Economic Viability Assessment of Neighbourhood versus Residential Batteries: Insights from an Australian Case Study

Soheil Mohseni (), Jay Rutovitz, Heather Smith, Scott Dwyer and Farzan Tahir
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Soheil Mohseni: Institute for Sustainable Futures, University of Technology Sydney, Sydney, NSW 2007, Australia
Jay Rutovitz: Institute for Sustainable Futures, University of Technology Sydney, Sydney, NSW 2007, Australia
Heather Smith: Institute for Sustainable Futures, University of Technology Sydney, Sydney, NSW 2007, Australia
Scott Dwyer: Institute for Sustainable Futures, University of Technology Sydney, Sydney, NSW 2007, Australia
Farzan Tahir: Institute for Sustainable Futures, University of Technology Sydney, Sydney, NSW 2007, Australia

Sustainability, 2023, vol. 15, issue 23, 1-27

Abstract: Amidst the evolving paradigms of the contemporary energy landscape, marked by the imperative of sustainability and efficiency, the integration of energy storage has emerged as a transformative strategy that seeks to recalibrate the dynamics of electricity distribution and consumption. However, there remains a pressing need to determine the most economically viable approach for deploying energy storage solutions in residential low-voltage (LV) feeders, especially in rural areas. In this context, this paper presents the results of an economic evaluation of energy storage solutions for a residential LV feeder in a rural town in Australia. Specifically, the study compares the financial viability of a front-of-the-meter (FTM) battery installed on the feeder with that of a fleet of behind-the-meter (BTM) batteries. The FTM battery, with a size of 100 kW/200 kWh, is assumed to be operated by the retailer but owned by the community, with any profits assigned to the community. In this scenario, we studied a battery operating under standard network tariffs and three different trial tariffs that distribution network service providers currently offer in Australia. On the other hand, the fleet of BTM batteries (3 kW, 3.3 kWh) are individually owned by households with solar installations, and their cumulative capacity matches that of the FTM battery. The comparison is based on key economic parameters, including network charges, retail margins, frequency control ancillary service (FCAS) revenues, wholesale energy costs, technology costs associated with community batteries, and net profit or loss for the community, as well as considerations of utility grid arbitrage and solar photovoltaic (PV) self-consumption. The study also assumes different grant levels to assess the impact of subsidies on the economic feasibility for both battery configurations. The findings indicate that, while both require some form of subsidy for profitability, the BTM batteries outperform the FTM battery in terms of economic viability and so would require lower grant support. The FTM battery case finds a need for grants ranging from 75% to 95% to break even, while the BTM fleet requires approximately 50% in grants to achieve a similar outcome. In conclusion, this study highlights the importance of grant support in making energy storage solutions economically feasible. In particular, it highlights how the less mature segment of FTM batteries will need higher support initially if it is to compete with BTM. The outcomes of this study inform decision-making processes for implementing energy storage solutions in similar communities, fostering sustainable and cost-effective energy systems.

Keywords: community batteries; neighbourhood batteries; energy storage; solar photovoltaic; renewable energy; Australia (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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