Community batteries fail to deliver value for energy consumers, or reduce bills

As more communities embrace the renewable energy transition there’s a growing interest in what are being called ‘community batteries’ – batteries that are bigger than home batteries but smaller than utility scale, big batteries.

Community batteries are often supported by communities deeply concerned about climate change. For people who can’t afford the upfront cost of a home battery, or who are renting, or live in apartments where it hasn’t been possible to install solar or batteries, the idea of a community battery sounds great.

A recent survey by the Yarra Energy Foundation found people really like the idea of community batteries - 80% of survey respondents said they are “strongly supportive” of a shared battery being installed in their neighbourhood.

But not everyone thinks community batteries can deliver value for consumers or local communities.

Tristan Edis, the Director of Analysis and Advisory at the consultancy firm Green Energy Markets, told the SwitchedOn podcast that what we call a ‘community battery’ is a misnomer – he says most of the community batteries that have been installed so far are not owned by local communities or householders.

“These things are not in any way, shape, or form, a community battery …. [They’re] owned by a monopoly network business …. they are in the business to make a profit,” says Edis. “You've got a very large electricity company controlling when to turn [the battery] on and off as well when to play the wholesale market.”

Edis says the network batteries are delivering less value for energy consumers because they're not actually giving consumers any reduction on their bills.

Until recently the job of the networks was just to build the poles and wires that transmit electricity; they were ‘ring-fenced’ and prevented from generating power.

“They're essentially not meant to be rolling out solar. They're not meant to be rolling out batteries, and they're not meant to be rolling out any kind of power generation project.”

However, with the increasing interest in community batteries, Edis says the networks have been advising communities to “lobby the regulator to remove the ring fencing, so they can help [them get a] community battery.”

The federal government has recently funded a number of trials of community batteries through ARENA – the Australian Renewable Energy Agency - to determine whether community batteries might be the missing link in our energy storage needs.

Most of that funding was allocated to network operators to roll out community batteries around the country.

Edis has crunched the numbers and found “there are no economies of scale by moving to what we might call a neighbourhood sized battery. In fact, when the networks are involved, those batteries are substantially more expensive than a residential, household battery.”

He estimates that a rough rule of thumb for a residential home battery to be fully installed costs between $900 to $1,300 a kilowatt hour (kwH), including GST.

However, the average government grant given to each network project was just under $1,400 a kwH. The networks were expected to then make a contribution to the project, but Edis says they took their contribution “out of a thing called the innovation allowance, which then gets passed on to customers. So the network's didn't really put in any real money.”

Edis then dug deeper to find extra data on what it costs the networks to generate power using a community battery. “I haven't been able to find a single example of a network community battery, that has been less cost than what a household can roll out a battery in their own home.”

He found:

·      in Victoria, where the Government has their own neighbourhood battery program, the cost of a community battery was $2,000 kwH;  

·      the average cost of Energy Queensland’s ‘solar soak batteries’ was $1,864 a kwH;

·      United energy, in Victoria, was at “the extreme high end” - they were $4,000 a kwH;

·      Powercor had “a community battery that was substantially supported through Victorian government funding, and again was $2,000 a kilowatt hour.”

Edis argues the Government shouldn’t be giving funding for community batteries to big network monopolies.

“Giving money to these networks is not helping the poor. It’s predominantly helping wealthy people, or it's helping the Chinese government or the Singaporean government.”

“Many of them are owned by very rich individuals like the wealthiest man in Hong Kong …. Superannuation funds … or by overseas governments, like the state grid Corporation of China, or Singapore power, or the Singapore sovereign wealth fund.”

Rather than investing in community batteries Edis thinks the Government should help communities invest in home batteries.

“There's no reason why a battery in your home can't behave exactly like a network battery, and export power to the broader network when it most needs it.”

Edis predicts the cost of home batteries will fall dramatically within the next four to five years.

“When batteries start getting rolled out at a similar scale to what we've done with solar a lot of people are going to say, why am I paying the network so much money when I barely use the network?”

And as the cost of batteries comes down, many more people will install more battery capacity than they can consume in their own home.

“That's what we do with solar. Right now the average system being installed would export about 90% of its generation.”

“There’s a lie being promoted by networks and other electricity companies saying solar is just helping the rich and disadvantaging the poor, because the poor can't get the solar system. It's rubbish.”

Edis says even people who can’t afford solar and batteries are benefiting from other people installing solar because the more solar that is being exported from rooftops is bringing down the price of grid electricity during the daytime.

“Guess what happens when the batteries get out? Then they're going to benefit from lower night-time prices, too.”

“[Householders] will be exporting a lot of their power and that will be helping everyone in the community. The household battery will be a community battery.”

Edis concedes that householders will need to be given incentives to export some of their power to the grid, not just keep it for themselves. Governments will need to take more control over the pricing structures that the networks come up with. Currently networks are delegated to come up with their own pricing structures.

“The idea that these networks will change their spots and start restructuring their business to actually deliver value to end consumers through cheaper options than poles and wires has just has not been borne out in reality.”

Rather than try and set up their own community scale battery, Edis recommends community energy groups find a business with a large solar array and excess solar, such as a council building or water treatment business, to host a real community battery.

The battery could store excess power during the day, and then generate money by feeding it back into the grid during the evening peak period. The benefits could then be shared with the wider community and “save a lot more money, because they don't have to get the network to cooperate to deliver some of that network value.”

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You can hear the full interview with Tristan Edis on the SwitchedOn podcast here.