes at a steep price.

When we look at solar, we look at ROI and payback and it is often 4-10 years on straight grid-connect solar. When we add storage to this, it blows out by many years. Therefore, from an economic point of view, batteries rarely add  up at this point in time.

However, there are circumstances when the technology makes sense and they are:

  • Need for independence – if you suffer from brown-outs or black-outs, batteries can give you a more stable supply. This  is true with or without a solar aspect, and UPS for business is not new.
  • Peak demand management. In a commercial scenario, up to ½ of a bill can be a one off charge attributed to the highest demand of power on your premises. Not consumption. Just that peak. It’s like a “high tide mark” on your pattern of consumption. If your pattern of consumption is “peaky” as opposed to “flat” and those peaks are short exceptions to your normal pattern, batteries may have an impact in reducing these peaks. Even then, the economics would need to be modelled in detail.
  • Manage time of use billing. In some situations such as residential time of use billing  (in some Ausgrid areas for example) the peak rate of power is close to 50c per kWh between 2-8pm on weekdays. This high price can start to make storage a viable proposition.

Another way to look at battery solutions, or in fact solar generally, is the amortised cost of power delivered. If you invest in a solar system, what you are doing is investing once to create a long term supply of free power. If you then spread out the cost of that investment over say, a 10 year period, you can say that you are buying power at a rate of say 12c per kWh (you’re just buying it in advance). If you currently pay more than 12c per kWh for power, and you have  a time frame that gives you certainty – you know you’ll be in those premises for that period – then solar will make sense for you. Add batteries to the equation, and you might find that the cost of the power you pre-purchase by buying a PV + Battery system is now 30c per kWh. With that higher price comes some freedom, however. You can control when you use it and you may be independent in the case of a blackout, but the power has cost you more. This is unavoidable. Is that freedom worth the extra investment (and the subsequent higher ongoing value of that power). It might be…but probably not.

Despite the numbers not looking highly appealing (at the moment), the future for storage is bright.

The falling cost of batteries is the biggest change that will occur. This will take several years. Where we are now is the phase where it is exciting for early adopters. Just as the price of PV systems fell to less than a quarter between 2008 and 2014, we will see battery prices plummet. It is a virtuous cycle… adoption leads to improved products and better economies, which leads to more adoption. With storage, this is being assisted by other demands for batteries such as electric vehicles, and we are seeing huge investment in R&D and production.  Tesla is an example, having stated a plan to invest $5 billion in a battery plant.

In a storage grid connect system (a hybrid) batteries currently make up more than half the value of the system. As well as that, batteries don’t last forever. A high quality lead gel battery discharged to 50% of its capacity daily will only last 1000-1200 cycles. That’s not many years. New technologies such as lithium iron ferrous phosphate (LFP, or LiFePo4) can last 5000 – 8000 cycles but cost several times the price initially. New technologies are emerging, and old technologies are being dusted off (Edison battery – which was hot off the press in 1906. Yes, there have been improvements since then).

If you want to look at it… talk to us. We can discuss the economics, and we’ll be brutally honest about when it will work and when it won’t.