Opportunity or crash - where to for the electricity grid when the battery bunny comes along

I've just received the first quarterly electricity bill that includes generation from the Solar PV on my roof. What I want to highlight is that we are about to reach an inflection point in the electricity market. With the correct legislation society will benefit greatly, but with the current legislation (and the legislation in QLD is relatively common world wide) society is in for some rough and painful times.

Note that the prices/regulations are those for QLD, Australia, where we have net metering. But the concepts are applicable everywhere.

To sum it up, to consumer electricity pricing looks like:

• Network access cost - $/day
• Electricity usage cost - $/kWh
• Electricity generation - $/kWh (net or gross)
• Net metering - you only get back for excess energy you feed into the grid.
• Gross metering - you get paid for all electricity you generate.

So once you know how much energy you consume and generate it becomes very easy to determine the return on investment installing solar PV would provide. For us it dropped our yearly bill from $2,000 to $545 for an outlay of $8,000. 

That's an 18% low volatility after tax return on investment.
Ie it's a no brainer. See PV Return on Investment for the breakdown.

So legislation has provided a good economic platform to encourage solar uptake. And this shows, with PV generation in Australia roughly 4 times the size of the United States. So we are outperforming the US by a factor of 40 on a per capita basis.

Where it becomes interesting is if we look at what would be required to remove/reduce that remaining $545/year. Since we have net metering in QLD, I only get paid $0.08/kWh for generation I contribute back to the grid while getting charged $0.22/kWh for any that I pull from the grid. THis means that I have 2 strategies available to further reduce my electricity cost.

1. Add more solar panels. But I already have the largest inverter allowable on a residence in QLD, and anyway I am already generating about 10kWh/day more than our total consumption.
2. Store some of the excess energy we are generating so that I don't need to pull from the grid at night.

Option 2 works well for us and there are now a range of home solar batteries that will provide the approx 7kWh we use each night.

So let's look at what happens as people start to take up the small 7-10kWh batteries that are now available to remove/reduce that final $545/year.

There are two options

1. Stay grid connected.
   
   This option is best for the consumer as if you drain your battery during heavy night time usage or after poor production days that you can still call on the grid for top up.
   
   It is also best for society as it means that the grid is being filled with a decentralized, de-carboned energy source during the day when most industry and business use occurs.
2. Disconnect from the grid.

The problem we have is that on current prices this gives

• 4.8% after tax return to stay connected
• 6.8% return to disconnect.

While not stellar returns, they are both better that leaving the money in the bank, and they are after tax returns too so multiply by 1.47 to give a rough before tax return.

But the rub is that you are better off disconnecting! 

The current legislation does a good job encouraging PV solar, but it doesn't consider the impact as people start to take up battery storage. And they will. Figures above are based on today's prices. Battery costs are coming down in line with Moore's law and mass production brought on my phones, laptops and cars.

So what needs to be done?

Well we want to keep encouraging people to install solar. But we also want to encourage them to install batteries but to stay grid connected, as this makes the grid more resilient and also offers far cheap on demand power than gas fired generation.

How to achieve that?

• Increasing the feed in tariff towards the usage cost reduces the ROI for either battery storage option. So this is not the answer.
• Likewise reducing the consumption cost makes the return for either battery storage option less attractive. So this is not the answer.
• Reducing network costs does decrease the disconnect ROI without affect that of staying connected. But those poles and wires need to be paid for AND it doesn't do anything to encourage battery uptake. So this doesn't look like an optimal solution.
• Increasing the feed in tariff, but only if a reasonable size battery is in place. This has the advantage of encouraging battery uptake inline with the increase in feed in tariff and it doesn't have any adverse impact on any of the other outcomes. If it were to match the usage charge (which by defacto means that it would become gross metering), then return for my scenario would be 11.2%  compared to 6.8% for disconnected, so reason enough to stay connected.
  This looks like it might be the solution we are looking for.

So, think about it . Feedback is welcome.

And contact your state and federal pollies (in Australia it is the state pollies that will mainly determine this, though a smart federal pollie may throw his weight around and make things happen at a federal level too) and point them to this article.

The next 2-4 years will be make or break for the grid in Australia. 

Let's keep us connected and powerful (no pun to see here, move along).

And for those that would like a great state of the battery phenomenon in Australia, Catalyst did a great 25 minute segment http://www.abc.net.au/catalyst/stories/4398364.htm