The Australia Experience: How Energy Storage is Transforming National Grids

Energy storage has undeniably emerged as a critical component in the growth of solar energy. For much of the last decade, high installation costs and the intermittent nature of renewable energy sources were major barriers to wider adoption. However, advancements in technology and government subsidies have significantly reduced these costs, with increased competition and production further driving prices down. Additionally, energy storage has proven to be a solution to the challenges posed by fluctuating solar and wind power. Australia serves as a prime example, with its high rooftop solar adoption followed by a pioneering energy storage initiative that sets the standard for others to follow.

In recent years, Australia has seen exponential growth in solar energy adoption, particularly in rooftop solar, where it stands as a global leader in terms of penetration. The country’s progress in rooftop solar has been unmatched, with Australia on track—or even ahead—of its targets in this sector. To support this new solar-driven energy mix, Australia has successfully embraced energy storage solutions to balance the fluctuations in solar energy generation, paving the way for a more reliable and sustainable energy future.

Australia’s Solar Growth 

According to the Clean Energy Council’s bi-annual Rooftop Solar and Storage Report for the first half of 2024, Australia has achieved a cumulative rooftop solar capacity of around 24.4 GW, putting it on course to surpass the 25 GW mark by the year’s end. This figure exceeds the remaining combined power generation capacity of the country’s black and brown coal-fired power stations, which stood at 21.3 GW in the 2023-24 financial year.

 

Solar growth has maintained its momentum in 2024, with 1.3 GW of new capacity—spread across 141,364 systems—installed by the end of June. Rooftop PV now accounts for 11.3 percent of the national electricity mix. 

Energy Storage: A Silver Bullet 

Home batteries are the missing piece needed to maximise solar savings by providing power when the sun isn’t shining, helping households significantly reduce their energy bills.

As part of its impressive solar expansion, Australia has turned its attention to energy storage, with data showing increased consumer interest in storing solar energy for future use. In the first half of 2024, 20.7 percent of rooftop solar installations included small-scale batteries, and the battery attachment rate for solar households rose to 19%—a 5% increase compared to the same period last year. 

In November 2023, it was confirmed that an Australian Renewable Energy Agency (ARENA) programme to put $120 million towards community storage received applications for more than 10 times that amount. This is reported to be the first round of funding for the Federal Government’s Community Batteries Funding Program.

Large-Scale Battery Storage

In addition to home battery growth, significant investments in large-scale battery storage have led to a sharp increase in storage capacity across Australia. According to the Clean Energy Council, 2023 was a record year for large-scale battery storage, with 27 projects under construction by year’s end, up from 19 in 2022.

These projects boasted a combined capacity of 5 GW and 11 GWh, a dramatic rise from the 1.4 GW and 2 GWh seen the year prior. Investment in large-scale storage also soared, with AUD 4.9 billion committed in 2023, compared to AUD 1.9 billion in 2022, a trend that continues into 2024.

The largest battery commissioned in 2023 was the Riverina Energy Storage System in New South Wales, with a capacity of 150 MW and 300 MWh. However, in 2024, the Waratah Super Battery, also in New South Wales, stands as the largest project under construction, with 850 MW and nearly 1.7 GWh of capacity—over five times the scale of Riverina.

This will soon be surpassed by the Portland Energy Park in Victoria, developed by Pacific Green, which will offer 2.5 GWh of energy storage. This massive project is expected to reduce wholesale energy costs in Victoria by an estimated 3.8%, according to modeling from Cornwall Insight.

According to Wood Mackenzie’s APAC Power & Renewables team, as reported in Forbes, one key factor driving the growth of battery energy storage systems (BESS) in Australia is its status as one of the most favorable markets for such systems. The team highlights that Australia’s daily spot markets for power and system frequency control services provide multiple revenue streams, essential for the financial viability of BESS.

Additionally, they point out that the decreasing price of lithium carbonate, a crucial material in battery production, has likely influenced investor confidence in storage projects. Wood Mackenzie forecasts that BESS costs in Australia could decrease by 18 percent over the next decade.

What Are Others Doing

Push for energy storage solutions to complement renewable growth isn’t just limited to Australia. More and more policy makers and corporations are now realising the need of energy storage to realise their renewable goals.  

The US

The United States put forth its dual Battery Materials Processing and Battery Manufacturing and Recycling programs, expected to enable USD 16 billion in total investment for battery manufacturing, processing, and recycling.

The US Department of Energy (DoE) announced a USD 3 billion investment in 25 projects across 14 states, aimed at strengthening domestic production of advanced batteries and battery materials. This initiative is part of a broader effort to bolster the country’s energy storage capabilities and reduce reliance on foreign supply chains. 

Earlier, the US had committed USD 1.82 billion to 14 projects focused on scaling up commercial facilities for extracting critical battery materials such as lithium and graphite, as well as manufacturing battery components. These investments also support innovative approaches to producing components from recycled materials, further advancing the nation’s push towards sustainable energy storage solutions.

China

In 2023, China experienced a breakthrough year for its industrial and commercial energy storage sectors, and this momentum has continued into 2024. By the end of the first quarter of 2024, the nation’s energy storage capacity had grown significantly, with new-type energy storage installations reaching 35.3 gigawatts—an impressive 2.1 times year-on-year increase, according to the National Energy Administration (NEA).

Investment in grid-connected batteries surged by 364% in 2023, totaling 75 billion yuan (USD 11 billion). These new energy storage technologies include lithium-ion batteries, liquid flow batteries, compressed air, and mechanical energy storage.

The NEA reports that northwestern China has seen the most rapid growth in new energy storage, with 10.3 GW of capacity installed and operational by March 2024. By the end of 2023, Northwest China had 222 GW of wind and solar power capacity and more than 10 GW of battery storage projects, accounting for 29.2 percent of the nation’s total. China’s solar power generation capacity also reached a remarkable 660 million kW by March 2024. In May, the government set a new target of achieving at least 40 GW of installed battery storage capacity by 2025.

Government policies have been a key driver of China’s energy storage expansion. For example, peak-valley pricing, which raises electricity prices during high-demand periods, encourages storage providers to sell stored energy during peak times when prices are higher, enhancing profitability for storage solutions.

What Lies Ahead

Despite ongoing efforts, home battery energy storage adoption in Australia lags behind the growth necessary to meet the Australian Energy Market Operator’s 2024 Integrated System Plan and the country’s goal of 82 percent renewable energy by 2030.

A March 2023 report from the Commonwealth Scientific and Industrial Research Organisation (CSIRO) projected that Australia’s National Electricity Market will require an additional 11 GW to 14 GW of storage capacity, along with 59 GWh to 69 GWh of energy storage, by 2030. However, Australia is adopting fast, and may remain ahead of the curve if it keeps up the momentum in place.

Other ambitious nations, such as India, can draw valuable lessons from Australia’s renewable energy progress, which has emphasised solar adoption followed by a focused push toward energy storage solutions. As of March 2024, India’s installed battery storage capacity stood at 219.1 MWh, a figure significantly lower than that of countries like Australia. A recent Mercom report predicts that India will add 1.6 GWh of standalone battery energy storage and 9.7 GW of renewable projects with storage by 2027. The nation’s target of 500 GW of renewable energy by 2030 will also rely heavily on the expansion of its energy storage sector.

The industrial energy storage sector is at a pivotal moment, presenting both challenges and opportunities. On one hand, the market potential is immense, with more industrial users recognizing the value of energy storage and showing increasing interest in adopting storage systems. On the other hand, the sector faces significant hurdles, such as the high costs associated with procurement, deployment, land acquisition, grid connections, and financing.