Energy storage analyst Wood Mackenzie forecasts that despite COVID-19 Australia is set to more than double its year-on-year installed energy storage capacity in 2020.
The industry forecasters predict the country will add 1.2GWh of energy storage capacity this year, taking its cumulative storage capacity to 2.7GWh. Last year, Australia installed 499MWh of energy storage capacity.
By 2025, WoodMac estimates Australia’s cumulative storage deployments to reach 12.9GWh— translating to energy storage investment of around US$6 billion.
For the first time, front-of-the-meter (FTM) capacity—672MWh— is set to overtake the back-of-the-meter (BTM) capacity— 581MWh— due in part because of funding programmes by the federal and state governments, as well as the Australian Renewable Energy Agency (ARENA).
The FTM market’s cumulative capacity could hit 4.2GWh by 2025 with the majority coming from solar-plus-storage.
Wood Mackenzie (WoodMac) senior analyst Le Xu predicts the costs of energy storage systems will decline 27% over the next five years, with the levelised cost of electricity of energy storage paired with renewables expected be cheaper than gas plants by 2025
“In general, we can expect renewables-plus-storage costs to be about 20%-29% lower in 2025 compared to today,” said Xu.
However, Xu said the FTM market’s leading position was likely to be short-lived as the industry faced many uncertainties.
Xu said: “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.”
BTM installations previously led capacity growth as state governments issued subsidies for rooftop solar and residential storage, as well as funding for distributed energy resources.
Residential, commercial and industrial customers are also incentivised to install BTM systems to manage rising electricity bills and power outages.
Other concerns surrounding the country’s energy storage industry include ARENA phasing out its advanced renewable funding, with storage developers having to seek private equity to cover 10%-50% of initial project investments.
There’s also the matter of revenue uncertainties and risks of grid connection that could potentially prevent projects from attracting funding. The FTM market is most affected by this and is likely to contract in 2022, say WoodMac.