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Coalition wants wind, solar forced to match each MW with storage

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The federal Coalition is proposing to try and “level the playing field” between cheap renewables and fossil fuel generation by forcing wind and solar plants to match each megawatt of capacity with one megawatt hour of storage.

In an attempt to placate the far-right party room rebels arguing against a clean energy target, energy minister Josh Frydenberg, according to media reports, has said he proposed to level the playing field by forcing all new wind and solar plants to build storage equivalent to 25 per cent of their capacity and four hours of storage.

For a 100MW wind or solar farm, that equates to 100MWh of storage, effectively matching each megawatt of capacity with a megawatt hour of storage.

finkel storage costs

This graph was presented by Frydenberg to Coalition backbenchers as part of a slide package obtained by Fairfax Media. The 25 per cent capacity and four hours of storage is cited in small print at the bottom left. (Apologies for the quality).

It puts the average cost of wind and solar without storage at around $92-$92/MWh, and $107-$108/MWh with storage.

The idea that all new wind and solar farm was raised in the Finkel Review as part of the proposed “Generator Obligation”, but few details have been released in the Finkel Review.

It had been thought that the level of storage would be decided by the Australian Energy Market Operator, in line with the local grid’s needs, but it now appears that the Coalition is considering a blanket obligation to appease the defenders of the coal industry.

Many late scale wind and solar farms are contemplating storage additions, such as batteries or pumped hydro, but the idea that it should be mandatory for each new wind and solar farm is seen as overkill, particularly in states which have very little wind and solar to date, and will add to consumer coss.

It is a scenario that suggests that conservatives are obsessed with turning wind and solar into “baseload” plants, when most in the industry suggest that the concept of “baseload” is now redundant, and the new focus should be on dispatchability at peak times.

The CSIRO has suggested that any level of wind and solar below 40 per cent should be considered “trivial” for the grid, and most states are well below that level. NSW, for instance, has less than 10 per cent wind and solar, Queensland has virtually none, although more than 1,700MW of large scale wind and solar is under construction.

Analysts also say a better idea is to use the market rather than regulatory intervention, such as a “dispatchability” market contemplated by BNEF’s Michael Liebriech.

They also note that coal and gas plants are not required to write contracts or provide back-up when they have capacity unavailable. Many coal and gas plants failed unexpectedly in the recent heat waves in South Australia, NSW and Queensland.

The Coalition leadership, however, is desperate to find a way to appease its conservative members. Relaxing the carbon intensity benchmarks will likely make renewables even more attractive, so the only option is to find ways to penalise renewables.

Nationals MP Andrew Broad has spoken of the need for “more brown coal generators” to be built, because he says it will be cheap.

Screen Shot 2017-06-09 at 1.26.52 PM

The Finkel review said that wind and solar, paired with storage, was cheaper than gas and as cheap or cheaper than black or brown coal, even without taking into account their emissions and environmental impacts.

   

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  • wholisticguy

    That seems like a more unreasonable regulation than requiring all co2-e emissions to be offset.

  • wholisticguy

    In a properly functioning market with genuine competition, the price should be the incentive for generation capacity during periods when renewables can’t meet demand.

  • Chris Schneider

    It’s an interesting thought…. I think there should be a replaceable energy source for the variability but the government (state government) should be able to allocate existing sources to this task. ie in Queensland we already have Hydro and Gas, While ever Solar and wind does not excesses the capacity of these it should be able to be constructed without any additional requirements once it surpasses that then I believe there should be storage. But what about projects that are pure Storage? Where do they sit in this? should they be credits Renewable can be offset against? Queensland has a Pumped Hydro being installed is that independent of this deal?

    • George Darroch

      Exactly. We already have huge batteries in the NEM. They’re called the Snowy Hydro and Tasmanian hydro systems.

      We’re just refusing to use them in this way.

      • Chris Schneider

        Actually they are using them in this way. Politically they choose not to acknowledge this though. In the morning you will see huge Hydro use. As Solar comes on Hydro goes down. Depending on the weather forecast more Hydro is used at the start of the day if it is going to be sunnier or the wind is predicted to pick up. I have seen the Hydro as low as 700MW when there is a huge amount of wind and solar. (over 5GW) Currently the Queensland system is use well below it’s capability, I’m not sure why, it might be to do with Politics around water storage but they also have a huge pumped hydro system that is not being utilised at the moment. Hopefully as wind and large solar starts to come on in the State this will change.

  • coreidae

    Would these changes need to be made via legislation? In other words, would it need to go through both Houses of Parliament?

  • Chris Drongers

    Appalling idea! But all that storage looking for cost recovery would smooth grid price variability and hasten the exit of coal generators on economic grounds

  • Peter F

    The good news is that for every GW of new renewables the capacity factor of coal goes down and the breakeven goes up.

