There is a great opportunity for Australian state governments to offer home battery storage incentives to consumers and to funding this incentive by repurposing existing, committed government expenditure. The mechanism I’m talking about is a voluntary trade-in offer, built around the residual payment stream for existing (and often very generous) solar Feed-In Tariffs (FITs).
These solar Feed-In Tariffs have already achieved their goal of kickstarting solar panel adoption in Australia. Indeed Australia is now among the world leaders in its per capita deployment of PV solar panels.
From a public policy point of view, continuing to pay solar Feed-In Tariffs well beyond the point where the underlying consumer investment in their solar installation has been fully paid off represents a substantial forward liability that does not deliver improved public good outcomes. However, state governments are clearly sensitive to the political risk of simply cancelling these long-running tariff schemes, some of which hold liabilities to as far as 2028.
However, Governments have an attractive way out of that problem, which serves both a public policy and industry development agenda while removing these long term liabilities from the public purse.
This involves inviting consumers to voluntarily trade in the residual life of their FIT in exchange for funding to buy a home battery energy storage system. This would have the dual benefit of eliminating a long-term forward liability for governments while kickstarting a home energy storage industry in Australia.
The remaining forward liability for a given customer can be readily estimated based on past subsidy payment patterns for that customer.
Past subsidy payment patterns are also likely to underestimate the remaining forward liability from the FIT schemes to governments. Each time a consumer reduces their home energy usage during daytime hours (through buying new and more energy-efficient appliances, installing automatic energy optimising control systems, and also through government-funded incentives such as this LED lighting replacement scheme), their future FIT payments from the government are set to rise still further in the future.
Accordingly, it seems likely that governments can likely save money overall by offering such a voluntary trade-in, even if the trade-in offer funds the entire capital cost of a home battery energy system. That up-front payment now could well be below the net present value of the (rising) forward liability of the FIT payments to the customer concerned.
Over the past year, Australia has emerged as a global battery proving ground because of its widespread deployment of PV solar panels and high electricity costs. Home batteries based on Lithium battery chemistries have been launched here by companies including Tesla, Enphase and Panasonic.
Redflow, an Australian company of which I’m Executive Chairman and a major investor, has recently launched its ZCell home battery, which is based on Redflow’s unique ZBM2 flow battery. This is a different kind of battery entirely. We believe it is far better suited to the long term demands and the daily ‘deep cycling’ required to store daytime excess solar energy generation and to let you use it to power your home at night.
The solar FIT buyout concept note here has been widely discussed in the Australian renewables sector and is reportedly under consideration by the Queensland Government. It has the virtue of re-using funds previously committed to kickstarting the PV solar panel sector to encourage the new home energy storage sector – with associated jobs and business growth.
Its important to appreciate that in many areas, the solar installation industry is now starting to saturate – with installers starting to struggle to find new growth areas in what has become a highly competitive pricing realm. The big opportunity for renewal in this industry is (now) the installation of battery energy storage systems in the same homes that have previously installed solar – but the high cost of battery systems at this early stage of the battery industry cycle is getting in the way. This voluntary FIT trade-in scheme could be just the growth catalyst the industry needs.
Just as with solar PV incentives, it will prove politically popular with citizens who increasingly regard home energy storage as a way to increase their energy independence and reduce electricity costs.
Widespread energy storage will also benefit far-sighted electricity companies by reducing demand during peak power periods and providing them with the possibility of buying home-stored energy as a ‘virtual’ on-demand power source rather than relying on fossil-fuelled driven peaking gas generators.
At a national level, widespread energy storage, both at the consumer and the grid level, will help Australia achieve its international carbon reduction commitments by time-shifting renewable energy so it can be used 24/7, not just when the wind is blowing or when the sun is shining.
Swapping solar Feed-In Tariffs for home battery installations is not just a win-win: It’s the gift that keeps on giving.