Senate Environment and Communications Legislation Committee, , 2:39:03 to 2:54:00
Senators review the Home Battery Scheme's $8.1 billion appropriation and recent adjustments to subsidy levels due to falling technology costs.
Topics: Energy storage, Government spending
Speakers: Dean Smith, Paul Johnson, Hon Tim Ayres, Varun Ghosh, Unknown Speaker
>> Okay. Um I just want to turn to an OPD if I can. So the OPD number is SQ260721 which deals with um So in summary, uh my understanding is the OPD is that the department's response to that uh sorry question on notice, question on notice, my apologies. uh question or notice is it that it revealed that the um average support being provided to participants on the scheme had risen from a $45,000 cost which was the original estimate to a $7,910 cost. This is the average support. a $7,910 average support cost between July to December 2025. That's my my understanding of that uh response is correct.
>> Um Paul Johnson, branch head of renewable certificate schemes. Um, yes, I believe that that was the number
>> and the explanation that was provided in that response for this increased average support cost was that households were installing higher average battery sizes. >> Correct. Right. And so what can you what why I'm just trying to understand um so the modeling for the program assumed that customers would choose smaller battery sizes?
>> Yes, that was the original expectation.
>> And so and on what basis was that um assumption
So I understand that assumption was made on the um with reflection on at the time. So this is about two years ago now when the scheme was being designed about the uh what uh what batteries what battery sizes were being sold in the >> Um and uh the level of sales in the
So the so from your perspective the increase in the average support for customers is being driven by the availability of different battery sizes in the market market that was not foreseen when the program was developed.
>> Yes. Uh technology costs have fallen. Um a larger r a much larger range of batteries have been offered into the market by manufacturers. um and larger battery sizes amongst those and there's been a take up of
you must be able to identify how many households have installed higher average battery sizes than those for than the battery size foreseen in the original design of the program cuz the in your answer you say and I'm assuming this is the design feature that the program was designed on the basis of about $370
>> Yes, that was the uh initial subsidy.
>> Yep. So, Yep. So, my question is how many households have taken up higher average battery sizes?
>> Um, we would have to go to the CER to ask them to analyze their data.
>> Right. But you would expect them to have that answer?
>> Yes, they would.
>> Great. Um what does this represent in so what so the appropriation for the cheaper home battery programs is what
uh this year's appropriation is one 1.47 47 billion
>> 1.74 and is that over four years?
>> No, sorry, that's this year. Um, over the period 2025 to 26, sorry, 2025 26 to 2930, the total appropriation is $8.1 billion.
>> $8.1 billion is the total appropriation
>> over those five years.
>> Over five years. And what is the quantum that's been expended thus far?
uh to the 27th of September uh the total expenditure is 4.63 billion
$4.63 billion. So in one year of the program half of the full appropriation has been expended.
Yes, there was a higher level of expenditure in the first year because the original program settings were considered to be um too generous. So this time last year at the midyear economic fiscal outlook, the government adjusted the program settings to sub significantly reduce the level of subsidy. Those changes did not take effect until the 1st of May. So up until the 1st of May, the original program settings were in place and the bulk of that expenditure relates to that period of time. Since that time, we have seen smaller uh levels of expenditure uh reflecting lower levels of battery installations and also a reduction in the size of batteries.
>> You characterize it as too generous. Could just expand on that point. In
hindsight, um the knowing what we now know about the uh relative s relative fall in technology costs which exceeded expectations um it was too generous. It was always envisaged that technology costs would fall over the life of the program and from the outset the subsidy was set to decline over the course of the program but the uh technology costs fell faster than was anticipated. So the changes that were introduced in Mayo last year accelerated the decrease in the discount going forward.
why were the original assumptions why why did the why were the original assumptions wrong?
>> They were best uh they were based on what was the best available information whereas last year we had available to us um the initial 3 or 4 months of data from the actual program.
>> So what information was available to you at the time when the program was designed which has proven to be you know very very wrong.
>> There was very little information prior to
>> so the program was designed on very
little information. There was prior to the um program being put in place there was no requirement to report installation of batteries. Um with the program being in place now we have a complete uh data set. We now understand the levels of uh information uh batteries that have been installed. We also did rely upon uh the Australian energy market operators projections of future home battery or small scale battery installations in the 2024 ISP.
