Mrs SG and I are big fans of green energy. We have as many PV panels as we could cram on our roof, and they generate an average of 18kWh/day. That varies a lot through the year, of course. At the moment they are managing 10kWh/day, but the midsummer record is 31. As it happens today is the 9th anniversary of the panels’ installation and their total output has been 60,831kWh. I estimate the financial return on our investment to have been 8.8%pa – not taking into account depreciation (the system will probably outlive Mrs SG and me), the public subsidy or the value of carbon credits that we had to sign over to the installer.
We don’t have a battery though. When we have surplus production we sell it to our French-owned supplier (on average 6kWh/day) and when we’re running our centralised heating/cooling system we buy to make up our deficit at more than three times the price at which they buy from us.
Some people talk glibly about large-scale battery storage to solve the problem of intermittent output from solar panels and wind turbines, but the cost of this strategy is not sidely understood. AGL (an Australian company that generates and distributes electricity, and has been characterised by Greenpeace as the country’s biggest emitter of greenhouse gases) has commissioned a huge Li-ion battery to be built on Torrens Island, South Australia. It will have capacity for 250MWh and cost A$180M (US$130M at the present rate of exchange). The capital cost is therefore A$720/kWh (US$520/kWh). Feel free to check the maths in case I’ve made a mistake.
Our car – an average-sized petrol-driven sedan – has a fuel tank that holds 51 litres. 1 litre of petrol contains 8.8kWh of energy. Therefore the cost of a Li-ion battery with the energy capacity of our fuel tank would be 51 × 8.8 × US$520 = US$233,000. This is an order of magnitude more than we paid for the car.
So how does AGL think it can make money from this huge battery? The answer lies in the magic of the free market, which now prevails in Australia thanks to the fragmentation and privatisation of what used to be a publicly-owned monopoly. According to the Australian Energy Market Operator (AEMO) the average wholesale price of electricity in 2020-21 ranged from A$0.045/kWh in Tasmania to A$0.072/kWh in NSW. At these prices AGL would have to fully charge and discharge its battery at least 4 times a day to turn a profit.
But, due to wildly mismatched supply and demand profiles, on 22 occasions last year the market price of electricity spiked about A$5/kWh. That’s not a misprint: five dollars per kWh! So AGL will keep its powder dry until there is a sudden extreme shortage and then sell the contents of its battery to the highest bidder. If the whole battery is emptied at A$5/kWh (which is nowhere near the maximum price, mind) AGL will receive a windfall of A$1.25M. At its maximum discharge rate the battery will empty in an hour. Great for price spikes and short-term outages, but it’s not like having a hydro-electric dam full of water. Hence the need for:
- Snowy Hydro 2.0 – pumped storage for 350GWh (1,400 times more than AGL’s battery) that’s expected to take 8 years to build and cost at least A$5bn. That’s equivalent to US$10/kWh, about midway between our petrol tank and AGL’s battery on a logarithmic scale.
- Back-up dispatchable power (available at the push of a button) from some other source. The Government favours natural gas, of which Australia has an abundance; green voices propose biomass; some contrarians suggest nuclear power, which is a political no-no at the moment.
That’s all. There’s no punchline.