Though Australia is expected to install less than 7 megawatts' worth of energy storage capacity in 2015, GTM Research predicts an annual market of 244 megawatts by 2020 in the recently released report The Australian Energy Storage Market: Downstream Drivers and Opportunities.
Channel strategies present an interesting case study, offering a valuable opportunity for increasing the reach of energy storage system vendors. In particular, a significant number of market players have either announced or are discussing channel partnerships with Australian electricity retailers.
A new path for bringing energy storage systems to market
Several key drivers have positioned Australia’s storage market to accelerate starting in 2016 and 2017. Australia possesses one of the highest behind-the-metersolarPV penetrations of any nation, with high electricity prices, generous feed-in tariffs, and high solar insolation causing massive growth in the nation’s solar PV market over the past decade. PV deployments are continuing apace, but new customers are unable to access the generous feed-in tariffs enjoyed by early adopters; as a result, a significant portion of new customers are purchasing bundled solar-plus-storage systems. Meanwhile, early solar PV adopters in New South Wales and Victoria are poised to lose high feed-in tariffs at the end of 2016, and are investigating energy storage for self-consumption of solar electricity as a way to offset high electricity prices.
Electricity retailers such as Ergon Energy, AGL Energy and Origin Energy have already announced energy storage offerings for their retail customers. Channel partnerships with storage system vendors are mutually beneficial: electricity retailers unlock new revenue streams, while storage system vendors gain access to a large customer base and the electricity retailers’ pre-established marketing channels. Existing relationships between electricity retailers and their customers reduce marketing costs and simplify the customer acquisition process for storage system vendors. Some electricity retailers are already selling energy storage systems, with widespread rollout expected by mid-2016.
FIGURE: Australia Energy Storage Retail Channels
Source: The Australian Energy Storage Market
Recently, AGL Energy announced two additional options for its residential storage system offerings: the “Large” 5-kilowatt/11.6-kilowatt-hour system and the “Extra Large” 5-kilowatt/19.4-kilowatt-hour system. Commitments to offer larger systems reveal that electricity retailers are mindful of end-customer desires: systems with longer discharge durations are key for offsetting energy consumption during peak periods. Furthermore, a significant number of solar PV systems were oversized when first installed years ago, in order to take advantage of generous older feed-in tariff schemes. These larger storage systems will permit a greater degree of self-consumption of electricity generated from homeowners’ solar PV systems, and thus significantly improve the economic case for behind-the-meter energy storage.
However, electricity retailer channel partnerships are not a silver bullet for storage-system vendors. The need for vendors to demonstrate their technology to electricity retailers can increase the sales timeline compared to selling storage systems via storage developers, who often possess a better understanding of the technology landscape. Furthermore, there are geographical limitations when working with electricity retailers: while service territories are often large, they are usually concentrated within a few Australian states, meaning vendors cannot rely on a single channel partnership if they wish to serve markets across the nation.
While the United States does not yet possess channel partnerships between utilities and energy storage system vendors, there are initiatives underway to implement behind-the-meter storage for grid services. New York’s Reforming the Energy Vision initiative includes investigations of the value of behind-the-meter storage. In particular, Con Edison is collaborating on a pilot project with SunPower and Sunverge, which examines how residential solar-plus-storage can provide grid services.
In California, the Distributed Energy Resource Provider (DERP) initiative allows aggregated distributed energy resources (DERs), including both residential and non-residential systems, to participate in California’s electricity market. While Australia does not yet have any large-scale initiatives in this space, there is a publicly announced project in this vein: Ergon Energy is pursuing a virtual power plant trial with Sunverge to explore the economic case for aggregated residential storage systems for providing grid services. As U.S. utilities continue to explore the value of aggregating DERs, energy storage business models in Australia can provide valuable market insights.
Channel partnerships between electricity retailers and energy storage system vendors in Australia offer a unique channel strategy not pursued at large scale elsewhere. As the price of energy storage systems continues its rapid decline, and as more retail electricity customers install solar PV, offering energy storage products becomes ever more appealing for electricity retailers. Though electricity retailers are only promoting residential energy storage systems at present, we expect similar products for commercial and industrial customers to be offered in the near future.
Australia possesses a large addressable behind-the-meter energy storage market, which is expected to make up roughly 90 percent of the total market by 2020, including significant contributions from the C&I segment. Australia’s behind-the-meter segment will be an intriguing market to watch over the next few years, and it will be especially interesting to monitor the role electricity retailers will play.
For more information on Australia's energy storage market, click here.