Electricity revolution: What's in store

by Fiona Rotherham / 10 June, 2016
Batteries for home power storage are predicted to be a third of today’s price within eight years.
Solar panels at Sylvia Park shopping centre, left, power 20% of its needs. Photo/Supplied
Solar panels at Sylvia Park shopping centre, left, power 20% of its needs. Photo/Supplied


Among the technologies most likely to be economically disruptive by 2025, energy storage ranks eighth and wind and solar energy 12th, according to McKinsey’s global in-house think tank.

US clean-tech guru Tony Seba predicts that fossil fuels and nuclear power will be rendered obsolete by 2030 as a result of four fast-growing technologies: solar photo­voltaics (roof-top solar electricity generation, solar PV), energy storage ­(batteries), electric vehicles (replacing fossil fuels and acting as home batteries) and self-driving cars (dramatically increasing the productivity of existing roading infrastructure).

The tipping point globally, says Seba, will be when solar PV becomes cheaper than the cost of transmission; he predicts that by 2022 solar will be showing the technology S-curve of uptake rather than the slower, more traditional linear rise it’s shown to date.

What does this mean for New Zealand’s $6 billion electricity industry? Industry participants agree there will be disruption – the debate centres on how much and by when.

Simon Mackenzie, chief executive of Vector, which has been at the forefront of exploring new technologies, says he’s determined to ensure the Auckland lines company doesn’t become another Kodak, which was caught out by the rapid shift to digital photography.

“People start talking about the competitive retail market in New Zealand – it’s the same people on the same dance floor just shuffling chairs,” says Mackenzie, whose company is a regulated monopoly, hamstrung from growing by its ownership of electricity and gas wires and pipes, and straining to break free. “That’s probably much like what happened with the taxi industry or hotel chains – you had Uber and Airbnb coming in and suddenly the whole dance is upset.”

From top, SolarCity chief executive Andrew Booth; Vector chief executive Simon Mackenzie; US clean-tech guru Tony Seba, who predicts fossil fuels and nuclear power will be obsolete by 2030; Sylvia Park’s Jason Happy.
From top, SolarCity chief executive Andrew Booth; Vector chief executive Simon Mackenzie; US clean-tech guru Tony Seba, who predicts fossil fuels and nuclear power will be obsolete by 2030; Sylvia Park’s Jason Happy.

CONSUMER CONTROL


Mackenzie says energy storage is the game changer that signals the death of central planning. Consumers, who would happily take control of their power bills but otherwise don’t care about where their electricity comes from, are getting the chance to have choice and control over how they use and even produce electricity.

Vector is partnering with Tesla in New Zealand and potentially Australia to sell the US electric car maker’s home battery product, which can be used to store energy produced by solar panels and wind power. The batteries also serve as a backstop against blackouts and can help lower consumers’ power bills by storing power generated during the day to use during pricey peak times.

They still cost too much to make sense at a household level but like ultra-fast broadband access that could change quickly as demand and technology advance hand in hand.

Large-scale versions are on offer that will do the same thing for companies and organisations, such as councils. In one example, Kiwi Income Property Trust, which has the country’s largest solar PV installation – the size of 12 tennis courts – atop Auckland’s Sylvia Park shopping centre, is considering adding battery storage. Unlike with a PV installation on a house, where there won’t be much power generated at winter breakfast and dinner times, Sylvia Park has an electricity load that the sun can mostly deliver, for air-conditioning, lighting, refrigeration, lifts and escalators for daytime shoppers.

Even then, the solar array provides just 20% of the Auckland shopping centre’s electricity needs. The rest comes from traditional sources and needs a national grid to supply it – for now.

The listed property company is crunching the numbers for a solar installation on another centre this year or extending Sylvia Park’s. Facilities manager Jason Happy says the costs don’t quite stack up yet for installing batteries, but once the price sharpens, it will be a logical step.

Vector will soon deploy a $5 ­million battery grid to deal with growing peak demand in Auckland rather than a ­traditional $15 million substation upgrade. It has a further 13 large mobile batteries on order to be installed in the network within the next 18 months. Mackenzie likens it to having another lane on the motorway to relieve congestion at only at a third of the usual cost.

South Canterbury lines company Alpine Energy is also trialling a shipping container-sized battery to see whether storage reduces overall network operating costs and how it might stack up for heavy users. And Transpower has contracted a range of consumers to test different ways, including battery storage, of lowering peak demand.

Mackenzie predicts 50,000 New Zealand homes will have the lithium ion batteries within the next 10 years, led by rural customers in areas where it’s more expensive to string a power line than it is for urban households.

About 80% of the country’s electricity comes from solar and other renewable sources such as geothermal, wind farms and hydro. Photo/Getty Images
About 80% of the country’s electricity comes from solar and other renewable sources such as geothermal, wind farms and hydro. Photo/Getty Images


The Tesla home batteries are expected to be in the hands of the first paying Kiwi customers by July, after 2000 expressed an early interest. In the US, Tesla’s ­6.4-kilowatt-hour Powerwall costs US$3000 ($4400) for installers, but will almost certainly be a bit more by the time it’s shipped here. This doesn’t include the cost of an inverter to convert from direct to alternating current, which could be as much again, or the installation.

