pv magazine Australia: Early this year, Australia was tipped to lead the world in the residential battery uptake and make up 30% of global demand. From a viewpoint of a manufacturer, is the market actually living up to expectations?
Dunn: The quick answer to that is – no. It’s not meeting the suggested expectations that were publicized by BloombergNEF at the beginning of the year. The Australian home battery market is still growing but it might be at a slightly slower rate than what was anticipated earlier. That has a lot to do with the education of the end customer.
The uptake was expected to accelerate on the back of a number of battery schemes integrated into state and territorial energy policies. What do these subsidy programs mean for the market?
We think it’s great the states are taking the time to think about their constituency and provide them with an opportunity to work towards energy autonomy because of the ever increasing cost of electricity, particularly over the last five to 10 years. Utilizing PV and energy storage is a great way for the end customer to not be surprised when the energy bill comes to them on a regular basis.
Australia has taken to renewable energy from a residential rooftop perspective very well, in some states that is between 25 and 30% penetration of rooftop PV, and it has been interesting to watch consumers understand that the installation of solar is not necessarily the beginning and the end for them from an energy saving perspective. As feed-in tariffs have reduced over the last years, the energy storage proposition has been brought more to the fore.
What are the headwinds for residential battery storage uptake in Australia?
From a market perspective, the biggest challenge is that consumers are not necessarily aware of the full benefits that they could gain from implementing the right energy storage solution for their home. What we are finding is that there is a number of energy storage installations that haven’t met the customer’s expectations, and as word of mouth spreads that slows down the rest of the constituency actually thinking about the benefits of energy storage.
Also, there is a perception in the marketplace that energy storage will reduce in cost significantly over the coming years and people are holding off purchases because of that. If I take it back to the early days of solar, we are seeing the same scenario play out with home batteries. It’s our job as energy storage providers, manufacturers and resellers to educate the consumers so that they can maximize their benefit. Generally, we have seen a number of installations that actually don’t match the solar installation, so it’s all about right-sizing.
What has been sonnen’s experience with the programs in SA, QLD and VIC?
We’re incredibly confident about the SA Home Battery Scheme, because we were there when the program was launched last October as one of the earliest participants. Now I’m happy to say we have more than doubled our sales in SA. Although on a YoY basis, our penetration in SA has more than doubled, that wasn’t an easy achievement. There was a lot of education from our end and making sure that the end customers actually knew what they were purchasing and understood the connection between their solar generation and their energy storage.
What are the lessons learned?
The Queensland subsidy which ended in June this year is already a good example of a scheme that was limited by the fact that it primarily focused on the dollar value related to the low or no interest loans that would be provided. Given that it was focused more on the dollar value, it resulted in the installation of much smaller-sized energy storage solutions and because they were much smaller, it meant that they did not necessarily meet the requirements of a large amount of constituencies that were out there and were looking to maximize their solar penetration.
Another big subsidy scheme will be launched this summer by the NSW government and eventually see 300,000 solar-battery systems rolled out across the state. sonnen has made a submission for the NSW Empowering Homes Program, so what message has it sent?
A good degree of the feedback that we have provided to the NSW government particularly in relation to the implementation of their scheme has to do with right-sizing. Instead of actually providing a set fee for the installation of a home battery, we have proposed the installer gets a flat percentage of dollar amount of the installation to make sure that they were focusing on the lowest common denominator being price and installing a solution that prioritised the quality and warranty of a home battery. This is increasingly important as more households will eventually be connected to VPPs.
As part of our experience in the government schemes, we know that if they set a cap in NSW which at the moment is at $9,000, it will limit the number of participants that can actually take part in the program because larger systems will just not be covered.
From our experience over the last 12 -24 month, the solar system size in Australia has been increasing. At the beginning of 2017, the average system size was around 5-5.5 kW, we are now seeing the average system sizes in the vicinity of 7.5-8 kW and in order to maximize a system of that size, you need a 10 to 12 kWh battery and you just not going to be able to get a proper battery under the $9,000 cap that they have set.
