Grid-scale electricity storage will be a critical element of Australia’s future electricity system. Broad deployment of storage will facilitate more low-cost solar and wind electricity in the grid.
Storage will also provide system security services and be a source of reliable, dispatchable electricity. It can reduce pressure on electricity prices by meeting peaks in consumer demand. Low-cost backup and storage will enable more solar and wind electricity in the grid and has the potential to reduce Australia’s cumulative emissions by over 700 Mt CO₂-e to 2040.
Setting the stretch goal
This stretch goal is consistent with an average wholesale electricity price under $70 per MWh and represents the cost at which low emissions electricity, available on demand for eight hours or more, will be competitive with conventional mid-merit gas generation in the National Electricity Market (NEM).7 The market contracts firming services by way of capacity contracts.
The stretch goal represents the capacity cost plus the short run marginal cost of mid-merit generation.
A mix of storage options will be needed to meet the needs of Australia’s electricity system. Initially, the lowest cost storage option will likely be pumped hydro.
Batteries and solar thermal energy storage (charged by solar thermal generation) will become increasingly cost competitive, and will be suitable in places where pumped hydro is unavailable or where other characteristics are valuable, such as the ability to provide frequency control or heat for industry. These are emerging technologies and there is scope for costs to fall as experience with them grows and global supply chains mature.
Governments and industry can pursue a range of actions to bring down technology costs, including ongoing investment in research and demonstration projects, de-risking projects through offtake agreements, deepening international supply chains for critical battery minerals, and electricity market reforms to recognise and value the strengths of emerging storage technologies.
The Australian Government has already invested over $270 million in innovative energy storage projects since 2014-15.8 In 2019, it committed $25 million over six years for the Future Battery Industries CRC. The development of new battery mineral reserves is also being encouraged through the 2019 Critical Minerals Strategy.
Prioritising energy storage and working towards this stretch goal will further accelerate the development of this critical technology and its deployment in Australia’s electricity system.
As one of the world’s largest per capita installed solar countries in the world, the impact from solar is limited without the addition of energy storage technologies, such as batteries, to support it.