    As the figure changes every day I am not sure what the latest number is, but including rooftop solar, over the next 3-4 years we will install about 7GW of renewables which will generate 15-18TWhr of power. As demand is static all that will come from coal and gas.
    Hard to say how much from each but there is a reasonable argument to say most of it will come from coal so their utilisation will approach 50%. The High cost coal plants will give up for most of the year.

    The Stockyard Hill project is selling power for $52/MWhr. It has a capacity of 530MW. 530MWhr of storage at current battery prices will add $280m to the cost. In three years time when they need to add it it will be about $200m. Interest depreciation and operation costs for the batteries will be about $35m/yr on a 10 year life. The farm will generate about 1,800,000 MWhr per year or about $20/MWhr.i.e total cost of $72/MWhr still less than 60% of the price of OC gas at $10/GJ and less than half the projected price of new coal

    On the other hand if Snowy hydro builds the plant, it already owns the backup so even if if it doesn’t get favourable Chinese financing it can still add capacity for less than $60/MWhr and save more of its hydro for $300+ events.

    As Snowy hydro is still publicly owned I think that this all a devious plan by the closet socialist Frydenburg to drive coal out of the market and reverse privatisation all in one go in the guise of protecting coal. Absolutely brilliant

    • Nick Thiwerspoon

      Yep. I suspect in fact that the compulsory battery storage will be profitable for wind and solar, given how high wholesale prices can go. And since wind and solar with storage are already cheaper than new coal generation, and renewables costs are still falling (wind by 5 -10% per annum; solar by 15-20%; batteries by 20% plus) , as you say, coal will just get more and more expensive absolutely and relatively. This proposal by Frydenburg is designed just to get a consensus CET past the rabid right. He knows and we know that there will be no new coal generators built. But the rabids think this will save coal. It will actually accelerate its demise.

      • Rod

        I read that Abbot came in swinging and hadn’t even read the report!
        You can’t reason with someone like that. All he can see is a political wedge against Labor and maybe Turnbull.
        And apparently only four or five MPs spoke out at the meeting (most against) Gutless.

        • Nick Thiwerspoon

          Abbott and his ilk are increasingly irrelevant. Wind and solar even with storage are cheaper than coal and gas. Utilities will make rational decisions to close down coal and gas whatever Tony thinks. I suspect Frydenburg and Turnbull know this. I’m quite sure AGL and Origin have told them and Shorten that what is needed is a consensus bipartisan policy environment. So Frydenburg is throwing a sop to the rabids. But it is irrelevant. Even without a CET, renewables will be the preferred generation source. The rabids are too stupid or too blind to see this.

  • Chris Fraser

    Such a wild, desperate call to insist that renewable generation perform to this dispatchability requirement when thermal generators do not.And how rude for the Coalition to hijack a socially minded term like ‘level playing field’ when their hubris doesn’t permit them to concede anything like a level playing field when it comes to pollution coming from ‘their’ generators.How preternaturally arrogant of them, in their haste and their self-entitlement, to assume that thermal generators are somehow always online, never hoard their fuel, never suffer mechanical difficulties or fire, and are managed by simply flicking a switch. Clearly AEMO at the very least knows, those market gaming generators are allowed to go offline, anytime they like, for as long as they like, for any ridiculous reason, just to push up wholesale energy prices.If any discussion of dispatchability is genuine, then all generators old and new are already in the playing field, and all can install batteries or outsource their obligation to a gas or hydro backup. What a brilliant idea, Coalition. But will you play by the rules that govern everybody ?If the likes of your average Barnaby expect to use only fossil energy and expect to have as much instant energy anytime they wish, those consumers should be able to share the unreliable fossil fuel firming cost amongst themselves through their retail tariff. And we won’t expect to be happy until they are spending $100 for their lamb roast.

  • Andrew Thaler

    I want the coal and Gas power stations to also have batteries for those times when, you know, its too hot, or there’s no gas and they shut down… that they have their outputs matched by batteries too. Its only fair…

    • John Saint-Smith

      I think that is a seriously good idea. Had the gas plants in South Australia been equipped with battery back-up, we wouldn’t have had the huge black-out. Unlike the gas plants, the batteries would have been able to keep the grid going when ‘all else failed’. An electrical engineer who used to work for Santos told me that failure of gas generators in heat waves is ‘quite common’. So, not only is their fuel supply ‘unreliable and expensive’, but the generator technology will be increasingly compromised by climate extremes.

      All that remains is to find a way to get the Coalition back-stabbers to get their heads around the concept of reliable generation technology, instead of unreliable propaganda.