Has there been any reaction from the NSW government to your feedback?
This is one of the things that I am enjoying the most about the engagement with the NSW government – they are constantly pulsing the market. As recent as three weeks ago, we had the opportunity to provide them with our feedback. So they have released the program and asked for industry feedback and they have been pulsing the market on a regular basis and asking for more feedback to make sure that whatever program they implement will maximize the benefit of the money that they are actually going to be spending.
We saw a bit of that with the SA government, we saw very little with the implementation of the Victorian scheme and Queensland scheme. That’s not to say they did a poor job of consulting the industry, I think they consulted the industry but in a more finite manner, the NSW government is actually taking a broader reach-approach to getting feedback from the market on how to implement it correctly.
The ultimate goal of the state battery schemes is to built virtual power plants and buttress the grid. Sonnen has floated plans to aggregate its sonnenFlat package customers into the equivalent of a gas-fired peaking power plant in SA. Is the company already working on this and how far has work got?
We are already working on it. Since sonnenFlat is not a proposition which is sold regularly in combination with the battery system, we are contacting our customers to talk them through the offer. After that, we are individually right-sizing their sonnenFlat plans. We have see around 25-30% growth among sonnenFlat customers, but we definitively need a lot more customers to maximize the work we are doing with the VPP. But it’s in progress and we have already started testing the back end of the market from the utilization of these batteries and operating within the National Energy Market.
Has sonnen’s feedback to the NSW government included any message about VPPs?
We’ve been very specific in our feedback around the quality of the product that is being approved for utilization in the scheme, the way the NSW government should be looking at those qualified products and how they would work in VPPs. All batteries are not made equally and what we have presented quite emphatically to the government is that it is important for both them and the end customer to understand the manufacturer’s warranty and the performance warranty.
So, for example, when a battery is part of a VPP it is likely to be cycled more than once a day, but a lot of the manufacturers which are in the country at the moment state as part of their warranty that the cycles that the battery will go through will impact the life of the battery. Therefore, they’ve reduced their warranties if it is cycled more than one or one and a half times. The sonnenBatterie is designed to cycle 2-2.3 times a day within a VPP scenario and we have a 10 year warranty which is considered one of the best in Australia. We are the only vendor who can provide that. While sonnen is certainly not asking the NSW government to lock out other providers, it is important for customers to know that the warranty will change as part of the VPP for most of the other vendors.
How far has the consultation with the NSW government progressed? We know the installations are expected to begin this summer.
They are still on target to launch this summer 2019/2020, but we think it could be anywhere between December 1 and end of February.
Anything else the NSW government needs for a successful program?
We have seen how the Victorian rebate scheme has been implemented and particularly from the solar installation perspective, it has met some challenges. They were working with smaller number of subsidies provided in the in the beginning of the program rollout. The NSW government had suggested to do the same thing and a big part of our feedback referred to the limitation of subsides which could affect the uptake of the scheme. Our recommendation was that they need to figure out a better way than capping the output in the first instance.
sonnen began to assemble batteries in Australia in late November signaling strong commitment to the market. What is the current status in terms of output and number of employees? What’s next for the Adelaide plant?
The facility is built to construct more than 10,000 batteries every year and the team has grown to 65 full time jobs with around 20-30 people in production, logistics and operations. We moved into the production facility in early-mid October and we were pushing sonnenBatteries out the door by the middle of November, which from my perspective was a fantastic achievement and this has met sonnen’s expectations.
The team continues to be fully engaged in the manufacturing process and we are now working with the broader organization to identify new markets that we want to enter, mostly in the Asia-Pacific region. The most attractive one is Japan, but it will probably take us a bit more time to determine the right fit for product for the market. We know Japan has a particularly strong appetite for energy storage as a significant number of customers are coming off very generous feed-in tariffs at the end of 2019. We see that market growing exponentially over the next two-three years.
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