Will SA’s “Solar Sponge” Tariff Make ‘Batteries Without Solar’ Worthwhile?

Update 9th April 2020:  South Australia Power Networks has informed us the Solar Sponge tariff is available now for people with smart meters, but very few electricity retailers are offering it.¹  It was to become standard on the 1st of July, but this may be delayed due to the Coronavirus pandemic.

In October 2019 South Australia Power Networks (SAPN) announced they would introduce a new “Solar Sponge” tariff promising electricity in the middle of the day at one quarter their usual rate.  As a result, some people have claimed this will let a battery pay for itself, even if the home doesn’t have solar panels.  Are they nuts? Not completely.

Thanks to South Australia’s hefty home battery subsidy and the low advertised cost of some battery systems, it’s possible for a battery charged at the solar sponge tariff to pay for itself without solar under very specific circumstances.

But if people want the full SA subsidy they’ll have to hurry as it gets cut by one-third after the 14th of this month, with the maximum rebate dropping from $6,000 to $4,000.

And be aware that relying on the solar sponge tariff to make a battery-sans-solar pay will be a gamble. The Solar Sponge tariff may not be introduced for years.²

SAPN Solar Sponge

The Adelaide Advertiser wrote about SAPN’s Solar Sponge here and Michael mentioned it on our blog here.  When introduced, the tariff will work in the following way:

• Solar Sponge period from 10am — 3pm:  25% of standard tariff
• Peak periods from 6am-10am and 3pm-1am:  125% of standard tariff
• Off-peak period from 1am-6am:  50% of standard tariff

This has caused some people to think:

“Wow!  I only have to pay one quarter of the normal amount for electricity in the middle of the day?  I can store that in a battery that has been heavily subsidised by South Australian tax payers and save heaps on my electricity bill!”

Unfortunately, they’ve made the mistake of thinking they’ll only be paying 25% of the retail rate for electricity when what they’ll actually be paying is 25% of SAPN’s standard tariff which makes up only around 31% of their electricity bills.

This means — all else equal — the reduction in the cost of electricity per kilowatt-hour during the solar sponge period will be less than one-third what they are expecting.  Fortunately for battery aficionados, this is still enough to improve their return.

Smart Meter Required

To use a Solar Sponge tariff requires a smart meter.  At the moment only around 13% of South Australian homes have one, but if you get a new solar power system your old meter will be changed over.  In 5 years time the number of homes with smart meters may be around 50%, although if the current rate they’re being replaced is maintained it will only be around one-third by then.

Solar Sponge Controlled Load — Not Suitable For Batteries

The Solar Sponge tariff arrival date has not been announced and its introduction may depend on smart meter uptake.  But there is a Solar Sponge controlled load currently available, provided you can find a retail plan that offers it.  It used to be called “Afternoon Boost” which was a dumb name for something that now starts at 10:00am in the morning.  You are not allowed to charge home batteries with it, but you may find it useful for hot water systems and some other loads.  It starts at a random time³ between 10am and 11am and ends at 3pm.

SAPN Tariff Rates

As the state’s Distributed Network Service Provider (DNSP), SAPN is responsible for the local distribution of electricity to homes and businesses, and since we don’t have enough chickens to pay them in barter, they get money in return.  According to this document SAPN’s current residential tariffs are:

This means their current standard rate is a daily supply charge of 44.2 cents and 14.24 cents per kilowatt-hour of grid electricity used.  After adding GST it becomes:

•  48.6 cents daily supply charge
• 15.66 cents per kilowatt-hour

So for the Solar Sponge tariff, including GST, this would become:

Daily supply charge:  48.6 cents

Solar Sponge period from 10am-3pm:  3.92 cents
Peak periods from 6am-10am and 3pm-1am:  19.58 cents
Off-peak period from 1am-6am:  7.83 cents

This means electricity in the Solar Sponge period is 11.74 cents cheaper than the standard SAPN rate and 15.66 cents cheaper than during peak periods.