      • MrMauricio

        the biggest gas plant in S.A was turned off at the time of the storm because they were too busy gaming the market!!

        • Joe

          In NSW during the February heat wave we nearly had blackouts because of problems with “Coal” generators. Load shedding had to be initiated to stop blackouts. Now if Coal had those batteries in place or we had more Solar then there would not have been an issue.

  • Chris Jones

    While its obvious that the proposed storage requirement is purely political, there will be a need for some kind of overnight capacity to compliment the renewable sources, and calling for storage isn’t that unreasonable. But to call for a MWh of storage for every MW installed is overkill. Surely only a quarter of this would be required in the short term for solar and even less for wind?

  • BushAxe

    Clearly a political policy which may have a short term effect on new projects, however in the longer term it will have a detrimental effect as renewables will be able to compete with thermal generation more effectively. This possibly could make PHES less attractive though if batteries are chosen as an easier construction option.

  • Mike Christensen

    We need to start up a social media campaign (GetUp or Avaaz) to let the politicians know that this is rubbish, and that they will lose voters through this – the voters are sick and tired of these shenanigans!

  • howardpatr

    Idiotic Coalition wants MW for MW storage of renewable energy but have we seen any significant money go into acquiring and evaluating US technologies like those developed by EOS and ViZN. Those two technologies should then be rapidly evaluated against the technologies developed in Australia by Ecoult and Redflow.

    Not much chance of having such things done when financial support for this has to go through a Parliament virtually devoid of members with scientific training.

    One wonders what Finkel was thinking when he made the recommendation given he knows full well that storage technology has a long way to go to reach more economical costs. Panasonic, Samsung, Tesla and the likes are not going to bring down their charges any faster than markets demand.

  • Hettie

    A question.
    The notion of mandatory storage attached to all generating projects (new or old) seems sound, but surely 1 mwh per mw generating capacity is excessive? Can someone who knows what they are talking about suggest a reasonable ratio?

    • Nick Thiwerspoon

      Well, solar has (very roughly) a 25% capacity factor. So each MW of capacity would produce roughly 0.25 MW per hour averaged over 24 hours. Or, perhaps to put it a better way, 0.5 MW averaged over 12 hours of daylight. So 1 MWh of storage would provide the equivalent of 2 daylight hours of average output from the panels. The afternoon demand peak is from 4 to 10 pm, so to fully cover demand in an “island” grid you’d need 6 hours of storage. But if you add wind and interconnectors to the mix, the CSIRO’s estimates are that you won’t need that much storage till we reach 80% renewables. 2 hours of storage will be plenty for the next few years.

      http://volewica.blogspot.com.au/2017/05/how-much-storageii.html

    • Cooma Doug

      The market rules appropriately designed will entice battery use actoss the grid to the depth and extent required. If there is not enough the rewards go up.
      The thinking in this string of comments doesnt understand market design and the cause and effect of the rules.
      Renewables will have more than the figures in storage mentioned here. To work out the numbers look at the capacity factors and consider the differencr in price across the day. Thr batteries will br used to maximise normal incomes as well as a security option.
      When the system flattens the load profile scross the day through load shifting and stotrage we will see the full value. uou can work it out examining the load profile and thd capacity factors.
      You must also realise that 40% of the load at any moment will also effectively be storage due to thd load shifting options.

  • Cooma Doug

    One simple point guys.
    Markets dont force. They entice.
    If the market rules are appropriate no one will be forced.
    We used to use the words force and compell. But soon saw the truth.
    The new rules will see to it or we fail.

  • Ian

    ……ok…..on the condition the 5 minute settlement rule is introduced simultaneously. …:)

  • Miles Harding

    The COALition backbenchers are dancing with the devil on this one.

    It may not adversely affect the PV generators to the extent they think. I have long thought that some storage may make solar more attractive by allowing it to sell into the peaks after sunset. It will remove a bit of the belly of the duck as the storage is recharged, but will have a significant effect on the peak prices generators rely on for profits.

    If the COALition stands by, coal dies from it’s technical inability to track demand through the day and it they get their way, it dies because of profits.

    We haven’t even got to trashing the environment or responding to the blue arctic ocean event that can’t be more than a few seasons away now.

  • Ian

    Oh, this is good, it’s a point of negotiation, it acknowledges the roll of renewables in the electricity grid, it also opens the door to forcing fossil fuel generators to provide dispatchability in the interest of fairness. Coal should not waste its pollution intensity tolerance on idling or curtailment but should be required to export every KWH produced, or store the excess. A generator that is inflexible in its generating profile should be required to provide storage of say 25% of its generating capacity to account for variability. In addition, a fossil fuelled generator should be required to capture its carbon emissions at least to the base-emission profile of competing technologies. It is now technically possible to generate electricity without carbon dioxide emissions so this should be the base-emission standard. As an interim measure, based on successful CCS projects costs per KWh , these generators should be charged a penalty on every tonne of carbon dioxide emitted.

