Your battery project will involve capital (or CAPEX), operating and maintenance costs (OPEX), funding and revenues (incoming payments for the services the battery delivers). You need to factor all into your business model. Clearly, the goal is to ensure that ongoing revenues will support operating costs throughout the life of the battery. Under current revenue models, in 2022, most neighbourhood battery business models require a subsidy to break even. This is partly associated with the relatively high cost of neighbourhood-scale batteries, but also due to the current regulatory and market environment being less favourable for batteries on the neighbourhood scale situated on the distribution network. It is expected that new revenue streams will open up and battery capital costs will reduce, such that business models can stack up without subsidies.
In this design section, consideration of the different CAPEX and OPEX costs, as well as the potential revenue streams will be covered. In the testing section, a tool will be provided to allow you to estimate the net present value (NPV) of your neighbourhood battery project.
Costs
| Min. value ($/kWh) | Max. value ($/kWh) | Avg. value ($/kWh) | |
|---|---|---|---|
| CAPEX | 800 | 1,600 | 800 |
| OPEX | 10 | 60 | 35 |
CAPEX
| CAPEX | Description |
|---|---|
| Feasibility study | Costs associated with conducting feasibility study of project (if externally contracted), including community engagement and surveys |
| Business case | Costs associated post conducting feasibility study to bring together business case for the project |
| Data | Costs associated with engaging with the DNSP and obtaining necessary data for the project. Costs are currently high, for example if obtaining data through C4NET data can cost around $900. Note, Citipower, Powercor and United Energy are currently building a platform to share data, however this is voluntary and so may not be applicable for all neighbourhood battery projects. |
| Expert advice | Consultant salary costs for energy, social, legal, and/or insurance experts |
| Design | Costs associated with engineering design of battery, the battery site, and its grid connection |
| Marketing & communications | Costs associated with project website, social media pages, dashboards, newsletters etc. |
| Community engagement | Costs associated with surveys, information sessions, forums & workshops, outreach |
| Battery | Includes Li-ion modules and the battery’s power equipment (inverters and switch gear). Battery costs will vary depending on the battery technology selection |
| Other battery components | Includes caging, hoarding, fencing etc. that may be required |
| Grid integration/ connection | Costs and equipment needed for connecting battery to the grid, including transformers, busbars, safety, mechanisms, cabling etc., including installation. Property sub-division or exemption for additional point of supply |
| Meter and meter installation | Type 4 meter (smart meter), price will vary depending on distributor |
| Control and communication costs | Includes any upfront hardware and software costs needed for battery’s digital management (non-recurring). Note, software costs can be very difficult to plan for and over-run costs may likely need to be added. |
| Land and site preparation | Costs associated with site preparation, construction and installation, and any non-recurring land costs |
| Legal | Includes contracts and planning (non-recurring) |
| Governance | If operating model involves creating a new entity, there will be costs associated with establishing a new entity |
| Retail | |
| Artwork, landscaping and/or treeplanting | Cost for procuring an artwork to design the exterior housing of the neighbourhood battery |
OPEX
| OPEX | Description |
|---|---|
| Project Management | Pre-installation – 1.5 FTE for 1 year Post installation – 0.2 FTE for life of the battery |
| IT operations | Includes day-to-day costs of running battery’s IT services. |
| Cloud hosting | Can vary between around $5/month for cloud hosting up to around $50/month for a dedicated server. |
| Software license (commercial) | Software licences can be either commercial or open source. In the commercial case, annual licence costs will apply. In the open source case, such as use of c3x, there are no annual license fee costs associated. |
| Battery maintenance | This will be dependent on your battery manufacturer, and typically range from $500 to $1,500 per annum, with some associated with more deluxe battery models in excess of $2,000. |
| Network charges | Only associated with FOM batteries or BTM batteries in an embedded network. DUOS/LUOS charges for battery’s operation. Will depend on tariff charged by given retailer. |
| Land lease | |
| Site maintenance | |
| Insurance | |
| Marketing & communications | Costs associated with maintaining project website, social media pages, dashboards etc. |
| Community engagement | Ongoing costs for maintaining engagement with the project |
| Financial reporting | Depending on the chosen model, there may be necessary costs associated with financial reporting |
Revenue
| Revenue stream | Description |
|---|---|
| Energy arbitrage | Revenue obtained from the energy market spot price. Dependent on the operating schedule of the battery (e.g. emissions reduction, solar soaking, revenue maximisation). |
| Revenue paid to aggregator | To participate in FCAS market will need to go via an aggregator if battery capacity <1MW |
| FCAS | Bids must be >1MW Currently only available for six contingency markets |
| Cap contracts | 5-60 $/MWh/MW for quarterly contracts Per MW contracted, reduces arbitrage revenue to only that up to the cap price (300 $/MWh). |
| Network services | Payment through special network tariffs (e.g. Powercor) Very variable to DNSP and arrangements made with them via RIT-D, DMIS and investment allowance revenue options |
| Network charges | In some cases, like the CitiPower, Powercor and United Energy community battery tariff, the battery is actually paid for charging or discharging in particular periods. If this is available, battery can actually end up receiving revenue from network charges. Note, the CitiPower, Powercor and United Energy community battery tariff is only available for batteries less than 240kVA (~216kW). |
| Subscriptions, memberships | For example, those associated with peer-to-peer trading models. Feasibility projects to date have accounted significant difficulty regarding subscription or membership costs (including confusion amongst energy users and high administration costs) |
| ACCUs/carbon incentives | No current market for these in Victoria |
| Funding, grants etc | These are generally one-off income to the project |