How Cheap Batteries Will Affect Commercial Solar Power

7th May 18

Cameron Quin

Written by Cameron Quin

Solar photovoltaic systems have become more affordable with each passing year, reaching a point where they can generate electricity at a lower cost than fossil fuels. However, there is a limit to how much solar generation capacity you can install in a power grid: photovoltaic modules have a variable output that depends on the availability of sunlight, and production drops to zero at night. Households tend to have the highest energy consumption after sunset, and businesses only get a significant electricity supply from commercial solar systems during the hours around noon.

In fact, deploying too much solar power capacity can be counterproductive. When too much energy is being fed back to the grid around noon it can destabilise voltage and frequency, forcing network operators to ramp down production from other sources. In turn, this tends to drive up the electricity cost of conventional power plants, since their fixed expenses must be allocated among a reduced kilowatt-hour output. For example, keeping a natural gas power plant on standby to be used a few hours each day is more expensive per kWh than having another with a constant output.

Photovoltaic technology is already reliable and affordable. Currently, the main challenge for commercial solar power is supplying electricity on demand, not only when sunlight is available. Low-cost batteries could be the solution.

How Do Batteries Improve Commercial Solar Arrays?

Assume a company plans to deploy a commercial solar array. If the generation capacity stays below demand, they can consume all the energy produced and subtract it from their power bill. On the other hand, if they oversize their array, surplus production is fed back to the power network and they only get a reduced feed-in tariff.

From the financial standpoint, commercial solar generation for self-consumption yields a higher return on investment than exported generation. Depending on where you are located in Australia, the feed-in tariff can be 2 to 4 times lower than the retail kilowatt-hour price.

Batteries are a viable solution technically speaking, but they are still held back by their high cost. However, consider that commercial solar power was still held back by cost a decade ago, and it is now competitive as an investment. A similar price reduction for batteries is expected in the near future, and this can help eliminate the main limitation of commercial solar power.

Exporting electricity and getting the feed-in tariff leaves less money in your pocket than consuming it, but batteries also have an ownership cost. The two costs that must be compared are the following:

  • The difference between the retail kWh price and the feed-in tariff.
  • The battery ownership cost, in cents per kWh stored and retrieved.

Assume the tariff paid is 30 cents/kWh and the feed-in tariff is 12 cents/kWh. If batteries can be deployed for less than 18 cents per kWh stored and retrieved, they reduce expenses compared with the scenario where all surplus electricity is exported to the grid. If batteries have a higher ownership cost, the business case is better for exports.

 

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