Battery Subsidy Scheme Outline Released By South Australian Government Is Short On Details
As part of their election campaign the the South Australian Liberal Party promised to provide a $100 million home battery subsidy. Five months after victory they have released information outlining the subsidy scheme that will:
- Apparently start in October.
- Be available to 40,000 South Australian homes.
- Start at $500 per kilowatt-hour of battery storage or $600 for pensioners and most people receiving Centrelink payments.
- Be capped at at maximum of $6,000 per home.
- Low interest loans will be available for the remaining cost, less deposit.
Unfortunately, there are a number of things that remain unclear and we may have to wait until October when a dedicated website will be launched to get the full picture. A few things I would like to know are:
- The exact start date.
- If it will apply to most battery systems from the start.
- Why so many Australians who are technically qualified to install batteries will be prohibited from installing subsidised systems.
- Why the state government is subsidising batteries at this time when they will increase emissions rather than lower them.
It Starts Sometime In October
We have been told the subsidy will start in October, but not given a date. It would probably make sense if it started on the first, but if you are looking to use the subsidy as soon as possible you should keep in mind this may not be the case.
Choice May Be Very Limited At First
The page of information on the South Australian Department of Energy and Mining website says installers who want their battery systems to receive the subsidy must first qualify as a “System Provider” and says the following:
“In assessing applications, priority will be given to System Providers that commit to installing approved battery systems that are manufactured or assembled in South Australia.
These Providers will be afforded a nine-week priority period when the Scheme launches in October.”
To me this sounds like an extremely limited range of battery systems will be able to receive the subsidy in the first two months. This is because no battery cells are manufactured in South Australia and there’s not much assembling of battery systems going on either. Maybe importers should consider pulling apart battery systems before trucking them to SA for assembly.
Sonnen has said they will assemble batteries in South Australia. I emailed Sonnen a question about when this was going to happen and one week ago they gave me the reply:
“In regards to the manufacturing site in Adelaide, I cannot provide you with more information than what you have already gotten from publicly available sources.”
At the time, the information available from publicly available sources was bugger all. But one day after the battery subsidy was announced Sonnen said they will manufacture battery systems at Adelaide’s old Holden plant. Because their actual batteries are sourced from China I assume they will assemble battery systems rather than manufacture actual batteries.
The only other battery assembler in South Australia I can think of is Zen Energy. They have a home battery system and are also involved in large scale solar and battery projects.
The Subsidy Will Likely Decrease Over Time
The battery subsidy scheme has $100 million in funding. The maximum subsidy is $6,000 per household and it is supposed to be available to 40,000 households. But if the average amount of subsidy comes to more than $2,500 per household, as seems likely, then that $100 million isn’t going to be enough. However, the South Australian Government appears to have this covered as they say:
“The subsidy levels and cap are expected to reduce over time as competition in the market increases and the cost of home battery systems goes down.”
So this could explain how they expect to subsidize 40,000 systems with an average of only $2,500 each.
The Minimum Battery Size Is 2.5 Kilowatt-hours
The minimum battery size that can receive a subsidy is 2.5 kilowatt-hours. At the moment there is no indication if an individual unit must be at least 2.5 kilowatt-hours or if multiple small units that total 2.5 kilowatt-hours or more are okay. But if an individual unit has to be at least 2.5 kilowatt-hours that would be kind of dumb.
Subsidy Tops Out At 10 Or 12 Kilowatt-Hours Of Storage
The subsidy is at a rate of $500 per kilowatt-hour of storage capacity for most households or $600 for South Australian energy concession holders, who are generally pensioners and people receiving Centrelink payments. The maximum total amount of subsidy is $6,000 per home for everyone. This means energy concession holders only receive a subsidy for the first 10 kilowatt-hours of storage and for others the subsidy tops out at 12 kilowatt-hours. While most battery systems installed in Australia are under 10 kilowatt-hours the Powerwall 2 is at least 13.5 kilowatt-hours.
I think the subsidy is unlikely to apply to lead-acid batteries that can cost less than $500 per kilowatt-hour1.
