{"id":11696,"date":"2017-05-30T13:28:59","date_gmt":"2017-05-30T02:58:59","guid":{"rendered":"https:\/\/www.solarquotes.com.au\/blog\/?p=11696"},"modified":"2017-11-01T19:43:26","modified_gmt":"2017-11-01T09:13:26","slug":"when-electricity-price-hikes-dont-improve-the-economics-of-batteries","status":"publish","type":"post","link":"https:\/\/www.solarquotes.com.au\/blog\/when-electricity-price-hikes-dont-improve-the-economics-of-batteries\/","title":{"rendered":"When Electricity Price Hikes Don’t Improve The Economics Of Batteries"},"content":{"rendered":"
\"batteries

Do\u00a0rising electricity prices always improve the economics of batteries? No. Read on to discover why. (And don’t stand on your roof without wearing an approved safety harness – especially if you are balancing giant golden scales on your head.)<\/p><\/div>\n

I’ve already written on how electricity prices are set to rise substantially<\/a>.<\/p>\n

Because Australians will soon have to shell out like an evicted hermit crab when it comes to grid power, both the good<\/a> and bad<\/a> mainstream media are declaring\u00a0that rising power costs make buying batteries more attractive.<\/p>\n

Unfortunately for fans of shock boxes this is unlikely to be the case. Counter-intuitive I know. But bear with me.<\/p>\n

Most households without rooftop solar can expect an increase of roughly 20% in their electricity bills over the next two to three years while those in NSW may be hit with a 25% hike.\u00a0 But where\u00a0previous price rises were due to (often unnecessary) transmission and distribution upgrades, this round of rises\u00a0will be the result of higher wholesale electricity prices.<\/p>\n

Because solar feed-in tariffs<\/a> are supposed to reflect the wholesale cost of electricity during the day, the coming increases in the cost of electricity per kilowatt-hour should be matched by identical increases in solar feed-in tariffs.\u00a0 At least, if there is any justice, they should be.\u00a0 Feed-in tariffs offered by some electricity retailers have already increased with Origin now offering 10 cents1<\/a><\/sup> in all the states they operate and even higher feed-in tariffs are available from some other retailers2<\/a><\/sup>.\u00a0 Our electricity plan comparison tool<\/a> can be used to compare local feed-in tariffs.<\/p>\n

But the thing about\u00a0higher feed-in tariffs is they reduce the economic benefit of battery storage. \u00a0So they are likely to cancel out the benefit to batteries caused by rising electricity prices.<\/p>\n

Higher Feed-in Tariffs Means Less Benefit From Batteries<\/h2>\n

Because solar feed-in tariffs’\u00a0effects on\u00a0battery economics is not immediately obvious, I will go over how they interact, with examples.\u00a0 (This will be on the test.)<\/p>\n

Zero Feed-in Tariff:<\/strong><\/em>\u00a0 First off, imagine a situation where there is no feed-in tariff and grid electricity costs 25c per kWh.\u00a0 In this case a household could install a battery, charge it with surplus solar, and each kilowatt-hour<\/a> of stored electricity used would cut their electricity bill by 25\u00a0cents.<\/p>\n

Working out how much money a battery saves in this situation is straight forward and there are a number of businesses restricted to zero electricity export which prevents them from receiving any feed-in tariff and puts them in this situation.<\/p>\n

Feed-in Tariff Equals the Cost of Grid Electricity:<\/strong><\/em>\u00a0 There is only one place in Australia where feed-in tariffs are equal to the cost of electricity per kilowatt-hour and this is the Northern Territory<\/a>.\u00a0 Those lucky bastards!<\/p>\n

Well, I guess it isn’t quite lucky enough to compensate for the fact that God keeps trying to destroy Darwin<\/a>, but it’s better than a poke in the eye with a blunt stick, or since this is the Northern Territory, it’s better than poking yourself in the eye with a blunt.<\/p>\n

When the feed-in tariff equals the cost of electricity there is no economic benefit to installing a battery.\u00a0 If a home exports one kilowatt-hour of solar electricity they will save as much on their electricity bill as if they had stored it in a battery and used it in the evening.\u00a0 In fact, because there are always some losses when using batteries, they will save more on their bills by exporting electricity and not storing it.<\/p>\n

If you are you are receiving an old feed-in tariff that is higher than the cost of grid electricity, then battery storage\u00a0makes absolutely no economic sense.<\/p>\n

Feed-in Tariffs Are Less Than the Cost of Grid Electricity:<\/strong><\/em>\u00a0 The very large majority of Australians are in the situation where their feed-in tariffs are less than what they pay per kilowatt-hour for electricity.\u00a0 Usually much less.<\/p>\n

If a household has a six cent feed-in tariff, pays 25 cents a kilowatt-hour for grid electricity, and has a magic battery that is 100% efficient, they can reduce their electricity bill by 6 cents by sending one kilowatt-hour of surplus solar electricity in the grid or they can reduce it by 25 cents by storing the solar electricity for use during the evening.\u00a0 It may look like their battery is saving them 25 cents per stored kilowatt-hour, but since their electricity bill would be reduced by 6 cents anyway if they didn’t have one, their battery will actually only save them 19 cents.<\/p>\n

If their feed-in tariff rises\u00a0to 10 cents then their battery would only save them 15 cents a kilowatt-hour.<\/p>\n

If a household is on a time-of-use tariff and not a standard tariff, which is likely if they have a battery, it may help the battery be more cost-effective, but it won’t change the overall effect of feed-in tariffs.3<\/a><\/sup><\/p>\n

