Unlocking the value of installing a home battery

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UNLOCKING THE DIFFERENT POCKETS OF VALUE IN A BATTERY
Batteries are fairly expensive items and when someone makes that upfront investment, they need to think about how they are going to get a return. A battery falls somewhere between a consumer good and a financial product. Consumer goods are your flashy cars and mobile phones. People buy consumer goods because they look nice, they feel nice and they value the brand. With home energy batteries there is a bit of that. Everyone loves the Tesla brand and wants to put it in their garage and show it off. But at the end of the day it’s a pretty low engagement product so you also need to think of it as a financial product. It’s going to sit in your garage and you need it to get a return on investment. Otherwise why would you get one?

There are lots of different pockets of value that could be opened up by using batteries in different ways. They can benefit the customers who buy them, but can also benefit many other parties in the energy supply chain. Not all of those streams of value are currently open or easy to access, and there are some real barriers to opening them up. We’re working on opening up those value streams, because we want to be the business that is able to harness all the value in a battery and share it with our customers.

HOW THE CUSTOMER BENEFITS FROM BATTERIES

The first pocket of value is the value to the customer. They’ll charge the battery in one of two ways; when their solar is pumping out (so charging is effectively free) or from the grid during off-peak periods, when energy is really cheap. The battery will then dispatch during peak hours so the battery offsets their energy use at times when electricity is more expensive. The customer therefore gets a financial benefit from each unit of energy they consume from their battery, rather than from the grid at peak times. Depending on whether the battery charged from solar or from the grid, this benefit can range from 15c – 25c per KWh.

HOW THE RETAILER BENEFITS FROM BATTERIES

The second is the value to the retailer. When a meter at a property ticks over, the retailer is financially responsible for that energy consumption. If you have a smart meter, you can tell exactly what time the energy was used, so the retailer can match the usage to the prices on the wholesale market.
The wholesale market price for electricity fluctuates between positive $14,000 and negative $1,000 per MWh. It swings around a lot and retailers have to manage the risks associated those fluctuations, because we don’t want to be caught carrying the can for lots of consumption at the $14,000 market cap. One way to manage these price fluctuations is to control the battery that sits behind a customer’s meter, so that when the price goes high the battery discharges and the retailer doesn’t have to pay the high prices for the electricity consumed at that time.

HOW THE NETWORK BENEFITS FROM BATTERIES

The third pocket of value is the value to the energy networks, the guys who own the poles and wires. Batteries can help networks delay or avoid certain investments they would otherwise need to make. They have an obligation to keep the lights on, so it’s essential to have networks that are resilient to future levels of demand – peak demand in particular. They might find that in order to keep the lights on they need to either build a substation in a particular suburb, or alternatively reduce demand by contracting to call on a number of batteries in the area during a few peak periods a year. The value of the batteries in avoiding building that substation for a few years can be significant.

HOW EVERYONE CAN BENEFIT FROM BATTERIES

And then there are services that the batteries can provide to the power system in general – which benefits everyone. For example, keeping the network stable and secure. There are requirements that the frequency and voltage of the grid should stay within certain limits and when they go outside of those limits the energy market operator is responsible for bringing the system back within the limits. System stability becomes more difficult to manage as more renewable energy enters the market and as coal fired generators (who have traditionally provided these services) exit the market. Batteries can provide those services – they can inject power or lift frequency in near real time, and that is really valuable as we move to a decarbonised power system.
 

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