Nominal Vs. Usable Capacity
If an LG Chem RESU10 battery system was discharged 100%, it could supply 9.8 kilowatt-hours of electricity2. This is called its nominal capacity. But because being discharged 100% would be bad for the battery its usable capacity is only 90% which makes it 8.8 kilowatt-hours. Nearly all batteries have a usable capacity that is less than their nominal capacity. We currently don’t know if the battery subsidy applies to nominal capacity or usable capacity. It seems likely it will be nominal.
Eligibility
There is a maximum of one subsidised battery system per home, so if someone owns multiple properties they can have one subsidised battery system in each. If you are a renter you can also have a subsidised battery system installed if you have your landlord’s permission. At the moment there is no information as to whether the battery is expected to stay on the premises when you leave.
Low Interest Loans
Low interest loans will be available for the remaining cost of a battery system, less the deposit if one is required – and at the moment one usually is. While the subsidy applies only to battery systems, if a person has a solar power system installed at the same time, they can potentially borrow its cost as well. Details of the loans and interest rates will be made available in October.
You Are Free To Join A Virtual Power Plant
You are free to have your subsidised battery become part of a virtual power plant. This is where batteries installed in multiple homes work together to supply power to the grid and help keep it stable. This can allow a battery to earn additional income that would not be available as a stand alone system. You are not required to join a virtual power plant but to receive the subsidy battery systems must be capable of joining a virtual power plant, either when initially installed or with only a minor amount of additional hardware. Most home batteries installed on-grid in Australia are capable of being part of a virtual power station.
I’ll mention the Tesla Virtual Power Plant is still going ahead in South Australia as the new state government has not kicked it into the gutter and pissed on it, as I thought they might given the behavior of the Federal Coal-ition3.
The Subsidy Is Not Available For Off-Grid Installations
The subsidy is not available for off-grid battery installations. All subsidised batteries must be capable of becoming part of a virtual power plant and that is really difficult to do without a powerline connected to your house. Even if you are able to make lightning bolts of electricity arc through the air to a local transformer, SA Power Networks would probably have something to say about that and if it did work you wouldn’t really be off-grid anymore4.
Warranties
Workmanship and all parts of a subsidised battery system must have a minimum warranty period of 5 years. This includes rooftop solar if purchased along with a battery. The batteries themselves must have a minimum warranty of 7 years when cycled once per day. Generally this refers to a battery providing its usable storage capacity an average of once each day.
Technical And Business Requirements
The SA Government says:
“A set of minimum technical requirements for battery systems has been developed to ensure the batteries are safe, reliable and capable of being recruited into a virtual power plant.”
Done right this will help keep crap battery systems out of the market.
There are also requirements for businesses that wish to be able to install subsidized batteries:
“To qualify, System Providers will need to demonstrate:
- financial health, reputation and competency
- they use only CEC accredited installers
- CEC Approved Solar Retailer status”
Requiring financial health is understandable as companies that go under won’t be around to fulfill their warranty obligations. Financial checks can weed out both dodgy operators and well meaning people whose optimism has them writing checks their financial acumen can’t cash.
The other two requirements are more problematic.
CEC Accredited Installers Only
All solar installers must be CEC accredited in order for the solar power systems they install to receive the STCs that lower their cost and are often referred to as the “solar rebate“. It is not unreasonable to require a CEC accredited solar installer be involved when a battery and solar system are installed at the same time.
But if just a battery is being installed there is currently no need to be a CEC accredited solar installer. The only requirement is the installer be a suitably qualified electrician. This is because it’s not actually necessary to know how to install a solar power system to install many batteries. Some battery systems only require an AC connection, which means familiarity with DC connections isn’t required5.
CEC Approved Retailers Only
While it is necessary to be a CEC accredited solar installer to be permitted to provide subsidised batteries, there is an additional requirement that further restricts the pool of potential qualified businesses. They must also be a CEC Approved Retailer. While all solar installers are CEC accredited, only a small number are CEC Approved Retailers. You can read what the difference between the two is here but in a nutshell it takes extra time, effort, and expense to become a CEC Approved Retailer. Being an Approved Retailer is a sign of quality, but there are plenty of installers who aren’t Approved Retailers who do high quality work6.
