Why the ACCC is urging Australian households to join battery networks to lower energy costs
Energy companies need to convince millions of Australians to hand over control of their home batteries to support the grid at critical times if the nation is to avoid major cost blowouts in its multibillion-dollar transition away from coal, the consumer watchdog warns.
While home-owners are rushing to insulate themselves from volatile electricity prices by installing solar panels and lithium-ion batteries, authorities are concerned that too few are signing up to join “virtual power plants” — schemes offering customers bill credits in exchange for allowing their power providers intermittent access to their stored electricity.
Because batteries can store cheap and abundant solar energy during the day and discharge it after sunset, a three-fold surge in battery uptake – triggered by the launch of large federal government rebates a year ago – has slashed power bills for those who have adopted the technology. It has also lowered wholesale prices in the evening peak demand periods across the wider grid by reducing reliance on coal and gas.
However, these grid-scale benefits remained “incidental,” according to a new report from the Australian Competition and Consumer Commission (ACCC), as too few individual home units were synchronised to charge and discharge at the most optimal times for the grid.
Spreading the benefits further would require a significant expansion of aggregated networks known as “virtual power plants”, it said. Virtual power plants are cloud-based networks run by power retailers or tech companies, which offer customers financial credits to orchestrate thousands of their household batteries at once into a single, co-ordinated power source capable of stabilising the grid during supply imbalances.
“Co-ordinated batteries can more reliably and efficiently respond to price signals and the needs of the energy system, resulting in further reductions in the need for grid-scale storage, enhanced system reliability and security, and lower costs for all electricity consumers,” the ACCC said.
Under the Australian Energy Market Operator’s 25-year blueprint for the least-cost pathway to replace retiring coal-fired generators and cater for burgeoning electricity demand, around 26 per cent of households would need to have batteries installed by 2050, and more than half of those needed to be part of virtual power plants.
Current participation rates sit well below that target. Only about 3 per cent of east-coast customers have batteries, and just 24 per cent of those owners are in a virtual power plant.
Failing to lift sluggish enrolment rates would increase the need for investment in other grid-scale projects, such as gas-powered generators, known as “peakers”, said Robbie Campbell, chief executive of Plico, a company that installs batteries and operates a 5000-household virtual power plant in Western Australia.
“A battery sitting in a garage doing its own thing doesn’t displace a gas peaker – a battery in a virtual power plant does,” he said. “Right now, most of them are sitting in garages.”
Lagging uptake in virtual power plants was not because of any technology problem, Campbell added. “It’s a trust problem,” he said, and too many in the industry were not focused enough on ensuring consumers understood how the schemes operated and the potential benefits.
“Households aren’t going to subsidise the grid out of goodwill,” Campbell said. “Show them the money, show them how it’s made, and they’ll stay in a virtual power plant.”
Some experts, however, believe the energy market operator’s assumptions on how batteries were behaving outside the virtual power plant setting may be too pessimistic. Tristan Edis, the head of analysis at energy consultancy Green Energy Markets, said a growing number of retail offerings were being built to encourage batteries to absorb low- or no-cost midday electricity and discharge it in the evening peak periods for a premium feed-in tariff.
“It would be great if more were in a virtual power plant, but we are probably too pessimistic,” he said. “Maybe we don’t need as many enrolled in virtual power plants as we previously thought, because we have now got these retail offers that are proving popular with battery owners.”
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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.
