Morgan Stanley: Australian utilities underestimate disruptive power of solar+storage

Dive Brief:

Australian utilities are underestimating the disruptive potential of solar-plus-storage technology, according to a new report from investment bank Morgan Stanley.
The report estimates that solar and storage technology will be adopted four times more quickly in Australia than the country’s utilities expect.
Morgan Stanley estimates battery storage will grow from about 2,000 Australian homes now to one million by 2020 or as high as two million homes by 2020 in its most optimistic estimate.

Dive Insight:

Australia is often viewed as a “proving ground” for solar-plus-storage that could provide valuable lessons for deployments in other markets.

Rooftop solar penetration in Australia is among the highest in the world, with about 13% of homes in the country hosting solar panels on their roofs. In 14 postal codes in the country, more than half of residences have rooftop solar, according to a recent report from the Australian Climate Council

And, like another closely watched market, Hawaii, the country has revised its net metering policies.

Solar feed-in tariffs (FIT) are being phased out in Australian states with some of the highest levels of solar power penetration, like New South Wales and Victoria.

The combination of lower FITs and rising electricity rates — up between 75% and 125% in the past seven years — is creating a ripe market for combining storage with new and existing rooftop solar arrays, GTM Research noted earlier this year.

While many utilities in Australia downplay the potential of storage, the Morgan Stanley report says storage installation costs are likely to fall by 40% within two years. And falling storage costs will likely trigger wider adoption, creating a tipping point in the market by 2018 that would usher in a period of rapid deployment.

“We think most incumbent utilities downplay the earnings risks from solar and battery take-up, and the market has not yet priced in the retail and wholesale market effects,” the Morgan Stanley analysts wrote, according to RenewEconomy. “We think the impact of solar and batteries will play out in a slow and steady fashion over time until reaching a tipping point in the next few years, showing up as unexpected drops in electricity demand) and lower average wholesale electricity prices and caps (which reflect volatility).”