In what could prove to be a landmark move for the Australian solar-and-storage industry, the federal Labor Party unveiled a $2.3 billion proposal to subsidise distributed batteries on Sunday. The policy would amend the Small-scale Renewable Energy Scheme (SRES) scheme to provide a 30% reduction in upfront cost for a distributed battery system.

It was a badly kept secret but a welcome development. Rumours and reports that the federal Labor Party were keen to adjust the SRES program to include batteries had been circulating for months. And now it’s official.

If re-elected on May 3, an Albanese government would roll out a program to subsidise battery systems for homes and businesses.

In announcing the move, Labor claimed that the policy would see one million batteries deployed – and power bills slashed by up to 90%. They’ve big numbers, but with $2.3 billion of funding behind it, it’s a big boost for solar installers around the country.

More details in briefing

To provide additional details to the industry, Labor’s Chris Bowen joined a Smart Energy Council “industry briefing” on Sunday. Bowen addressed some pertinent questions (thanks to SolarQuotes for taking down the details):

●    Batteries must be installed alongside a new or existing PV system.

●    The subsidy will roughly equal $372/kWh of usable capacity – minus some fees and charges.

●    The subsidy amount will decrease over time, as battery prices fall – similarly to the solar SRES.

●    The program will begin July 1. However, batteries installed before that date are eligible – but can’t be switched on before that date.

●    Systems up to 100 kWh can be installed, but the subsidy will only apply to 5 - 50 kW of system size.

●    New batteries can be added to existing one and still be covered by the program.

●    One owner can install batteries at multiple properties.

●    The government will purchase the certificates created by the battery installation.

●    “Double dipping” will be allowed, in states where there are existing battery programs – such as WA and NSW.

Warm reception

The usual suspects have lined up to support the policy. The Smart Energy Council described it as a “massive announcement”. The Clean Energy Council emphasised the links between its campaign and policy, saying “it’s great to see that the ALP has heard our calls to back home batteries.”

The Property Council of Australia welcomed the move, noting that, "electrification is the fastest and cheapest way to decarbonise our built environment.” It said that electrifying homes and businesses would save $49 billion on energy costs through to 2050.

The Independent MP for Indi, in Victoria, Helen Haines also welcomed the announcement – while noting that it “her policy”.

“In February 2022, and again in March 2023, I introduced legislation to make home batteries cheaper by including them in the Small-Scale Renewable Energy Scheme,” said Haines. “I listened to local people in my electorate, brought forward a solution and campaigned on it, and now we see the major parties acting”. And it’s true that her pursuit of the policy has been admirable.

Multiple positives

There are many things to like about the Labor policy. Most obviously it will provide a boost to the distributed solar industry, which has been squeezed by tight margins in recent years. It will also pave the way for ongoing solar expansion, with feed-in tariffs during the day set to continue to decline, and wholesale prices during the hours of solar production already minimal and only likely to continue falling over time.

That the Labor proposal will also support batteries for small businesses and community groups is also a win. This will provide opportunities across the community to enjoy the savings batteries will deliver and support the C&I market segment.

And maintaining the SRES structure, where the subsidy decreases over time also makes sense. It has served the industry relatively well as component prices have decreased and it will be likely that batteries will follow the trend set by solar.

Speaking to the ABC, the Smart Energy Council’s John Grimes noted that distributed battery systems will also shift solar energy from the middle of the day, to meet the evening peak – a challenge for grid operators and the electricity system more generally.

“If you think about a solar battery really as time-shifting energy, [shifting] zero-cost energy from the middle of the day to that evening peak, that's what solar batteries do," Grimes said. "They take that free energy from the middle of the day and time-shift it to the evening peak period.”

The integration of these distributed batteries into Virtual Power Plants would result in the biggest impact for Australia’s energy system – opening up an additional, system-supporting role for the batteries. The Clean Energy Council noted that having a VPP capability was a part of its recommendations to the government, and Labor has heeded the call.

The Australian Energy Council, which represents energy retailers, said as much in a statement on Sunday. “The benefits of this storage will only be realised when they can also be harnessed to deliver collective power to the grid… to help reduce system costs and meet demand.”

While encouraging, the policy will only be realised if Labor is returned to government in May. It is expected that the Coalition will announce its policy to support batteries – although few details have yet been released.