Helping to drive the battery uptake is the rapid fall in the cost of solar PV and storage as technology improves. A residential solution for battery storage is predicted to be a third of today’s price within eight years. Solar PV has shown the same trend. “We have to carefully consider how to invest capital in our assets because you can’t sit here believing they will have a 40-year life and for the next 40 years there will be no change,” Mackenzie says. If Vector gets it wrong, it will own equipment worth far less than it is today. For a monopoly that sets charges against the value of its assets, that could be a big problem.

The Electricity Authority, which regulates the industry, has been consulting the industry on the implications of evolving technologies for pricing on our electricity network. It’s holding an August conference to discuss incentives for change and managing the effect on consumers.

The authority is recommending a new service-based approach to charging and is at odds with Hawke’s Bay electricity lines operator Unison Networks, which started charging a special tariff to new solar and battery customers connecting to its network from April 1 and plans to extend this to existing customers by 2019.

Both the authority and Unison contend that ordinary electricity consumers are subsidising the small number of people who have solar generation, because of the outdated way local networks charge for the use of their wires. In many cases, the economics of solar PV only stack up because users are counted as “low users” and are charged less for their grid connection, despite still contributing to peak demand. Investment in network costs to meet peak demand has to be spread among other users, many of whom don’t have the means or the luxury of investing in solar PV.

Solar power company, SolarCity, has filed complaints with the EA asking it to stop Unison’s solar tax, saying it disadvantages customers and breaches the code that governs electricity industry participants. The company claims that since Unison introduced the tax, other lines companies have quietly ­followed suit or are considering doing so.

About 80% of the country’s electricity comes from solar and other renewable sources such as geothermal, wind farms and hydro. Photo/Getty Images
About 80% of the country’s electricity comes from solar and other renewable sources such as geothermal, wind farms and hydro. Photo/Getty Images

SOLAR PITCH


Andrew Booth, chief exe­cutive of SolarCity, which is offering consumers a monthly rental fee for battery storage and home solar in partnership with Panasonic, says it’s “unquestionable” that energy storage and solar PV will drive a fundamental change in the structure of the electricity industry. He reckons it’s already economic for consumers to make the shift, with savings varying depending on whether you’re in an area of higher power prices such as Northland.

Brendan Winitana, chairman of the Sustainable Energy Association of New Zealand (Seanz), says solar PV pricing in New Zealand is forecast to drop another 10% this year, which will drive more competition and greater uptake. Installations have gone from 3500 three years ago to nearly 10,000 today.

He claims solar averaging 16-20¢ per kilowatt-hour is already at “socket parity” with traditional power averaging 27¢ in Auckland; he’s picking the tipping point for the new technologies to be 2018, just two years away. “The end game is creating a secondary peer-to-peer market above the wholesale market that sits between ­consumers and wholesalers.”

Photo/Brendan Winitana, top, and Simon Coates. Photo/Supplied/Chris Coad
Photo/Brendan Winitana, top, and Simon Coates. Photo/Supplied/Chris Coad


Seanz wants New Zealand to roll out something similar to New York’s Reforming the Energy Vision (REV), which co-ordinates and facilitates the use of various distributed energy resources (DERs), such as such as storage and advanced renewable technologies, on the grid. REV will allow customers of all sizes to choose from a menu of DERs to produce and store their own power, as well as reduce usage.

In a submission to the Electricity Authority, Seanz said there’s a risk that distribution assets will be stranded by a sharp uptake in the new technologies unless a new pricing model is introduced that reflects the actual costs of maintaining the mainly community-owned assets rather than protecting historic investments.

Simon Coates, a director of Concept Consulting, which is due to release a report on the economics of new electricity technologies, says solar PV doesn’t stack up for consumers at the moment, but will longer term if prices for both solar and battery storage keep falling. The issue, he says, is that increasing solar generation is not economic for the country, which still requires users to pay to maintain the national distribution network.

Electric vehicles could change that. Batteries to both run cars and supply power in homes are another factor to consider, as electric vehicles approach the tipping point of take-up, Coates says.

Electricity Networks Association chief executive Graeme Peters argues that solar PV is still not economically viable in many areas, “but when you combine that with battery storage, it’s a different scenario”. The upside, he says, is the potential to drive down peak demand, which will mean less capital investment required in the network. “It’s hard to know what the impact will be because we feel like we’re staring into an abyss.”

Solar accounts for less than 1% of electricity generation, and there are only about 1000 electric vehicles, and very few storage batteries in use, he says.

“The one thing we agree on is that we’re going to be disrupted; we’re not in denial on that,” Peters says. “But this is not a Kodak situation.”

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