Re-inventing the electricity industry with storage

20 Mar, 2014

No matter what side of the fence you are on, everyone is agreed that electricity companies will be very different in a few years’ time.

In the broader context, change is inevitable of course and we need look no further than the business world to see that sustainable businesses adapt and prosper, leaving others in their wake. Although they come from a history of public ownership where things move more slowly, utilities are far from immune; transformational change is happening all around us at an ever faster pace.

We already have a “new normal”, compared to just a few years ago.

Just how storage will fit in the utility business models of the future remains to be seen, but clearly there are some great examples around the world of what it might look like.

In New Zealand for example, Vector Energy has jumped in boots and all to trial new business opportunities in demand management energy efficiency, solar and energy storage solutions. Although it’s not clear what the future market will look like, they clearly see opportunities to monetise the value of load shedding in residential and commercial applications.

Vector is a privately owned network company, but has diversified income from metering services, demand management, load shedding incentives and other activities. The metering part of their operations is a crucial piece of the puzzle if Australian experience is anything to go by; lack of granular data is a common excuse for lack of action here.

In 2013, Vector commenced a trial on fifty homes with an integrated offer of solar PV, Lithium storage, data monitoring, finance and load shedding. Although they are subsidising the current offer, they see this type of solution as logical and inevitable.

Whether Lithium – or some other technology is the ideal solution is just one of the many topics that will be covered at the Australian Energy Storage Conference scheduled for May 8th – 9th 2014. A leading cast of experts with real world technologies and first-hand experience will present their latest findings; an ideal opportunity for utilities to check their technology positioning.

Storage solutions will in all likely-hood be technologically diverse allowing utilities to target specific network issues. For example, using PV to directly heat water is an emerging market niche in Australia and abroad. The massive reductions in PV cost coupled with the simplicity of installation compared to solar thermal installation provide increasingly compelling economics.

The transformative part of this equation is unravelling how utilities can derive increased income by selling less energy.  This is no mean feat and will require regulatory intervention and a major change in the business models they currently employ in Australia to work.

Some parts of this equation are concisely clear, however.

The first is consumer demand. The desire for increased energy independence has created an overwhelming community desire for PV. Similarly, those with PV can now see that storage is the next logical step. It’s a simple psychological leap that increasing numbers of early adopters are already taking and as costs fall, wider adoption becomes inevitable. It’s no longer a question of if; it is now only a question of when.

Of course, wider adoption could happen in several ways. Like PV, it could be pulled through by community demand once the economics become compelling enough. This is far from ideal because it will happen despite utilities, in less optimal ways and if history is any gauge, faster than they expect. Messy disruption.

Alternatively, adoption could be forced on utilities in the same way California has done. By setting mandatory minimum network capacity requirements, utilities have limited say in when, how, what type or how much storage is deployed; they simply have to adapt or face penalties. Compulsory disruption.

It is entirely probable that we will see more markets take the incentive approach too, like we have seen in Germany and more recently, Japan. These countries have taken a high level position that storage makes sense for their own individual reasons and offered funding support to drive adoption in much the same way PV markets have been incentivised. Incentivised disruption.

Utilities are faced with major challenges which vary dramatically around the world; and even geographically in Australia. They now have a decision to make with respect to storage; get in early and choose their own hand which suits them best in exchange for early adoption, or face the consequences of an inevitable market surge and play the hand they are dealt; for better or for worse.

In the last month I have spoken with five different storage solution providers all offering different technologies, solutions and angles on what will work best. There was one consistent story across them all – costs are falling faster than they expected.

Attending the 2014 Australian Energy Storage Conference is starting to look like a necessity for utilities, if you ask me.

Post expires at 6:30pm on Friday March 20th, 2015

About the author

Nigel Morris
Nigel Morris

Nigel is the Director of SolarBusinessServices. After almost 20 years working for other companies SbS Director Nigel Morris, established the company in 2009 with a view to providing other organisations with the benefits of his wide experience in the renewable energy industry.

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  1. March 23, 2014

    Storage is the “missing link” in Solar PV as a renewable energy resource.
    Storage implies that the energy generated from a solar PV system can be stored for use at those times when the solar PV system can no longer generate the energy required at that particular site and importantly independence from the grid.
    The required change to the current business model involves reassessing “the customer site as a potential scaled energy station”. The customer site under this new perspective would have the necessary requirements to generate larger than its own requirements for energy and large enough to potentially provide a stable, predictable energy source to the grid.
    This new perspective also means being able to remove specific customer cost burdens and to envisage new grid infrastructure economics.

  2. March 23, 2014

    Excellent piece Nigel, insightful as usual. We have been developing our energy monitoring and management system independently of utility metering systems – smart or otherwise – with the future energy market firmly in mind. Solar PV, storage, EVs, personal ‘time of use’, demand management and more. Data, accurate and real time, is an incremental cost that underpins the whole package. Being able to create ‘networks’ of energy saving and clean energy, all free of the utility yoke, completes the picture. The future is grid ‘lite’ if not off-grid altogether.

  3. March 24, 2014

    “Storage much slower being implemented in Germany than expected”, Why?
    Because its too expensive! Even a small residential system has a BIG starting price. When you finally repay the investment, your batteries need replacing.
    Financial analysis might just start to look OK until you replace the salesman with the engineer.
    Let’s look at a typical micro-grid system using distributed solar power and battery storage. You start with say 1 kW of solar panels, which because they get hot, produce at most 800 watts of peak power and on average 3.5 kWh of electrical energy into the local grid after normal losses on an average Australian day. You then lose 10% converting AC power to the correct DC voltage to charge a battery, you then lose another couple of percent in chemical storage and recovery for Lithium batteries or a massive 15% for lead-acid, you then lose another 10% converting DC back to AC again. Power factor is not always 1 across a local micro-grid, so you lose another 5% driving phantom loads and then there is local grid cable and transformer losses of another 5%. What’s lefts from your 1 kW of solar panels? With lead-acid storage 50% or 400 watts peak power and less than 1.75 kWh of energy is not even a worst case scenario.
    Now the electricity grid owner is not going to let you use it for free so be prepared to pay exorbitantly high rent for use of the poles and wires, so there goes most of the remaining value in your distributed generation and storage financial model.

    • Nigel Morris
      March 24, 2014

      Hi John

      Thanks for your feedback, I think you make some excellent points.

      The one thing that keeps surprising me is how fast costs are reducing however, i think the picture is getting better all the time although I do agree right now its hard to justify. I am seeing some systems go in at reasonable prices, time will tell if they are sufficiently intelligent and quality.

      FWIW, I’ve always held the view that the best salesman is half engineer, half salesperson – not one or the other.

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