Australia’s energy storage capacity to more than double in 2020

Australia is set to more than double its energy storage capacity installations in 2020 compared to 2019, says Wood Mackenzie.

Australia is set to reach 1.2GWh of new energy storage capacity installations in 2020 from 499MWh in 2019.

By installing 1.2GWh, Australia’s cumulative energy storage capacity will stand at 2.7GWh.

This year will be the first time, front-of-the-meter (FTM) capacity (672MWh) will overtake the back-of-the-meter capacity (581MWh).

This is possible because of strong financial backing imposed by ARENA and the governments on FTM projects in 2020.

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Previously, the Australian government and ARENA have largely backed BTM projects by issuing subsidies for rooftop solar and residential storage, as well as funding for distributed energy resources.

However, ARENA has phased out its advanced renewable energy funding hence the need by energy storage project developers to seek private sector funding.

Revenue uncertainties and risks of grid connection may prevent projects from attracting funding. The FTM market is most affected by this and is likely to contract in 2022.

Le Xu, a senior analyst with Wood Mackenzie, said: “The FTM market’s leading position is likely to be short-lived as the industry faces many uncertainties. The coronavirus-led restrictions and economic downturn could cause delays or cancellations to the 4.6GWh announced projects in the pipeline over the next five years.

“South Australia, in particular, is at risk as the majority of the planned deployments are located there. Developers with strong balance sheets are in a position to push ahead with their project developments, but still face grid connection challenges in the future.”

Wood Mackenzie predicts the FTM market could hit 4.2 GWh by 2025 owing to an increase in the rollout of solar-plus-storage and in falling battery costs.

Xu added: “The costs of energy storage systems will decline 27% over the next five years. By 2025, the levelised cost of electricity (LCOE) of both solar-plus-storage and solar-and-wind-plus-storage are expected to be cheaper than gas plants.

“In general, we can expect renewables-plus-storage costs to be about 20%-29% lower in 2025 compared to today.

“As Australia gradually phases out its 31 GW coal fleet, it will need to look for alternatives. Project developers, both domestic and international, are clearly unfazed by the challenges. The number of Australian developers has doubled to 40 this year.

“By 2025, we estimate Australia’s cumulative energy storage investment to hit $6 billion. This translates to 12.9 GWh of cumulative storage deployments.”

Read the full report here.