So not only does the battery subsidy depend on using an accredited solar installer even when the job requires none of their particular skills or training, you can only use a member of a small group of them. I can understand wanting to ensure that only high quality installers are used, but I don’t think this is the way to go about it. Coming down like a tonne of bricks on an installer that does shoddy work is one thing, but keeping a profitable business opportunity for an elite few while barring a large group of people with the skills and desire to do the work is… what’s that word? Elitist. The reduced competition is bad for consumers and obviously bad for those who are denied the opportunity to participate. I also think it is bad for the national spirit7.
I have no problem with the South Australian Liberals being against small business if that’s what they want. I only have a problem with them pretending they aren’t.
The Purpose Of The Battery Subsidy
The South Australian Government says:
“The Scheme will directly reduce electricity costs for the 40,000 households that purchase a home battery system. In addition, the installation of these systems will reduce demand on the network (especially at peak periods) and in turn lower prices for all South Australians.”
It is true that once you have a home battery installed it should directly reduce your electricity costs. But this does not mean subsidised batteries will always pay for themselves. Even with this generous subsidy and South Australia’s high electricity prices it is still possible for a battery system to lose a household money. In a future article I will go into the economics of South Australian subsidised batteries, but for now I’ll just say that, provided you make reasonably good choices, if your subsidised battery is part of a virtual power plant it should be possible to get a good return on the investment.
The battery systems will also help lower electricity prices for all South Australians. But spending $100 million dollars subsidising them only makes sense if there are no cheaper options for reducing electricity prices. This is something I’ll also go into the future, but the short answer to the question — “Is the battery subsidy cost a cost effective way to reduce electricity prices?” — is “No”. An even shorter answer is “N” and an incredibly short answer is “|”.
The Battery Subsidy Is An Anti-Environmental Policy
Batteries lose energy when they are charged and discharged. Depending on the solar battery storage system, when new, this can result in losses from 6% to 44%. As a result, if electricity from rooftop solar is stored in a battery for use in the evening instead of being sent into the grid for a feed-in tariff it will result in more fossil fuel generation, more pollution, and higher greenhouse gas emissions.
This graph is from the Lithium Ion Battery Test Centre in Canberra. Note they have admitted they installed the SimpliPhi battery incorrectly and so it is possible its efficiency is higher than indicated. (Image Lithium Ion battery Test Centre.)
Energy storage can help reduce pollution and greenhouse gas emissions if clean energy that otherwise would have gone to waste is stored so it reduces fossil fuel generation later. But, at this point in time, the amount of clean electricity that is lost due to a lack of storage is not significant, so batteries are currently an environmental negative.
Hopefully it won’t be too long before batteries are an environmental plus, but to subsidise batteries when spending the money on renewable generation instead would reduce emissions by more is foolish. This is especially true since increased energy storage capacity may extend the life of current coal power stations by reducing the amount of time that wholesale electricity prices fall to or below zero.
Wholesale electricity spot prices in South Australia yesterday. Prices were negative early in the morning and early in the afternoon. (Image: AEMO)
Why A Battery Subsidy?
Home batteries are currently bad for the environment and are an expensive way to lower electricity prices compared to spending the money on more renewable generating capacity. This raises the question of why are we getting a battery subsidy?
A simple answer is because the SA Liberals wanted to win an election.
But I think the main reason is the myth that energy storage is vital for a high penetration of renewable energy. As a result we have a lot of well-intentioned people pushing for battery subsidies when, for now, we would be much better off subsidising renewables or putting a price back on carbon. This is not to say that low cost energy storage would not be a useful thing to have, but it’s not necessary. If it makes sense to subsidise batteries in the future we can always do it then, but we can be certain they will be cheaper in the future anyway.
P.S. You Can Already Get Dirt Cheap Batteries in SA
If you:
- wait until October for the SA battery rebate to begin
- and then wait another 9 weeks for the ‘Made-in-SA Batteries Only’ period to pass
- and then buy a Tesla Powerwall using full $6,000 rebate,
…you should be able to get your Powerwall fully installed for about $6,500. That’s very cheap.
But if you want a Powerwall 2 in SA right now, AGL are advertising them, as part of their heavily subsidised Virtual Power Plant (VPP) trial, for only $5,490 (+ $399 if you want backup).