Magic 100% Efficient Batteries Are Hard To Find<\/h2>\n
\"Leprechaun\"

Genies and leprechauns are very different because genies are always trying to get out of bottles…<\/p><\/div>\n

I’m sorry to have to tell you there is no such thing as magic and so magic batteries don’t exist.\u00a0 I didn’t want to break the news to you like this, but the leprechauns forced me to.<\/p>\n

Because there is no such thing as a magically 100% efficient battery it will always be necessary to put more energy in than can be taken out.\u00a0 I expect most battery systems will have a total round-trip efficiency<\/a> of about 88%.\u00a0 With that efficiency and a 10 cent feed-in tariff a household will have to forgo 11.4 cents in feed-in tariff in order for their battery to discharge one kilowatt-hour of electricity.<\/p>\n

If Feed-In Tariffs And Grid Prices Rise In Step, Battery Economics Get Slightly Worse<\/h2>\n

If a household has an 88% efficient Powerwall 24<\/a><\/sup> or other battery system, a 6 cent feed-in tariff, and currently pays 25 cents a kilowatt-hour for grid electricity, then each kilowatt-hour of stored electricity they use will save them 18.2 cents.<\/p>\n

If their solar feed-in tariff and what they are charged for grid electricity both rise by 5 cents, then each kilowatt-hour of stored electricity they use will save them 17.5 cents.\u00a0 Even though both the feed-in tariff and grid electricity price rose by the same amount, the amount of money battery storage saves decreases because the higher feed-in tariff means battery losses now cost more.<\/p>\n

Increased Fixed Charges Could Worsen Battery Payoff<\/h2>\n

Because the wholesale cost of electricity has risen, it may seem reasonable to expect an identical increase in what households are charged per kilowatt-hour.\u00a0 But this may not be the case because electricity retailers like to raise the fixed costs<\/a> on electricity bills when prices go up.\u00a0 They do this because it discourages energy efficiency, discourages rooftop solar, and discourages battery installation5<\/a><\/sup>.<\/p>\n

If feed-in tariffs rise by the same amount as wholesale electricity prices have, but some of the increase goes into fixed charges and not charges per kilowatt-hour, then that will make the economics of batteries worse.\u00a0 If wholesale electricity prices and feed-in tariffs go up by 5 cents but the charge per kilowatt-hour for grid electricity only rises by 4 cents because the rest of the increase goes into fixed charges, then the amount of money they save by using one kilowatt-hour of stored electricity will decrease by 1 cent.\u00a0 And that’s with a magic battery.\u00a0 With an 88% efficient one the amount saved will decrease by 1.6 cents.<\/p>\n

Feed-In Tariffs And Grid Prices May Not Rise In Tandem<\/h2>\n

While feed-in tariffs are supposed to reflect the wholesale price of electricity, it is possible they won’t be raised high enough to equal the increase in wholesale prices in all states.\u00a0 It would be a pretty rotten move, but could happen.\u00a0 For example, during Tasmania’s energy crisis when their wholesale cost of electricity went through the roof, no moves was made to make feed-in tariffs match.\u00a0 But on the other hand, it is quite possible feed-in tariffs will rise by more than wholesale electricity prices.<\/p>\n

In Victoria the minimum feed-in tariff will increase to 11.3 cents<\/a> on the 1st of July.\u00a0 This figure doesn’t just reflect the rise in the wholesale cost of electricity, but also includes a small payment for avoided distribution and transmission costs and 2.5 cents to reflect the value of avoiding carbon emissions6<\/a><\/sup>.\u00a0 Other states could follow Victoria’s lead and include more of the benefits of rooftop solar into the feed-in tariffs causing them to rise by more than wholesale electricity prices.<\/p>\n

Buy Batteries When They Pay For Themselves<\/h2>\n

Over the next two to three years as electricity prices and hopefully feed-in tariffs rise, solar batteries<\/a> should continue to fall in price.\u00a0 So although the economics of batteries may get worse due to increasing feed-in tariffs and higher fixed charges on bills, this could be more than offset by declines in battery costs.<\/p>\n

While I’m certain batteries will be cheaper than they are, I doubt they will fall the long way required for them to be a money saver for a typical household in that time.<\/p>\n

In the meantime beware of\u00a0any slick adverts\u00a0or daytime TV ‘advertorials’, that are selling batteries based on future\u00a0electricity price increases. \u00a0Do your research on local feed in tariffs, and decide how likely they are to rise in step with\u00a0wholesale electricity costs. Because handing over thousands of dollars for something that won’t pay for itself now but may pay for itself even less in the future is not a good investment strategy.<\/p>\n","protected":false},"excerpt":{"rendered":"

I’ve already written on how electricity prices are set to rise substantially. Because Australians will soon have to shell out like an evicted hermit crab when it comes to grid power, both the good and bad mainstream media are declaring\u00a0that rising power costs make buying batteries more attractive. Unfortunately for fans of shock boxes this […]<\/p>\n","protected":false},"author":10,"featured_media":11993,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[636],"tags":[555,30],"class_list":["post-11696","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-electricity-prices","tag-battery-storage","tag-feed-in-tariffs","entry"],"acf":[],"yoast_head":"\nRising Electricity Prices Don't Always Improve The Economics Of Batteries<\/title>\n<meta name=\"description\" content=\"Do rising electricity prices always improve the economics of batteries? 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