Australia’s electricity market is one of the most volatile in the world. Its citizens need solutions that can help them deal with this volatility. That is why, community batteries are gaining popularity.

Australia is one of the fastest growing markets for grid-scale energy storage, helped by competitive wholesale and frequency control markets, and generous government grants. Wood Mackenzie’s system level CAPEX outlook for battery storage Australia systems in Australia is below global averages.

Costs

The demand for home energy storage in Australia is rising, with consumers seeking a sense of independence from the grid. The technology offers a way to mitigate high electricity bills and provides energy self-sufficiency, even during blackouts. It also supports the transition to 100% renewable energy. However, the cost of battery systems remains a hurdle for adoption.

The price of lithium carbonate, the specialised chemical used for the production of batteries, has fallen from record highs in November 2022. This decline has been aided by softening electric vehicle demand growth and lower commodity prices. Wood Mackenzie expects further price declines to drive down system level CAPEX for BESS by 18% over the next decade.

Currently, the installation cost for a 5kWh and 10kWh battery is around or below $7,000, a tenable amount for something that can significantly minimize electricity bills and increase energy independence. Moreover, there are best solar panels Australia  sponge' plans available that can turbocharge battery payback and shorten the payback period.

Scale

Australia is a leader in the global large-scale battery energy storage systems (BESS) market. The country’s competitive market design and diverse revenue streams are attractive to BESS developers. However, high battery costs are a challenge to the industry.

The country’s first big batteries are being built, and investment commitments for BESS projects currently exceed AU$2 billion. These projects include the world’s largest battery, ENGIE’s Hazelwood Power Reserve in Victoria.

ARENA has committed $81 million to eight grid-forming batteries. These projects will help build experience with the technology, de-risk investment, and drive further innovation from inverter manufacturers.

These battery projects will add a significant amount of storage capacity to the National Electricity Market. They will also provide system services and reduce peak demand. This will help the NEM transition to 100% renewables and improve the reliability of the Australian power grid. However, the country still needs more short duration storage and longer duration pumped hydro capacity to meet its goals.

Energy efficiency

As Australia pursues net zero emissions targets and encourages renewables, it will need large-scale energy storage to maintain grid reliability. However, the technology is not yet at the scale or cost needed. The solution is to pair large-scale batteries with renewables, which will make them more economically viable compared to fossil fuel generation.

Battery prices are declining rapidly, with system level CAPEX in Australia reducing by 18% to 21% on a $/KWh basis for both LFP and NMC chemistries. This is driving a sharp increase in the share of grid-scale projects using two-hour grid-level batteries, which target high value frequency control and ancillary services.

The country is also deploying community-scale batteries, which can be installed in residential homes to lower their electricity bills and reduce pressure on the grid. The demand for these projects is so strong that ARENA had to close applications for round one of its Community Batteries Funding Program in April. The winners will install up to 58 community-scale batteries in urban and regional areas, each worth up to $500,000. Energy consumers will benefit from advanced metering that allows them to track their consumption and share power with neighbours.

Flexibility

Australia needs a rapid ramp-up of large battery storage to power industry with renewables and cut energy-related emissions. The building sector alone accounts for 46% of our annual emissions. With fast advances in battery technology, we can reduce emissions from this sector by a massive 0.9 GW/2.2 GWh a year. This is enough to create 24,400 ongoing jobs in the tech installation and maintenance of energy storage systems.

Residential batteries can give millions of Australian households who have installed solar a sense of empowerment and control over their electricity costs. Recent research has shown that the Australian electricity market is one of the most volatile in the world, with prices fluctuating dramatically every day.

The price of lithium carbonate is dropping rapidly, along with the cost of battery modules as a result of technological improvements and production efficiencies. This is expected to drive down the costs of large scale batteries by 18% over the next decade.