Why the ACCC is urging Australian households to join battery networks to lower energy costs
Energy companies must persuade millions of Australians to hand over control of their home batteries to shore up the grid at critical times if they are to avoid huge cost blowouts in the country’s multibillion-dollar transition from coal, a consumer watchdog warns.
As homeowners try to protect themselves from fluctuating electricity prices by installing solar panels and lithium-ion batteries, officials worry that too few people are signing up to join “virtual power plants,” which offer bill credits to customers in exchange for allowing power providers to intermittently access their stored electricity.
Because batteries can store cheap and abundant solar energy during the day and discharge it after sunset, a threefold increase in battery consumption triggered by the launch of massive rebates from the federal government a year ago has lowered electricity bills for those who adopt the technology. It has also reduced wholesale prices during evening peak periods of demand across the wider grid, reducing reliance on coal and gas.
However, according to a new report from the Australian Competition and Consumer Commission (ACCC), these utility-scale benefits remain “incidental”; because very few individual home units are synchronized to charge and discharge at optimal times for the grid.
Further rolling out the benefits will require significant expansion of aggregate networks known as “virtual power plants”, it said. Virtual power plants are cloud-based networks operated by energy retailers or technology companies, offering customers financial credits to organize thousands of batteries in their homes at once into a single, coordinated power source that can balance the grid during supply imbalances.
“Coordinated batteries can respond to price signals and the needs of the energy system more reliably and efficiently, resulting in further reductions in the need for grid-scale storage, increased system reliability and security, and reduced costs for all electricity consumers,” the ACCC said.
About 26 per cent of households will need to install batteries by 2050, with more than half of those required to be part of virtual power plants, according to the Australian Energy Market Operator’s 25-year plan for the lowest-cost way to replace retired coal-fired generators and meet growing electricity demand.
Current participation rates are well below this target. Only 3 percent of east coast customers own batteries, and only 24 percent of those owners are in a virtual power plant.
Robbie Campbell, chief executive of Plico, a company that installs batteries and operates a 5000-home virtual power station in Western Australia, said failure to address slowing enrollment rates would increase the need for investment in other grid-scale projects such as gas-fired generators, known as “peaks”.
“A battery doing its own thing in the garage doesn’t replace a gas pickup; a battery in a virtual power plant does that,” he said. “Most of them are sitting in garages right now.”
Campbell added that the delay in virtual power plants was not due to any technology issues. “It’s a trust issue,” he said, and many in the industry haven’t focused enough on ensuring consumers understand how the programs work and the potential benefits.
“Households will not subsidize the grid out of goodwill,” Campbell said. “Show them money, show them how it’s done, and they’ll stay in a virtual power plant.”
But some experts believe the energy market operator’s assumptions about how batteries behave outside the virtual power plant environment may be too pessimistic. Tristan Edis, head of analysis at energy consultancy Green Energy Markets, said a growing number of retail offers were being designed to encourage batteries to absorb low or free midday electricity and discharge it in exchange for a premium feed-in tariff during evening peak periods.
“It would be great if there was more to a virtual power plant, but we’re probably too pessimistic,” he said. “Maybe we don’t need as many people signing up for virtual power plants as we thought before, because we now have these retail offerings that are becoming popular with battery owners.”
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Nick Toscano is an economic correspondent for The Age and the Sydney Morning Herald.Connect with: X or email.