Or as part of the same scheme, you can get an insanely cheap 9.3kWh LG Chem Battery with SolarEdge battery inverter installed for only $2,990:
AGL aim to have 1000 participants in their VPP. The fact that at these prices, with their huge database of South Australian Customers, AGL have not sold out yet raises questions about whether the South Australian battery rebate will be as popular as the government hopes.
Footnotes
- While their upfront cost per kilowatt-hour of storage is low other issues generally make the cost of lead-acid energy storage expensive. ↩
- This is 9.8 kilowatt-hours of DC electrical energy when the battery is discharged at a specific temperature range and rate. Batteries are finicky. ↩
- Warning: Do not piss on a virtual power plant. Peeing on an electric fence is bad enough. ↩
- You’d also potentially send any Deloreans driving by through time. ↩
- But a qualified electrician should definitely be able to handle DC connections. ↩
- And there is at least one CEC Approved Retailer on the nationwide list that I would not recommend to a friend. Or an enemy for that matter ↩
- Bundaberg Rum. ↩
About Ronald Brakels
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In a perverse way this might also be an indirect subsidy to major utilities.
If the utilities are operating near maximum output at maximum peak demand, extra peaking capacity may be required and it is very expensive per unit of power. So if the batteries go ahead at residences because of subsisides, the utilities do not have to build additional peaking capacity. Of course extra peaking capacity could be come a stranded asset if battery prices reduce dramatically over time the way solar panels have, so etter if someone else makes the investment and bears the risk of obsolescence or at least the opportunity cost of being able to buy more battery for less money in 5 years time.
Also maybe the battery subsidy is going to have restictions that favour some battery manuafacturer that is assisting the state in developing its proposals or in some other way.
Maybe they would prefer centralised additional peaking capacity, but maybe they are happy to have households providing decentraliased peaking power because parts of the distribution network are also nearing capacity at peak demand and decentralising the peaking capacity by way of domestic batteries saves a lot of capital expenditure on the distribution network too.
Why would anyone, considering the abject failure of the LNP Federal Govt to manage technical projects, in particular, believe that a state counterpart, which by association, is really a clean energy non believer, consider any project promoted by them, to be of any real benefit.
I noted your statement here,
“Home batteries are currently bad for the environment and are an expensive way to lower electricity prices compared to spending the money on more renewable generating capacity. This raises the question of why are we getting a battery subsidy?
A simple answer is because the SA Liberals wanted to win an election.”
And as they have shown Federally, they are prepared to spend any amount of public money to push their agenda e.g. Public money to finance the building of new Coal powered generated electricity, that no-one, no bank or other financing provider will touch wirth a Barge Pole. Guaranteed (the only part of the now “dead” NEG, that could be guaranteed) to cost every tax payer every red cent so “invested”, because, in total contravention of Liberal policy and belief, they must be able to sold off at a profit.
They simply don’t care if the public get ripped off, so long as they can con their way back into power at the next election.
I have for some been interested in adding batteries to my solar system of about 6.5 Kw. My main interest is in being able to use the excess power from the solar system at night and on grey days.
The low FIT paid are a disincentive to exporting power, therefore I’d rather use it myself. I also like the idea of being able to continue using my own power when the grid fails.
Would It be more cost effective if the government were to use this money to subsidise the FIT payments, thus encouraging more people to install larger solar systems on their homes?.
Hi Bob,
What’s your postcode?
Finn
Hi Finn,
5050. Eden Hills. I currently export about 20% more than I import, but with the FIT payments so low, 10c/ Kwh. It doesn’t make much impression on my overall bill.
So I figure that by being able to use my own stored power when the sun isn’t shining, I’ll be able to save on having to buy less power. Plus the ability to stand alone when the grid fails.
thanks for your interest.
Bob.
Hi Bob,
Using this tool:
I see that in 5050 you can get a Feed in Tariff as high as 22c:
I don’t recommend Click Energy because their usage rates are too high – but Amaysim or Origin seem like good plans. I’ve just signed up to Amaysim for my solar powered investment property.
The right battery will certainly allow you to power your essential circuits when the grid fails (Powerwall 2 is the best at backup in my humble opinion).
But with a 20c Feed In Tariff and, say, 38c usage tariff – you are only saving 18c (38c-20c) per kWh stored in the battery. So bear that in mind when calculating payback.
