The evolving investment case for home battery storage: Incentives & virtual power plant programs

August 19, 2019 11:21 am Published by Leave your thoughts

Enabling households to tap into battery value streams additional to the standard ‘solar self-consumption’ approach will be crucial in driving uptake by making batteries more attractive. These include hard, financial benefits like virtual power plant (VPP) participation revenues (for energy market participation as well as grid services) which help shorten payback periods, as well as non-financial benefits such as improved energy self-reliance and blackout protection.

This article, by SwitchDin, aims to estimate the potential value of battery-related benefits to illustrate how they could impact the investment case for households to purchase a battery storage system. It is not intended to provide a definitive, final say on potential battery value streams or battery system payback periods.

SwitchDin notes that there are technological, regulatory, consumer acceptance and scale-related hurdles to overcome before a single site can access and realise all of these value streams concurrently. They also anticipate that regulatory changes coming into effect over the next three years (e.g. transition to five minute settlement period on the NEM and the Retailer Reliability Obligation) will alter the landscape significantly. As such, all values are estimates only, and should not be construed as financial advice.

SwitchDin is working with energy companies, product vendors, industry bodies & government to build a universal, vendor-neutral VPP platform that overcomes the main technological hurdles. While the principles discussed here focus on Victoria, they also apply more broadly across the Australia’s electricity system, including the National Electricity Market (NEM) as well as Western Australia’s Wholesale Electricity Market (WEM).

Solar & battery system payback periods

‘Payback period’ is the most common benchmark metric that homes & small businesses use to evaluate the investment-worthiness of solar PV & battery systems in Australia – as well as a common component of a sales proposal. While payback period doesn’t apply for homes purchase their system through finance (which then becomes a question of cash flows), it is still a useful and readily understood reference point.

Under a lens of strict scrutiny – separating out solar PV & battery returns instead of examining them as a single package – payback periods over 20 years are still common for residential battery storage systems in the unsubsidised market. By contrast, battery warranty periods are generally 10 years.

Read full article at SwitchDin site, here.