1. The Challenge

The Australian National Electricity Market (NEM) continues to undergo a world leading transition to renewable energy. South Australia (SA) has the highest household PV penetration at 43 percent, which recently saw distributed PV supply 84 percent of the state’s demand.  This has presented the NEM with several new challenges, including:

• Negative pricing: The surplus amount of solar energy during the middle of the day is increasingly resulting in negative spot prices.  For example, for the first 9 months of 2021 the spot price in South Australia averaged negative $47 per MWh for 15 percent of trading intervals. This is likely to result in solar feed in tariffs declining to zero over the medium term.

• Minimum demand: SA is also experiencing levels of minimum demand that threaten the safe operation of the network. In response SA has introduced “Solar Soaker” tariffs, which offer the lowest network prices during the middle of the day.  AEMO has forecast that the whole NEM would start to experience periods of minimum demand by 2025 (see chart below).  AEMO has also just proposed that all new PV systems will need to have the capability for dynamic export limiting to allow for remote curtailment of PV production.

2. The Solution

Having an excess of low-cost energy is usually met by industry as promoting the case for household battery storage. However, the high up-front capital cost, as well as the questionable payback for all but the largest energy users, does not make this an option for many. Controlled electric vehicle charging is also unlikely to be a similar consumer proposition for at least the next decade. So, this leaves the question as to the most appropriate option for the majority of Australian households to:

• Maximise use of their own solar PV generation, rather than export it for minimal benefit
• take advantage of the benefits of the emerging two-sided market for energy?

While batteries and electric vehicles are enjoying a large share of the limelight of the DER transition, another domestic appliance has largely been overlooked. That option is electric storage hot water – but one that is updated with some clever digital innovations.  In particular the flexibility to respond to the highly variable nature of household DER, and maximise the use of free excess solar PV. 

Rheem has developed a smart hot water system (Solahart Power store), and its innovations include:

• Integration with the PV inverter to use electricity whenever there is export energy, or it can be remotely activated by a service provider during negative price events.
• Ability to “time shift” up to 21 kWh (from cold) of electricity in a similar way a battery does. Normal reserve capacity is 14kWh.
• Triple Blade element design allows for 7 incremental steps in water heating / electricity usage to match the export profile of PV up to a maximum 3.6kW.
• 6 temperature sensors allow for stratification of the water heating, and maintains a minimum customer amenity via grid charging if required

3. Household Benefits

The key attraction of hot water as storage for PV owners is the cost/benefit relative to batteries for energy storage. Using industry standard calculation methods. Our analysis found that a Power store is able to achieve 55 percent of the financial benefits of a 14kWh battery for 10 percent of the cost. With a 4.8kW system it derives up to 90 percent of its input energy that would otherwise have been exported to the grid for a feed in tariff but avoiding the standard off-peak hot water tariff. Independent analysis has found that having a 5.4kW PV system should achieve 95.5 percent of hot water energy requirements. Noting that the current average install size in Australia is now 8.5kW.  This data is being validated as part of the ARENA sponsored trial being undertaken in SA. 

The additional “smart” technology means that a Power store is more expensive than a standard electric storage water heater. So, the payback calculation is dependent upon whether the customer waits until their old system needs replacing or not. Assuming a replacement system, the payback on the incremental cost is 5 years. The payback would be shorter if we included potential two-sided market and frequency support (FCAS) revenues, or when aggregated with the PV investment benefits.

4. Grid Benefits at Scale

The benefits are amplified when seen as a potential tool to address the minimum demand issue. We modelled the storage capacity for New South Wales under the scenario of all storage hot water systems that were currently on controlled load arrangements being replaced with Power store over 15 years. If orchestrated as a fleet it shows a potential storage capacity of 4.7GW at a small fraction of the cost of equivalent household battery capability.

It may not be as glamorous as batteries and EV’s, but orchestrated smart water heating is an appliance all homes can access and could play a huge role in the grid of the future.