Additional Electricity Bill Charges

On top of the SAPN tariff, electricity bills are also loaded up with the cost of:

• Wholesale electricity
• Long distance transmission
• Metering
• Retailing
• Environmental charges⁴

These additional charges makes your per-kWh charge more than three times the SAPN tariff.

Solar Sponge + Standard Tariff Retail Plan

If I use the SolarQuotes retail electricity plan comparison tool it tells me the cheapest standard tariff plan available in South Australia from any of the big 3 retailers — Origin, AGL, & Energy Australia — is from Origin and has a 90.81 cent daily supply charge and a 32.23 cent per kilowatt-hour charge.  This won’t be the best plan if you have solar panels because of its relatively low solar feed-in tariff, but I’ll use it to show the addition of the Solar Sponge can help make a home battery profitable.  I’ll use a current electricity plan to keep things simple, but keep in prices can change.  Hopefully downwards.

If I apply the Solar Sponge tariff directly to this plan it goes from a straight 32.23 cents per kilowatt-hour to:

Solar Sponge period from 10am — 3pm:  20.49 cents
Peak periods from 6am-10am and 3pm-1am:  36.15 cents
Off-peak period from 1am-6am:  24.4 cents

This means grid electricity during the Solar Sponge period will be 15.66 cents cheaper than in peak periods.  But if applied to a time-of-use tariff the difference between sponge and peak periods can be much greater.

Solar Sponge + Time-Of-Use Retail Plan

Time-of-use tariffs are a new thing for South Australia and they are still very rare.  I could only find one and it’s from Globird Energy.  They call it “Residential DMO Flex Rate SAPN” and it has the following charges:

• Daily supply charge:  $1.65 – OUCH!
• Shoulder 10am-3pm:  28.6 cents
• Peak periods from 6am-10am and 3pm-1am:  39.6 cents
• Off-peak period from:  28.6 cents

At the moment the Solar Sponge period is called “shoulder” and has the same charge as the off-peak period.  If the SAPN Solar Sponge tariff is applied the kilowatt-hour charges become:

• Solar Sponge period from 10am-3pm:  16.9 cents
• Peak periods from 6am-10am and 3pm-1am:  55.26 cents – OUCH!
• Off-peak period from 1am-6am:  20.77 cents

This makes the grid electricity during the Solar Sponge period 38.4 cents cheaper than during the peak period.  That’s a big difference.

Presumably, South Australia will have a wider choice of time-of-use tariffs in the future.  Hopefully, we’ll get some with less painful daily charges.

Solar Sponge + Battery & No Solar

If a household has an electricity plan identical to my Solar Sponge standard tariff example above and charge their battery during the solar sponge period and discharge it during the peak period they would save 15.66 cents per kilowatt-hour, but only if they had a magical battery with 100% efficiency.

In reality, a good round trip efficiency for a battery system is around 88%.  After taking this into account it would cost them 23.28 cents to store one kilowatt-hour of electricity, so using it during a peak period would only save them 12.87 cents.

If it’s assumed the household:

• Uses an average of 10 kilowatt-hours of stored battery energy per day.
• Uses it all in place of grid electricity during peak periods.
• Has a battery warranty of 10 years.
• Electricity prices remain constant in real terms.⁵

Then the battery could save them $4,698 within its warranty period.  If it is assumed the battery will last for 2 years beyond its warranty then it will save $5,637.  But note these savings are dependent on discharging an average of 10 kilowatt-hours a day during a peak period.  Very few households have a high enough electricity consumption for this to be a reasonable assumption.

Thanks to South Australia’s battery subsidy and some interesting pricing decisions, I have seen battery systems with an installed price which makes their simple payback period⁶ less than either of these amounts.  This includes installation,⁷ a hybrid inverter,⁸ and the South Australian home battery subsidy.

