Massive growth in the sector is inevitable
Australia is in the midst of an energy transformation that will intensify in the coming decades. The Land Down Under’s quest to foster energy resiliency and realize a low-carbon economy by 2030 is largely dependent on battery storage, making this an exciting time to invest in the sector.
Australia is currently seeing significant growth and demand for renewables and energy storage. This growth and demand are driven by recent electricity outage events, decommissioning of coal power, declining equipment prices, and open access to grid support service markets.
The World Bank estimates that 23,000 to 45,000 GWh of batteries and storage will be needed across energy systems by 2050, compared to around 200 GWh today.
Related: This Energy Storage research project delivered as a partnership between the Australian Council of Learned Academies (ACOLA) and Australia’s Chief Scientist, reviews the transformative role that energy storage may play in Australia’s energy systems; future economic opportunities and challenges; and current state of, and future trends in, energy storage technologies and their underpinning sciences.
Battery systems can store wind and solar power to provide electricity 24/7, affordably stabilizing electricity grids. The cost of lithium-ion batteries has fallen by 80 percent since 2010, and some expect prices to halve again by 2025.
As a result, many Australians are embracing battery storage to complement household solar and expect batteries to be commonplace in Australian homes by the end of the decade. Simply put, energy storage is critical for building a reliable, modern Australian electricity grid for the 21st century, and batteries are central to that mission.
Battery energy storage in the fight to combat climate change
The world continues to get hotter despite commitments under the Paris Agreement to limit the globe’s average temperature rise to two degrees Celsius, preferably to 1.5 degrees Celsius, above pre-industrial levels.
While nations have been falling behind in meeting emissions standards, the solution may just be a (rather large) battery cell away according to recent studies by Nature Communications.
Incorporating storage for power sourced from renewable resources could cut carbon dioxide emissions substantially more than simply increasing renewably sourced power, notes Ramteen Sioshansi, professor of integrated systems engineering at The Ohio State University.
As solar and wind can’t be flipped on immediately when additional power is needed, he explains, “the more renewable energy you put into your system, the greater your need to be able to forecast when those energy sources might be available.” Unless, of course, you can find an affordable, reliable way to store that energy.
Flexibility and low response time are both major benefits of battery storage, making it ideal for grid stabilization measures. As the Natural Resources Defense Council explains, renewable energy is key to combatting climate change, but it can be sporadic: solar panels don’t produce electricity when it’s dark, and wind turbines can’t run if the wind isn't blowing.
Batteries can store excess power when it’s bountiful and pump it back into electricity grids when it’s not, making them vital tools in ending the global love affair with carbon.
Battery storage in Australia offers an opportunity for investors
A surge in lithium-ion battery production over the last decade has led to an 85 percent decline in prices, leading to electric vehicles and energy storage being commercially viable for the first time in history. This means that the next step, and what will likely define the next decade, is utility-scale storage.
According to the International Renewable Energy Agency, energy storage deployment in emerging markets is also expected to increase globally by over 40 percent each year until 2025, and the battery market is anticipated to be worth $100 billion by 2025.
This translates to battery storage emerging as one of the most compelling investment opportunities in Australian energy infrastructure, explains portfolio manager Dania Zinurova.
“Developing storage facilities and infrastructure is a very interesting play with a strong tailwind,” Zinurova told The Australian Financial Review.
Why battery storage makes sense for Australia
Australia has some of the most enviable resources and geography for the switch to renewables. Batteries are particularly valuable in rural Australia due to their flexibility and ability to maintain grid stability by turning on and off in fractions of a second. As such, battery use in the Australian electricity grid is anticipated to grow continuously in the coming decades.
The state of Victoria has made particular progress in this realm, advancing plans for the largest battery storage system built so far in the globe’s Southern Hemisphere, according to EcoWatch.
In November 2020, Lily D’Ambrosio, Victoria’s Minister for Energy, Environment and Climate Change, announced contracts with developer Neoen and technology provider Tesla for the construction of the “Victoria Big Battery,” a 300MW lithium-ion battery energy storage system to be installed near the city of Geelong.
Once completed, it is expected to increase interconnection between Victoria and the state of New South Wales by as much as 250MW, reducing the probability of unscheduled power outages by alleviating unscheduled load shedding.
Such advances are well-timed, as Victoria’s fleet of coal power stations are increasingly becoming unreliable as they age. According to an independent study, every dollar invested in the project will deliver more than twice that back in benefits.
“Victoria is embracing new technologies that will unlock more renewable energy projects than ever before – delivering clean, cheap, reliable power to all Victorians,” said D’Ambrosio.
Building energy resiliency for Australian local communities
Energy resilience ensures a reliable supply of energy and contingency measures in the event of a power failure. Negative resilience issues stem from power surges, inclement weather, and natural disasters.
Battery storage systems are increasingly being viewed as a key solution to effectively integrate solar and wind renewables in power systems throughout Australia to bolster resiliency.
Australia bore the full onslaught of disruptive events in 2020 — fires, floods and severe wind persisted throughout the year — and calls for an integrated response to protecting the resilience of the nation’s power intensified.
Now, the alarm sirens are finally being acknowledged. Australia’s Resilient Energy Collective, for example, is installing prefab solar systems and Tesla batteries at 100 bushfire-stricken community sites struggling with power insecurity following a string of cataclysmic bushfires. Effective battery storage will be crucial to support future disaster response.
Mid-size batteries used in rural areas effectively isolate networks to provide a backup power supply in case the power goes out, and community batteries can be scattered around towns and shared between households in particular neighbourhoods.
These utility-scale batteries can enable a greater feed-in of renewables into the grid by storing excess generation and firming renewable energy output.
Particularly when paired with renewable generators, batteries help provide reliable and cheaper electricity in isolated grids, which otherwise rely on expensive imported diesel fuel for electricity generation.
As the climate crisis worsens by the day, reliably preserving valuable renewable energy through battery storage while increasing revenue generation should leave us all fully charged, and this is why RE Royalties Ltd. (TSX.V: RE), a global leader in renewable energy royalty-based financing, has entered into a letter of intent with Canigou Molonglo Bess Pty Ltd. to finance a 10MW battery storage project located near Canberra, in the Australian Capital Territory, Australia.
Canigou will install two separate 5 MW batteries that will support the growth of renewables in the ACT area and provide electricity grid stabilization services and the potential for selling electricity in the wholesale electricity market.
The Project will be installed in two stages, with the first battery installation planned to commence in June 2021 and be operational in November 2021. The second battery is planned to be installed and operational in the second half of 2022.
Bernard Tan, CEO of the RE Royalties' stated:
“We are happy to announce our first battery storage transaction and first investment in Australia. This is an attractive opportunity for our investors and allows us to work with the Canigou team in growing both our portfolios in Australia. The investment will help build energy resiliency for local communities and support further growth in the deployment of renewables.”
Closing of the transaction is subject to the completion of due diligence to the satisfaction of the Company, execution of definitive transaction documentation, customary closing conditions and is expected to occur in early June 2021.
Learn more about the letter of intent and the project here.