A Federal battery incentive program is needed to trigger Australia’s next step in electrifying homes and lowering home energy bills, but it needs to be done right, writes Con Hristodoulidis, CEC co-Chief Policy and Impact Officer.
Forty per cent of Australia’s electricity now comes from renewable energy. It’s been a remarkable journey, one that’s been powered by industry and supported by big and bold policy interventions. There’s been significant federal support for large-scale generation and storage through the large-scale Renewable Energy Target and Capacity Investment Scheme, for transmission through the Powering Australia Fund, and for rooftop solar through the Small-scale Renewable Scheme.
Yet, there’s one glaring opportunity left, one that can be rolled out quickly, help us to charge toward renewable energy targets and lower energy bills for all Australians (hint: it’s not nuclear). A Federal incentive for home batteries must be the next priority for Australia’s clean energy transition.
In October, the ABC* reported that the Australian Government is exploring a “higher education loan-style scheme” to increase household battery uptake and help tackle cost-of-living. However, a loan has proven to not be effective and is unlikely to do the job. Here’s why it’s essential the government chooses a rebate or similar incentive for home batteries.
Australia needs a lot more batteries and a lot more VPPs
Residential and commercial batteries offer great value to the energy system. They store excess daytime rooftop solar energy, which helps mitigate negative wholesale prices and supports grid stability. They reduce the need for large-scale transmission, generation, and storage infrastructure. When connected through virtual power plants (VPPs), they can also be orchestrated to help manage volatility and lower system costs.
These reasons are why decentralised batteries feature so prominently in the Australian Energy Market Operator’s (AEMO) plans for the clean energy transition. AEMO’s Draft 2024 Integrated System Plan outlines a “Step Change” scenario, an optimal, least-cost path for achieving Australia’s renewable energy targets. This scenario calls for a huge 34 times more residential and commercial battery capacity and 135 times more orchestrated home battery capacity by 2050.
Growth in batteries has long lagged behind forecasts. In 2016, Morgan Stanley expected there to be approximately one million batteries in homes by 2020. According to the Clean Energy Council’s latest Rooftop Solar and Storage Report, we have just over 140,000. Tesla recently announced it had reached 100,000 VPP customers globally, with only a small number in Australia. Clearly, something needs to change.
Government incentives are needed to overcome the main barrier to purchase
The main hurdle for most households interested in battery storage remains the upfront cost. In a myCEC Masterclass session at All Energy Australia in October, Tim Renowden, Manager of Enterprise Insights, Data and Reporting at Solar Victoria, shared survey data from 15,000 Solar Victoria customers. A key takeaway was that, while cost savings are the primary motivator for electrification, the high cost of new appliances is the biggest barrier. For batteries, with very high upfront costs and long payback periods, that barrier is most significant.
To drive widespread adoption of home batteries, financial incentives are therefore essential, especially during a cost-of-living crisis in which consumer confidence is low. Incentives reduce the up-front cost of a residential battery, remove the initial barrier to uptake and ensure that customers hit their pay-back period sooner.
Loans have failed while rebates have flourished
There are various ways a federal battery program could be structured, ranging from an expansion of the existing small-scale renewable energy scheme to include batteries, through to a newly designed incentive program.
In October, ABC News* reported that the government is exploring options like a “higher education loan-style scheme”. Such an approach would load debt on participants and is unlikely to drive widespread adoption of batteries.
State-based programs have demonstrated that rebate models significantly outperform loan schemes. South Australia’s Home Battery Subsidy Scheme provided rebates for residential batteries, resulting in a world-leading adoption rate of more than 39,000 batteries. In addition, more than 12,000 of these batteries were enrolled in orchestration programs, defying industry concerns that consumers would resist orchestrated arrangements.
By contrast, New South Wales’ Empowering Homes Program, which offered zero-interest loans, led to only 500 battery installations, far short of its target of 300,000. Learning from this, the New South Wales Government’s new Peak Demand Reduction Scheme now offers up to $2400 in rebates for a home battery.
The Clean Energy Council has presented compelling data that further supports the rebate approach. Modelling from Oakley Greenwood suggests that a national Home Battery Saver Program with rebates of up to $6500 per household could add more than 400,000 batteries and 4.3GW of orchestrated capacity to the grid, while delivering a net saving of $190 million to the energy system. Those savings would lower electricity prices for all customers, not just those with solar and batteries.
The case for a national home battery rebate is clear. As the final piece in Australia’s clean energy puzzle, this initiative can empower consumers, enhance grid stability, and ensure the benefits of renewable energy reach all Australians. A loan will not deliver significant battery sales and will increase household debt whereas instant and attractive rebates can reduce price barriers and incentivise adoption. Now is the time to back batteries and accelerate Australia’s journey toward a cleaner, more resilient energy future.
For more information, visit cleanenergycouncil.org.au/timetobackbatteries
This article featured in the December edition of ecogeneration.
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