Cheers,
Finn
Finn you do know that your 20c FIT is not really 20c once Amaysim has applied their 33% discount to it. Avoid them.
33% usage & supply **net** solar. So discount is applied to FIT and you end up with 13.4c FIT in the end.
Would it have been a better idea to invest this $100 million into solar panels which feeds into the Virtual Power Plant? At least this way low-income people do not have to invest anything in order to get lower energy prices.
I think they should have used it to put solar on rental properties.
Hi Ronald
I think the reason that people are not excited about “AGL’s super deal” is that it comes with strings. Those strings allow AGL to take as much of the stored power they want, when they want. Of course if the customer is using the stored power, AGL will only take the surplus. But as the batteries supply 5kW and in the peak periods (1630-1930) customers are using between 1.5 and 2.5 kW, AGL gets to se about 60% of the stored power. Thats why they pay about 60% of the costs
as an aside, because AGL ‘buy’ the power at $0.16/kWh and sell back to customers at more than $0.30 – AGL have an incentive to draw as much stored power as possible.
This is why I have no interest in the AL offer.
That’s not the deal the person I know who is on it has. But, having just looked at the AGL page for it, I would have assumed that myself. It’s not surprising AGL can’t get enough people in their program when the first point of contact for most makes it look like a potentially bad deal.
Even so, the government deal sounds better because you can choose whatever electricity retailer you like instead of being locked in to AGL for however many years and should be able to get revenue from virtual power plant activities yourself instead of AGL getting that revenue.
The financial viability even after the government discount still seems pretty marginal, but I’ll be interested to see what the actual options once it launches.
The AGL deal with the SolarEdge inverter sounds pretty good if you can use that inverter to run your solar panels – I’m not sure if that would be possible though.
I’m with you John – looked at the AGL offer and thought ‘no way’. Says they can take from your battery when they want (and pay you the usual feed-in tariff) then recharge said battery from the grid later on and charge you the normal supply rate.
I can’t for the life of me see an economic incentive for the energy company to do anything other than bleed the batteries dry fairly regularly, then recharge them from the grid (platitudes about it being occasional, and minimising impact on potential savings notwithstanding). No way would I lock myself into a 5 year contract with early exit fees where its viability for me depends entirely on a massive company choosing *not* to extract free money from me when the terms of the agreement permit them to do so.
If the nature of the deal is not actually as it is plainly described on their site then that’s even more confusing and yet another red flag, in my opinion (yes I acknowledge I am a cynical beastie).
On an unrelated note, wanted to say a huge thank you to this site for this post. I’ve been trying to find out more info about the government scheme for a couple of days, everything was either news articles behind a paywall or was just companies trying to get my details. Will be watching for further updates here.
Can you annunciate the deal, based on the person who has signed on?
I have sent him a message asking for details.
That was quick.
He says he can’t remember how many times a year they are able to draw on his battery to feed the grid, but it is limited and he hasn’t noticed it happening yet.
or ‘enunciate’.
“ As a result, if electricity from rooftop solar is stored in a battery for use in the evening instead of being sent into the grid for a feed-in tariff it will result in more fossil fuel generation, more pollution, and higher greenhouse gas emissions. “
Seriously, how much of a problem is this? By world standards, Australia’s contribution to CO2 emissions is minimal, somewhere between 1.2% and 1.8%, depending which we site you look at. By what percentage of that minimal amount will we increase (or to be more accurate, fail to decrease) national emissions by using power at night, rather than during the day? I suspect the difference is nine-tenths of damn-all. Fifth place of decimal stuff.
“ to subsidise batteries when spending the money on renewable generation instead would reduce emissions by more is foolish. This is especially true since increased energy storage capacity may extend the life of current coal power stations by reducing the amount of time that wholesale electricity prices fall to or below zero. “
Advocating spending the $100m on yet more green power generation ignores the fundamental problem that after 6pm solar panels are just so much scrap metal, and when the wind doesn’t blow the turbines are equally useless. Renewable, aka “intermittent” power is useful as a large-scale, long-term source of electricity only when there is sufficient storage capacity to cover the non-generation periods.
