Australia’s Electricity Companies Will Fight Tesla Over Powerwall Batteries

Opinion: Tesla’s Powerwall battery is coming to Australia later this year, and it promises to lower your power bills by charging from your house’s solar panels or when off-peak energy generation tariffs are in effect. But it may face competition and obstruction from Australia’s existing energy suppliers and retailers, whose current businesses are built around power generation and consumption, not storage.

This post was originally published on September 21 at 10:30AM.

RenewEconomy says that in the end, consumers may suffer. The fundamental idea of Powerwall, and of residental or small-scale battery energy storage in general, runs counter to the way electricity is generated and used around Australia. In Australia, as in any country around the world, large-scale power is generated relatively consistently from baseline generators like coal- and gas-fired power plants, with supplementary power and peak boost coming from sources like wind, industrial solar and hydroelectric. Power demands fluctuate based on industrial and residential requirements.

In the merit order, nuclear (of which Australia has none) and coal-fired power plants are relatively cheap to run due to low fuel costs, but take a long time to heat up and reach operating temperature — they are therefore suitable for generating a pre-set, fixed amount of power but are not able to adjust dynamically to daily fluctuations in consumer demand. Wind power contributes to baseload, but only at a proportion of its maximum power — it is changeable with regional weather.

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Mid-merit generation plants like hydroelectric, diesel and gas turbines are more responsive to demand, but comparatively more expensive. In a traditional energy generation system, there’s a baseload and a peak for production, and largely similar peaks and troughs that coincide in consumption. That means, thanks to the principles of supply and demand, that there are expensive times to buy electricity — these are the peak and off-peak tariffs we’re all aware of on our quarterly energy bills.

In the scheme of things, solar — especially on a distributed, rooftop-scale model — is surprisingly close to a baseline level of power generation, although only during daylight hours (and especially peak daylight hours). Australia has excellent rooftop solar penetration — over 4400MW on 1.4 million homes — and generally excellent sun (thanks, giant hole in the ozone layer), as well an existing time-of-use tariff system from electricity companies.

It’s those three things that make Australia attractive to Tesla Energy and the Powerwall. There’s a huge market of people with solar energy generation already installed on their rooftops, and a population open to the idea of rooftop solar, as well as a traditional energy generation infrastructure and retailers that charge users based on when they use their electricity. Battery energy storage — through a device like the Powerwall, which has the Tesla factor even though BES has been available for some time already through — means that houses with solar can store that midday energy rather than feeding it back into the grid.

And that solar energy, generated from peak sun at the rooftop level and stored for later use, can be fed out from the Powerwall in evenings and mornings — the demand periods where electricity purchasing from the grid, from those baseline and mid-merit sources, is expensive. The Powerwall can even charge itself during off-peak tariff periods if you don’t have on-roof solar, leveling out grid usage and reducing the need for peak tariff consumption.

And that is why it’s perceived as a threat to energy companies’ traditional business models.

In some places, under some tariffs, solar plus battery storage is already cheaper than grid power. Australians are on track to install 55,000 battery energy storage systems per year in the next 10 years. UBS predicts that a battery solar system may pay for itself after as little as five years of regular usage.

But it seems like Australia’s incumbent electricity companies — generators, suppliers, retailers — are unprepared for what seems like an inevitable transition to battery energy storage. Queensland’s government pushed through backdoor changes that massively increased fixed prices for electricity while publicising lower energy tariffs, making baseload and grid power more attractive but removing an incentive to install rooftop solar. WA’s government-owned Synergy power provider banned battery storage from any new rooftop solar installations. These moves are anticompetitive and are a kneejerk reaction to the supposed threat of Powerwall and BES more generally.

This fight is already happening. But battery energy storage systems are not at all a threat to the nation’s established power generation infrastructure. All they do is provide the potential for users to monitor, adjust and level out their power consumption, reducing the need for peak power generation on hot summer’s days and cold winter’s days. In conjunction with rooftop solar, Powerwall will reduce any given house’s reliance on grid power, especially during peak periods. But a Powerwall and solar panel will never be enough to take a house entirely off the grid, and that means retailers and generators will still draw their fixed fee — all while having to produce less power.

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Energy companies will have to adapt to a country where partly decentralised power production and completely decentralised power storage is commonplace. That’s inevitable, from the uptake Australia has already had for solar and from the likely uptake of Powerwall and its competitors. What Powerwall offers is the opportunity for an average household to lower its grid energy reliance during those morning and evening peaks when the grid is busy and expensive and the sun isn’t out. It just means that one day, we won’t have to run expensive gas turbines to meet peak demand, because there won’t be any peaks.

Maybe when that happens, the extortionate fixed prices to stay connected to the grid might go down.