Asia Pacific's solar-plus-storage costs could fall 23% by 2023

Unsubsidised utility-scale solar-plus-storage could fall by as much as 39-121% in 2023.

Wood Mackenzie expects developments in solar-plus-storage in the Asia Pacific as it forecasts the average levelised cost of electricity (LCOE) to drop sharply by 23% from $133/MWh this year to $101/MWh in 2023.

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, Wood Mackenzie said.

Unsubsidised utility-scale LCOE for a four-hour lithium-ion solar-plus-storage is expected to command a cost premium between 48% and 123% over solar LCOE in 2019 and fall 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. “Whilst 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,” Wood Mackenzie said.

Subsidies for capital expenditures and additional remuneration through different forms of renewables certificate will be crucial for projects to go-ahead.

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 there are some mature markets where solar cost is extremely competitive whilst 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, Wood Mackenzie said.

However, 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,” Xu said.

He added that 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.