Summary: Going off-grid is a pipe dream that will remain uneconomic for decades for those already connected to the grid. Even just adding battery storage will not make financial sense for the vast majority of Australian households, including those with solar power and low/zero feed-in tariffs. Making the correct solar and battery-capacity decisions for your circumstances is also very complex. The sensible, simple solution is to lower your energy use and ensure you switch to the cheapest providers of electricity and gas.
Details:
1. For the vast majority of grid-connected consumers it will never be economic or feasible to use batteries to go off-grid
Battery storage simply won't transform electricity generation or use, let alone enable grid defection as the costs and overheads involved in being energy self-sufficient don't stack up now or in the next decade:
The announcement of Tesla Motor’s cheap new lithium-ion storage batteries set the renewable energy world on its ear. Breathless commentators pronounced them a revolutionary advance heralding cheap, ubiquitous electricity storage that would make solar power a 24/7-power source for the masses. Elon Musk, Tesla’s wunderkind CEO, fed these hopes at the glitzy product launch for the 10 kilowatt-hour (KWh) Powerwall home storage battery.
“You could actually go, if you want, completely off the grid,” he told them. “You can take your solar panels, charge the battery packs, and that’s all you use.”
Powerwalls would let developing countries “leapfrog” straight to a solar-plus-storage electricity system, he explained, and the 100-kWh utility-scale Powerpack version would have a world-historical effect. Just 160 million Powerpacks would suffice to “transition” the United States to “sustainable energy,” he said, adding, “With 900 million [Powerpacks] you can…make all the electricity generation in the world renewable — and primarily solar.”
But does all the messianic talk of battery-powered “disruption” and solar triumphalism stack up? Hardly. For all their ballyhooed price reductions, Tesla batteries are still way too feeble and expensive to come even within hyping distance of either a reliable power supply or an off-grid revolution.
On cost, the average residential retail electricity prices in the US are $0.12 per kWh, while electricity from Tesla’s Powerwall on paired rooftop solar would cost 30 c/kWh or more.2. Australian analysis on payback times for Integrated PV and Storage Systems (IPSS)
The grid will not be disrupted: why Tesla’s Powerwall won’t catalyze a solar revolution
The best independent analysis comes from the Australian Energy Market Operator (AEMO) in its Emerging Technologies Information Paper published on its NEFR Supplementary Information 2015 page.
As you can see, the payback times for states (Tasmania, Victoria) with less sunshine and relatively low electricity prices are over a decade. For small (low demand) electricity consumers, the payback time in Victoria is 20 years and in Tasmania is 29 years.
3. In Victoria, we pay $650 a year for electricity (hydro sourced) and ~$800 a year for gas
I've discussed in detail how to choose the best energy providers and plans in other posts. The key points to take away in this post are that:
Usage prices for electricity in most of Australia (a single grid) have actually been falling and no major increases are likely due to demand-supply factors over the next decade. My usage rates have fallen substantially and are now at just 15.04 cents/kWh for the first 6.5kWh per day and 16.36 cents/kWh after that. This is with Momentum Energy providing 100% hydro power from Tasmania.
Using energy efficiently is the key to keeping annual costs low, especially in areas where the cheapest usage rates are over 20 cents/KWh. Our household uses ~1600kWh per year which translates into annual usages costs at these rates of $256 / year (1600 * 16 cents). Interestingly, with the lowest-available usage rates having fallen so much, we could double our electricity use and it would only cost us an extra $256.
The cheaper your usage rate, the less worthwhile are flexible pricing plans (using smart meters to shift when to consume). At the peak usage rate we pay (16.36cents/kWh), we can only be worse off financially from flexible pricing as the difference to the shoulder rate is negligible, while the peak rate is huge, and the off-peak period is rarely used. This also explains why using Tesla-like batteries for load-shifting doesn't make financial sense. There is no flexible pricing plan in Australia that competes with the always-low cheap usage rates we pay.
Fixed prices for electricity in most of Australia continue to rise to recover the "gold-plating" over-investment, also because demand has fallen rapidly due to rising costs and home solar PV generation, and additionally due to cross-subsidies. These fixed tariffs vary considerably between networks and retailers and so you need to consider this when choosing where to live and especially when selecting retailers and plans. Don't worry though, virtually no-one is escaping the grid or these fixed costs (including solar and battery boosters) and so there will be no "death spiral" causing massive fixed cost increases.
Nobody currently grid-connected in Victoria will find the best way to save money is by getting battery storage to go with their solar PV, let alone by obtaining so much surplus capacity they can disconnect from the grid. And I expect this to remain true for decades. Even in the sunniest parts of Australia it is feasible only if grid costs are very expensive and usage is low. Anyone who claims batteries will become ubiquitous and grid disconnections will make financial sense for many is dishonest or really bad at maths.
To prove this point, I will update a running total of Australian urban households who have disconnected from the grid using solar and batteries here:
As of September 2015 Australian urban households that have:
- Disconnected from the grid using solar and batteries: < 10 (my estimate, please send me a source if you have one).
- Disconnected from the grid using solar and batteries and saved money: 0
Even the boosters of solar PV, battery storage and going off-grid are exposed by their own calculations (see below table) regarding the capacity of solar PV and battery storage required to make it possible mathematically. Embarrassingly, they even warn against disconnecting unless capacity is even higher than suggested or you can run diesel generator backup (not allowed for urban residents living next to neighbours).
The current set up cost of such hyper-capacity, off-grid systems is in the order of $30,000 to $70,000. It is crazy to presume this can ever come down to a level that would make it financially-sensible compared to just using energy efficiently and finding the cheapest grid supplier.
If I invested $30,000 long-term at just 4%, just the annual interest of $1,200 would cover twice my current electricity bill ($650). And I'd still have $30,000 in my pocket. In other words, there is no pay-off period remotely possible at anywhere near current costs for grid vs off-grid.
4. Real-world Australian on-grid versus off-grid costs have existed for ages and if you want to know if they're getting much cheaper with Tesla-like batteries just keep an eye on them
In rural areas where the maximum freedom exists to exploit solar panels, batteries and the cheapest backup options (e.g. noisy diesel generators), the on-grid vs off-grid real costs have been accurately tracked for years. This is because those properties not grid-connected have to pay very large grid connection costs which leads some to go off-grid solely for financial reasons.
These providers will continue to take advantage of modern battery storage as it becomes more advanced and reduces in cost. However, the true costs of going off-grid can't be hidden in their estimates and so it is worth using them as a baseline of minimum cost. (Diesel backup will be much cheaper than creating sufficient solar and storage capacity headroom for winter runs of little sunshine).
As you can see below the minimum off-grid setup cost is currently around $40,000. If Tesla-like battery storage and solar PV are going to get as cheap as the boosters claim, then you'll see this cost come down significantly over the next several years. My prediction is that it won't.
Further Info:
Business Insider: This is what Tesla's home battery, Powerwall, will cost to run in Australia
SunWiz's Warwick Johnston: Battery Storage Design for Grid Connected Systems (pdf)
Reneweconomy
Tesla already forcing down battery storage prices in Australia
AGL sees no mass market for battery storage before 2020s
Would Darryl from The Castle buy battery storage?
What the Tesla Powerwall battery means for households
The Guardian
Will Tesla's home battery really transform our energy infrastructure?
Forbes
Ok, So Maybe Tesla's Powerwall Isn't 'Only' For Rich, Green People
Why Tesla's Powerwall Is Just Another Toy For Rich Green People
Climate Spectator: Are new electricity demand tariffs an elaborate charade?
AEMC
Price Trends
AEMO
Emerging Technologies Information Paper
Climate Spectator
COMMENTS