I’m not recommending these low cost batteries.  I’m also not anti-recommending them either.  I don’t have enough information about them to give advice one way or the other.  I’ll just say what I normally would, which is be careful, do your research, check installer online reviews — if you look at our reviews, check their “Ausranking” to see how they compare to other installers — make sure you haven’t missed any important points, and consider potential downsides.

One potential downside is battery system breakdowns driving your provider bust and prompting the manufacturer to pull out of the country, leaving you without warranty support.  But that could happen with any volatile new technology.

Solar Sponge + Time-Of-Use Tariff

As my Solar Sponge time-of-use example allows grid electricity to be bought in the middle of the day for 38.4 cents cheaper than during peak times, it appears capable of providing almost two and a half times the savings my Solar Sponge standard tariff example does.  But in real life the savings often don’t work out that way.

This is because any household that uses enough energy during peak periods to regularly drain its energy storage is also going to often draw a significant amount of energy from the grid during peak periods.  Normal households have a lot of variation in energy consumption.  Because peak electricity prices are very high on the Solar Sponge time-of-use tariff, this has the potential to reduce the benefit if lower charges at other times aren’t enough to compensate.

Also, if the electricity bill without a battery would be less on a standard tariff than a time-of-use tariff, that is the correct comparison to use when determining savings.  So while it can definitely make sense to have a time-of-use tariff after getting a battery, the return may not be as high as you think if you only compare it to what your electricity bill would be on the same tariff.

Despite often not being as good as it seems, there is still plenty of potential for time-of-use tariffs to improve the return from home batteries.  But just how much benefit — and in some cases there may be none — will depend on the household’s electricity consumption patterns.

Solar Sponge + Solar & Battery

If a home battery can pay for itself without solar panels, then — most of the time — the return will be even better with solar.  This is because it’s usually cheaper to charge the battery with solar power than grid electricity.  The exception to this would be if the solar feed-in tariff was greater than the cost of charging the battery.  This is possible with current feed-in tariffs and the Solar Sponge time-of-use retail plan example.

Another advantage is that if surplus solar output is not enough to charge the battery it can be topped up with low cost sponge period electricity.  Because — as it currently stands — the SAPN Solar Sponge will be constant through the year and not change for winter or cloudy days, this can be very useful for homes with batteries but without a large enough solar system to regularly fully charge them.

VPPs Can Improve Battery Payback

A range of Virtual Power Plants (VPPs) are being trialed and also have the potential to greatly improve battery payback.  At the moment it’s impossible to say how much they will help as no historical data is available yet, but unless you choose very unwisely — and the VPP is downright evil — they shouldn’t hurt payback.  So battery systems are looking a lot more economically promising than they were.

April 15th Subsidy Deadline

The South Australian Battery Subsidy will be reduced from a maximum of $6,000 to a maximum of $4,000 on the 15th of this month.  This will add $2,000 to the cost of system with a nominal capacity⁹ of 10 kilowatt-hours or more.  While I don’t recommend rushing into these things, you can’t really dawdle either if you want to get the maximum amount of subsidy.  You only have to sign up for a battery system from an approved provider before the 15th.  It doesn’t have to be installed by then.  And it probably won’t be installed for a long time, since I imagine they’ll have a lot of orders to get through.

Batteries Can Potentially Pay

At the moment it looks like batteries will pay for themselves for more South Australian households than ever before.  But in just over a week, that number will be greatly diminished as the state’s home battery subsidy is cut.  If you want to rush into signing up for a battery before the 15th, don’t let me stop you.  All I ask is you don’t blame me if it all goes pear-shaped.¹⁰

But if you don’t rush ahead, my guess — and it is only an educated guess — is we’ll see some price reductions among the better known home battery brands after the subsidy is reduced.  This is because pretty much every South Australian early adopter will have bought a battery by the 15th and manufacturers will have to start competing on price rather than coasting by on coolness.  But we may have to give them a couple of months so they can pretend it wasn’t because of the subsidy cut.