>> I mean this has been um an extraordinary success this program. Uh Senator
>> I was about to characterize it as poor design but you're as great success and the official characterized it as too generous
>> in indeed. um uh it has reduced energy bills for battery owners substantially. So it's good for individuals and it is good for the country. So uh battery owners um have had uh reductions in their median annual bills of between $329 to $99. That is 20 to 52% reductions uh lower than uh regular customers. It has um mean that there's increased daytime charging lowering peak demand. It's put downward pressure on wholesale electricity prices.
>> Do you agree officials characterization program was too generous? Senators, I
>> I think just just let me finish my answer and then I'll come to your
questions are more interesting than your
answer. >> Then I will come to your question then I will come to your second question.
>> Are tedious.
>> I will answer your question. Um and I would not characterize your questions in such a way. Um, Senator, I always enjoy your questions. Um, I don't find them tedious at all. Um, >> but, uh, there is, um, for example, households with solar and battery storage used around 73% less grid electricity during evening peak periods than households with solar alone. So there is an enormous benefit, dare I say firming benefit, Senator Roberts, uh in uh in the cheaper um home batteries program, it is true uh that because of the sharp fall in the cost of the technology, sharper than uh I think was predicted in the you know uh properly conservative design, uh of the system at the outset that the um parameters of the system had to be adjusted. That is true. That's what
conservative design the official calls it too generous.
>> That's that that's what a responsible government does. >> But it is principally because the costs of the technology have fallen. Senator, that is a good thing. That is a good thing. More Australians grabbing hold of this opportunity for themselves and for their country is a good thing. uh lowering costs not just for themselves but for their neighbors too. Uh that is a very Australian thing to do. This is part of building a future Australia that's stronger and more resilient with a lowerc cost electricity
>> Mr. Johnson, when does the program expect to be fully expended given the huge sum that's been expended in just the first year?
>> The program runs through to December 30. Um because of the reducing discount rate that takes place every uh every six months the expenditure on the program will rapidly de decrease. So in January on the 1 of January this next January uh the discount falls by about 16% and thereafter every six months it falls by 16%. So by a year from now it'll be a third of what it is a third less than
So in what time period do you expect the full one $8.1 billion to be expected
>> Well the estimates have been produc uh published in the budget documentation Senator runs through to December 30. M
um in the answer to the question on notice, you were good enough to uh identify the 26,462 installations had uh occurred the 31st of December 2025. What is that figure
total number of installations as of the 27th of September is 555,370.
>> 555,370.
>> Yes.
>> Including um 6,984 in Mr. tailored seat of hum. But I mean, people in outer suburban uh uh parts of our communities are absolutely getting into this um taking control of their own energy costs, supporting their neighbors lower electricity bills. Uh and I intercede not just to make that point, but just to come back to you, Senator Smith, I was looking for the Um, I did assert that battery costs have fallen. I didn't give you a figure. Um, I was a bit anxious about that. Average BA battery costs have fallen by around 90% since 2010 due to production advances, battery chemistry and battery manufacturing process uh, advances principally in lithium-ion batteries but in other batteries too. uh this is an area where where Australians and Australia can get hold of lower cost technology to drive lower cost electricity.
>> Thank you Mr. Johnson. Um you were did the department do an estimate in terms of how many batteries ex how many batteries it expected to be installed in each of the years of the program? not not the not the number that is currently installed but did you estimate the number of uh installations that you expected within each year of the program and if so could you detail those to me
>> um this is at the outset of the program
>> sorry
>> at the outset of the program
>> at the outset of the program
>> there may have been yes I I don't have those figures with me
>> so there but you've been very generous with providing me with lots of other figures thus far
>> that's because he has the wicked
>> I'm sure he'd be happy No, I'm just I'm just And Mr. Johnson's a very um you know astute official. He did use the word may.
>> I don't have the figures with you.
>> You don't have the figures in front of Can you take that on notice? >> I will. >> Thank you very much. Thank you. And >> Thank you, Chair.
>> Thank you very much, Senator Smith. Um I'll go to Senator Hodgins. May, but before I do, can I just indicate that um we're now in a position to release the officials from the emission reduction assurance committee uh from today's program. Thank you for your attendance and the preparation that goes in to uh getting ready for estimates. Senator Hens,