State governments can deliver benefits to electricity consumers, Australian industry and the public purse by using home battery storage incentives to encourage consumers to ‘trade in’ generous solar Feed-In Tariffs (FITs), writes Redflow chief executive Simon Hackett.

Announced 10 years ago, solar FITs have already proved enormously successful in achieving their goal of kickstarting solar panel adoption in this country.

Australia is the world leader in its per capita deployment of solar panels. Earlier this year, Energy Minister Josh Frydenberg, speaking on the ABC’s show Q&A, said that nearly 15% of Australian households have solar panels on their roofs.

“That’s the highest number of solar panels on people’s roofs per capita anywhere in the world,” he said.

The Conversation’s fact-checking service subsequently upped the ante by reporting that the latest data suggest this penetration rate is more like 16.5%.

Independent community organisation Solar Citizens released a report in June this year that says Australians have installed 23.2 million solar panels. Consumers have spent more than $1 billion of their own money to install small solar systems with less than 10kWh of capacity.

From a public policy point of view, this is ‘Mission Accomplished’.

The solar panel installation industry is now well and truly established in Australia. Continuing to pay generous solar FITs beyond this point represents a substantial forward liability for the public purse that does not deliver improved public good outcomes.

However, state governments are clearly sensitive to the political risk of simply cancelling these long-running tariff schemes, some of which hold liabilities to as far as 2028. Fortunately, policy makers have an attractive way to solve this problem – a solution that will deliver both public policy and industry development benefits and keep voters happy while simultaneously removing long term liabilities.

This solution involves inviting consumers to voluntarily trade in the residual life of their FIT in return for funding them to buy a home energy storage system. This would have the dual benefit of eliminating this long-term liability for governments while kickstarting a home energy storage industry in Australia – all using money that they have already ‘spent’.

The remaining forward liability for a given customer can be easily estimated based on past subsidy payment patterns. In many cases, governments may actually spend less to subsidise a battery today than to fund the long-running forward liability of the FIT for the next 12 years.

The time is right for this sort of innovative thinking. Over the past year, Australia has emerged as a global battery testing ground because of its widespread deployment of solar panels and high electricity costs.

Competition in the energy storage sector is now creating a wider range of choices and driving down prices. Global companies such as Tesla, LG, Panasonic and Enphase have entered the market with lithium-based batteries, which are based on an energy storage chemistry developed for portable electronics such as notebook computers and mobile phones and, most recently, electric vehicles.

Australia also has its own horse in this race in the form of Redflow Limited, an ASX-listed company of which I am CEO, executive chairman and the largest shareholder. Brisbane-based Redflow has developed the world’s smallest flow battery, an alternative chemistry to lithium-based batteries, which offers compelling advantages for on-grid and off-grid stationary energy storage applications.

Redflow’s Australian-developed zinc-bromine flow batteries are already deployed in Australia, Africa, Asia, America and Europe. Earlier this year, Redflow launched its ZCell energy storage system for the residential sector.

This activity shows that Australia is entering the second phase of the renewable energy revolution. The first phase – which saw solar panels and wind farms appear nationwide – had one significant limitation – intermittency. The sun doesn’t shine all the time nor does the wind always blow.

The second phase of the renewable energy revolution will bring widespread deployment of batteries that will allow renewably-sourced energy – specifically wind and solar – to be stored and supplied when it is required.

By solving the problem of intermittency, energy storage systems will enable wind and solar generated energy to become available 24 x 7. This will create a viable path for Australia to meet its renewable energy targets by replacing fossil fuel-powered baseload energy generators with renewable energy stored in batteries.

This creates an enormous opportunity for Australia at a number of levels – from consumers and electrical contractors to energy utilities and the Federal Government. The solar FIT buyout concept has generated significant interest in the Australian renewable energy sector and, according to media reports, is being considered by the Queensland Government.

When you look at the cascading levels of benefits delivered by energy storage, it’s easy to see why this proposal is gaining widespread attention. Just as with solar incentives, a solar FIT buyout will prove politically popular with citizens who increasingly regard home batteries as a way to reduce electricity costs and increase their energy independence.

For electrical contractors, energy storage systems offer a ‘second breath’ for an industry that has grown strongly on the back of installing solar panels. While demand for solar installation remains robust, growth has slowed considerably since its peak in 2012 and 2013, when it was fuelled by the availability of attractive solar FITs.

Repurposing this same FIT expenditure to encourage energy storage uptake will support industry growth and build a wider range of skills and experience in an area of world-leading innovation.

This proposal has the virtue of re-using funds previously committed to kickstarting the PV solar panel sector to encourage the emerging energy storage sector – with associated jobs and business growth.

Widespread energy storage will also benefit far-sighted electricity companies by reducing demand during peak power usage periods and giving them the potential to buy home-stored energy as a ‘virtual’ on-demand power source rather than relying on fossil fuel-driven peaking gas generators.

Nationally, widespread energy storage, both at the consumer level and the grid scale, will help Australia achieve its international carbon reduction commitments by time-shifting renewable energy so it can be used 24/7, not just when the wind is blowing or when the sun is shining.

So there is a compelling case at each of these levels for state governments to buy back existing long-term solar FIT liabilities with an immediate incentive to buy and install home batteries – which in many cases will save these governments money.

Even consumers in those states, such as NSW, which are terminating generous FIT schemes in the near future, can benefit from such a buyback scheme. By encouraging battery uptake, the buyout program will create greater competition and drive down prices throughout the country.

Swapping solar FITs for home battery installations is not just a win-win: It’s the gift that keeps on giving.