The Oldest (and Cheapest) Energy Storage

Unless you’ve been living under a rock for the past year, you’ve heard of Tesla and it’s Powerwall home battery. Whilst the economics of home batteries hasn’t reached the tipping point for mass uptake of the technology, it is certainly going to in the not-too-distant future. This is a familiar story in the energy industry, with the uptake of rooftop solar accelerating year on year. According to a recent IEA report, global solar installations increased by 25% in 2015, with 50GW of capacity coming online.


The driving factor is falling PV module costs which have declined by 75% since the end of 2009. A similar trend can be seen in historical energy storage costs.

Historical energy storage costs. (source)

Bloomberg New Energy Finance predicts this trend will continue. While it will no doubt revolutionise our energy systems for the better, it will also bring several challenges.

BNEF Energy Storage Predicted Costs and Production (source)

Many hail the rapidly improving economics of renewables and storage as the solution to our energy and climate woes. I hate to be the bearer of bad news but this simply isn’t the reality. In an ideal world each consumer would generate their own power on their roof during the day and store it for use during the night. Systems would be oversized to account for prolonged periods of cloud cover and peak demand in the summer and winter months. Unfortunately recent research from The University of Sydney shows that in Australia complete grid defection is not the most economic option. Since Australia has some of the highest energy prices in the world this research can also be extended to the global context. Add to this mix the fact that apartment dwellers and office buildings have limited access to distributed generation and it quickly becomes apparent that the future of energy is riddled with complexity.

What does this mean? Load defection (where people use less and less energy from the grid) is a reality, grid defection (where the technology and economics allows for a critical mass of consumers to disconnect from the grid) is not. So the grid, and some portion of centralised generation is here to stay. Load defection is going to put more and more economic stress on the utility companies which have to maintain the grid and produce centralised generation but that’s their challenge – to reinvent their business model to remain viable. It also means that the home battery is not the panacea many would like it to be.

But, fear not, there are other forms of energy storage available which are much cheaper and far less sexy than a shiny Tesla box. I’m talking about energy demand diversion – i.e. cutting energy use where you can, and moving demand outside of peak times. This is equivalent to storing energy because an unused KWh is the same as a KWh stored for later use. In fact, it’s better because the energy dissipated during transmission from the power plant (around 10%) isn’t lost! This concept may seem simple but how many people do you know who leave the lights/heating/TV etc on when they leave the house? There’s significant demand which could be removed from the system by managing energy use smarter.

Now, I hear what you’re saying – behaviour is incredibly difficult to change on a mass scale. But perhaps it doesn’t have to be a conscious behavioural change. Technology runs the power system so why not implement technology to solve this problem too? Perhaps I’m echoing conversations had in Google’s boardroom in early 2014 when they paid a whopping 3.2 billion USD for smart thermostat developer Nest.


The Nest thermostat learns your heating and cooling requirements and knows all sorts of info about you which it uses to intelligently manage the temperature in your home. This can be linked to real-time time-of-use (ToU) tariff data so when energy is most expensive it can manage your thermostat to reduce use and therefore cost. At 250 USD each they’re not cheap, but in a lot of places they have a payback period of around 2 years and that’s a good return on investment regardless of the environmental impact.

If we want to go low tech, though, load deferral or peak shifting really is the oldest form of energy management. For example, most electrical hot water heaters in Australia are programmed to come on in the middle of the night, when overall demand is lowest and electricity cheapest. ToU tariffs were first implemented to incentivise consumers to reduce use during high demand and increase use during low demand. This is important for a couple of reasons:

  1. When demand peaks, really expensive generators need to turn on quickly. These are invariably gas generators and emissions are highest at start-up so avoiding the need for fast start ‘peaker plants’ is economically and environmentally sensible.
  2. Our power lines have limits on how much power can flow through them. When demand and generation are highest our power system is under maximum stress resulting in more maintenance requirements and costly investment in new capacity.

Unfortunately ToU tariffs are somewhat ineffectual. Firstly, there are only three pricing periods: peak, off-peak and shoulder. This doesn’t provide enough granularity for an effective response to the dynamic and seasonal energy system. Secondly, most people don’t know what their cost savings could be by responding to ToU tariffs. And lastly, ToU billing is not mandatory so some users will respond to peak pricing and others won’t – not a very effective market mechanism.

A better alternative is Demand Response or Demand Side Management (DSM). Currently reserved for large industrial users, DSM allows loads to access the wholesale market so that when energy gets very expensive they can simply turn off and not use power. This is economically beneficial to the user and physically beneficial for the energy system for reasons 1 and 2 above. What if all consumers had access to the DSM? We’d have significantly lower demand peaks and higher troughs which is better for everyone. I’m certainly not suggesting anyone watch the changing price of energy all the time but with the next wave of IoT connected devices I think this will be a cheap and effective form of energy management, even though it may not come with the bragging rights of a battery hanging on your garage wall.

This is still some ways off. In the meantime, though, just make sure you hit the lights and the A/C on your way out.

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