Asia Pacific's solar-plus-storage could see key developments in next five years
In a recently published report, Wood Mackenzie projects solar-plus-storage prices or levelised cost of electricity (LCOE) for both utility-scale and distributed commercial & industrial (C&I) segments to decline considerably over the next five years.
Solar-plus-storage refers to a battery system that is powered by solar through solar photovoltaics (PVs). As grid resiliency and renewables intermittency continue to be a challenge in Asia Pacific's power markets, solar-plus-storage could address these issues particularly as solar and battery costs continue to decline.
According to Wood Mackenzie, unsubsidised utility-scale LCOE for a 4-hour lithium-ion solar-plus-storage will command a cost premium between 48% and 123% over solar LCOE in 2019. This will reduce to between 39% and 121% in 2023.
"By then, solar-plus-storage costs would already be competitive against gas peakers in all the National Electricity Market (NEM) states of Australia," said research analyst Rishab Shrestha. "The country's utility-scale solar-plus-storage LCOE will hover at about 23% above average wholesale electricity price."
Only Thailand is expected to have a utility-scale solar-plus-storage LCOE below the average wholesale electricity price by 2023. While the country does not have a wholesale electricity market, industrial power price taken as a proxy is higher compared to other wholesale markets and hence shows competitive solar-plus-storage economics.
CAPEX subsidies and additional remuneration through different forms of renewables certificate will be crucial for projects to go-ahead.
"In general, we expect the average solar-plus-storage LCOE in Asia Pacific to decrease 23% from US$133 /megawatt hour (MWh) this year to US$101 /MWh in 2023," added Shrestha.
On the distributed C&I solar-plus-storage front, the storage premium over solar LCOE is between 56% and 204% this year. In 2023, the cost premium will narrow to between 47% and 167%.
"The reason you have such wide LCOE range is because we have some mature markets where solar cost is extremely competitive while others are not and some in-between. This is due to a mix of labour/ land/ environment/ civil costs, weighted average cost of capital, and procurement methods (tenders vs feed-in tariffs (FIT)). Also, some markets have very well established supply chains with the availability of storage manufacturing," added Shrestha.
Unsubsidised C&I solar-plus-storage is expected to be competitive in Australia, India and the Philippines by 2023.
"The residential market also poses a great opportunity for solar-plus-storage," said senior analyst Dr. Le Xu, "In 2018 with the help of government subsidies, Australia's New South Wales saw a 76% savings on annual electric bills through solar-plus-storage installations."
Another attractive residential solar-plus-storage market is Japan. FIT for 600MW of solar projects is poised to expire this year. As power prices are set to increase, storage retrofits provide an opportunity for home consumers to avoid high residential prices.
Storage is still at its infancy in market development. The market will need to fairly compensate the value storage provides in order for storage paired renewables to take off. There is also enough leg room for pure solar to be added to the grid, although the extent varies from region to region.
Business models still need to be refined according to market design and future policy options. Safety and fire hazards also need to be looked at carefully. Once these challenges are addressed solar-plus-storage will be a great asset for the power grid.