Or for SA, it’s useful only as long as they can rely on importing power generated from east-coast coal and gas power stations. And as the Victorian government, in a exercise in bonehead virtue signalling refuses to let the petroleum industry develop Victoria’s untapped gas reserves, the price of gas (and electricity generated from it) will rise.
Do I support spending $100m on batteries? No. The SA government would do us all a power of good spending that money on lobbying the States, Territory and Federal governments to see that nuclear power is just as clean as any intermittent generation, and just as dispatchable as any coal-fired station – then push to repeal legislation forbidding the use of nuclear generation, then ask for a subsidy to get the South Koreans to come and build a power station for us.
Hi Old Cynic
The amount of extra fossil fuel generation required is in the article. It is 6-44% according to measurements of new storage systems by the Canberra Lithium Ion Battery Test Centre.
Many people are unclear on the characteristics of a low or zero net emissions electricity grid. Obviously, people aren’t going to be happy if electricity is only available at certain times depending on wind and sun and demand. So no one would ever build a low or zero net emission grid that behaved in that way because it would be really stupid. The designers would have to have rocks in their heads.
Instead, a low or zero net emissions grid would make use of solar and wind power as they are the cheapest forms of new generating capacity but would also include dispatchable generation to meet demand when the combination of solar and wind output are not enough. Dispatchable generation in Australia has traditionally mostly been hydroelectricity, gas, and pumped hydroelectricity. New dispatchable capacity now underway in Australia includes pumped hydro, gas, concentrating thermal solar with thermal storage, and battery storage.
Ah, Ronald
Check my figures, please
Subsidy is $500 per KWh storage
So, $100m subsidises 200,000 KWh of storage
Say you lose 10% each day on the charge/discharge cycle
So, you lose 20,000 KWh per day; – that has to be generated by coal or gas
20,000KWh = 20MWh
20MWh per day is 365 * 20MWh per year = (for round figures) 7,000 MWh per year
As a proportion of Australia’s daily CO2 emission, how much is represented by 7,000MWh of gas or coal generation?
Well, https://www.aer.gov.au/wholesale-markets/wholesale-statistics/national-electricity-market-electricity-consumption shows annual electricity consumption is about 200TWh (Tera Watt hours) per year
There are 1,000,000 MWh in a TWh
So, 7,000MWh = 0.007TWh
OK; it’s third place of decimals not fifth place of decimals, but as a proportion of Australia’s overall generation (and emissions) it’s still basically no more than a rounding error. Not enough to justify a claim that The Battery Subsidy Is An Anti-Environmental Policy, sir.
If I didn’t change my amount of physical activity but ate 10% more calories, I’d have no problem calling that an anti-weight loss policy.
Same story in Victoria. Have a look at
https://www.theage.com.au/politics/victoria/why-i-can-t-make-any-economic-sense-out-of-the-battery-subsidy-plan-20180914-p503py.html
Ronald,
Would yo be able to shed some light on the economics of the virtual power plant the government has proposed and asked homeowners to sign up to? It seems to me, that the homeowner has to pay for all power, whether stored in battery or sourced from the grid at the same rate (albeit discounted). Is this the same scheme that will apply to subsidized battery (with VPP connection)? If so it doesn’t make much economic sense. I’d much rather pay fully for the battery installation, and use free stored power, and pay only for the extra grid power at standard rate. Feedback appreciated.
Hi Alex
Virtual Power Plants are something I’ll look into in the future. At the moment there are two trial schemes I know of. The Tesla virtual power plant which I wrote about here:
https://www.solarquotes.com.au/blog/sa-virtual-power-plant/
With this scheme people will have their electricity bills lowered by about 30% but won’t own the battery.
There is also AGL’s virtual power plant trial where people own a battery that AGL subsidizes the cost of and in return and they occasionally use it. They only use it to support the grid a limited number of times a year and discharged power reduces household consumption first.
Presumably in the future you will have your choice of virtual power plants to sign up to. That seems to be what the new State Government is aiming for, either accidentally or on purpose.
There is a 3rd option for Virtual Power Plants currently with Simply Energy. more info can be found on https://www.simplyenergy.com.au/energy-solutions/battery-storage/smart-storage/
Thanks for letting us know.