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Storage

ARENA’s investment focus is on supporting activities that involve storage applications behind-the-meter and in a range of off-grid and fringe-of-grid applications, as well as in limited utility-scale applications on grid, to address barriers to entry and allow for the higher penetration of renewables in Australia.

This may include:

  • pilots and demonstration activities incorporating storage in end-user applications (ie behind the meter), which may involve control systems and innovative business models designed to maximise the value and benefit of distributed renewable generation
  • studies and knowledge sharing activities for utility-scale storage applications, and potentially larger scale pilots and demonstration projects where there is a clear demonstration effect, such as addressing renewable curtailment or unlocking additional value through time shifting or ancillary services
  • pilots and demonstration activities that apply storage in off-grid and fringe-of-grid applications to address barriers to higher penetration of renewables or grid stability constraints
NOTE: Research and Development Program only – R&D activities such as testing and pilots for storage technologies, especially where the activities relate specifically to quality and applicability testing of a technology in Australian conditions.

Rationale

This assessment is based on an independent analysis of the storage sector conducted by AECOM in 2015 for ARENA.

The AECOM report covered:

  • various applications for storage
  • status of leading storage technologies (i.e. whether they are “market ready” or require further commercialisation)
  • costs, benefits and overall economics of various applications and technologies
  • recent relevant international experience (e.g. California and Germany) and how this may apply to the Australian market
  • domestic market opportunities and barriers
  • timing issues (e.g. cost reductions for different technologies).

AECOM also undertook a stakeholder engagement process to verify the analysis and support the recommendations.

Likely scale and potential for growth by 2030-40

Energy storage is an enabling technology that can smooth and shift energy generation and demand profiles. Cost effective storage has the potential to significantly increase the take-up of renewables by 2040.

Different storage technologies are appropriate for different market segments. Both domestic and international energy storage markets are currently dominated by pumped hydro, a mature technology with known cost structures when applied to large-scale grid applications. There is potential in Australia for off-river pumped hydro using existing technologies, should market conditions be suitable.

Conversely, many emerging energy storage technologies are immature and the cost structures are not well defined. Battery technologies offer advantages in markets other than large-scale grid installations because they can be adapted to different applications and have high cycle efficiency.

The potential to significantly reduce the cost of some battery technologies provides opportunities for those technologies to be widely deployed in multiple applications. For example, the price of Lithium-ion batteries is expected to reduce by over 60% and flow batteries by over 40% by 2020[1]. Analysts expect these cost reductions to lead to significant new opportunities for deployment at a range of scales and applications.

Investment influence

ARENA’s investment influence is most likely to be in demonstrating applications of storage in particular markets. Cost reductions in battery technology are likely to be influenced by global developments and markets (including markets other than renewable energy integration), and so are less amenable to influence through ARENA funding.

ARENA is interested in investing in research, development or demonstration of storage applications that remove barriers to greater renewable uptake, increase available revenue, or help reduce costs of renewable installations (such as network connection costs).

In all cases, a proposed storage solution (or application) would need to demonstrate a path to replication and cost reduction as well as generate knowledge that benefits the broader renewable energy industry in order to justify ARENA funding support.

Gap in ARENA portfolio

As at June 2015 ARENA has invested over $77.6 million across 20 projects involving storage. These include:

  • off-grid demonstration projects that aim to prove reliability and control benefits of storage paired with renewables
  • a focus in some projects on new business models to facilitate the integration of renewables and grids
  • the allocation of a significant proportion of existing storage-related funding to concentrating solar thermal research and development, studies, and demonstration projects
  • a small number of projects focused on battery technologies, given ARENA expects international developments to play a larger role in this area.

ARENA’s investment portfolio would benefit from additional projects that combine renewables and storage to address grid constraints and deliver other customer and supply-chain benefits. As a result, ARENA is interested in further research, development and demonstration projects that incorporate storage in end-user or customer-focused applications.

 

[1] ARENA, “Battery Storage for Renewables: Market Status and Technology Outlook,” 2015.