    • Ken Fabian

      I think more fossil fuel plant idling or being curtailed, whether it suits them or not is exactly the direction we need to be going – and storage should be used to help facilitate the orderly shutdowns and re-starts of plant not so well suited to it as well as smooth the supply from RE, help regulate frequency and voltage, act as synthetic inertia and spinning reserve, displace the need for grid upgrades and extensions…

      Plant that can’t be curtailed or shut down and restarted without high emissions costs should be moved up the list of those to be shut down first as obsolete and unfit for purpose. Plant that find the added costs of running intermittently a financial burden should treat it as a de-facto carbon price and consider investing in RE with storage to replace it.

      CCS costs? You do realise that for every tonne of quality black coal burned you get 2.8 tonnes of CO2 and CCS that works (and where is that?) will be very expensive because of that unfortunate bit of arithmetic? RE with storage doesn’t look so expensive in comparison.

  • Adam Joseph

    As a former senior policy adviser to the federal coalition, and a former environment and community director at NSW Minerals Council, I have long considered the political imperative of energy security, and have longer still the handbrake that energy constraints represent in regional Australia. While we must maintain and extend the life of our pre-existing coal fired generation plants, and the “gold plated” grid delivery system, the most sensible way to achieve Min. Frydenberg’s imperatives (lower prices, market stability and emissions abatement) is by funding Renewable Embedded Generation (REG) installations at the “fringe of grid”. This entails rolling out floating solar farms on lakes, dams and reservoirs (an Australian invention, now delivering water and energy with the same expenditure in China, UK, Japan and India) coupled with FIVE TIMES the rated capacity in storage (ie each 1MW in generation coupled with 5MWh in storage). This allows the batteries (ideally Australian patented and manufactured vanadium flow batteries) to draw down cheap “off peak” power and to make it available again at top of damand. #InnovationBoomAU #HydroSunAustralia

  • JohnRD

    Energy storage can reduce the the amount of generating and grid capacity whether we are talking about fossil or renewable power. The optimum location may be a long way away from where the power is generated. In addition, batteries allow rooftop solar to keep a house going during both long and short blackouts.
    The need for energy storage is going to change over time and with changes in energy consumption patterns as well as the generating mix. (For example: Solar towers come with molten salt energy storage as part of .or think what effect increased use of electric cars will have on storage needs.)
    Investment in batteries should not be tied by a formula to solar PV and wind.

  • MaxG

    Level playing field… I mean if you tilt it 30 degrees and adjust your head by 30 degrees, it seems level :)) What a bunch of idiots.

  • Les Johnston

    The COALition policy gem is discriminatory. It is similar to the red flag that motor vehicles were required to have in front of them when they started using the roads. The idea is neither novel nor new nor is it innovatory. Maybe all houses with PVs on the roof should be required to have a red flag out the front. This would warn passer-bys of the dangers that PVs pose to coal.

  • Ken Fabian

    Whether good or bad may depend on how much assistance RE projects with storage will get; after all they will deliver reductions in emissions adequate for longer term climate goals whereas gas only delivers reductions sufficient for a weak and inadequate interim goal.

    There is a world of difference between delivering less emissions than old coal and delivering emissions reductions sufficient for climate stability purposes. Are we going to see the assistance based on emissions reduced or will it be a simple threshold, where a (misleadingly misnamed) “low’ emissions gas plant gets the same level of assistance, despite it’s still too high emissions and ongoing need to be displaced and replaced, as true low emissions RE projects?

    If storage becomes a requirement added to projects where it is not needed – without adequate subsidy and with an implied intent to impede RE growth – it could backfire, by bringing to light the unsavoury motivations of those seeking to set up the rules that way. Yet adequately supported, especially if the costs and durability improve faster than predicted, could see it become the leading wave of far greater investments in storage. Like reducing FIT’s didn’t reduce demand for PV, instead making greater incentive for use of storage, insisting on storage could backfire – and end up incentivising more storage and RE projects with storage Meanwhile any “excess” storage will probably have other opportunities for being profitable, especially if the spikes in NEM wholesale prices can be taken advantage of or if Frequency and Voltage regulation or synthetic inertia and reserve services can be contracted for.

    Another thing – could storage that reduces requirements for grid upgrades and extensions get a slice of the Poles and Wires funding pie?

  • TheTransition

    It’s already a good idea for new RE in SA to include storage. Already there are days when RE in SA has negative pricing. As the RE fraction in Victoria increases over the next decade, RE suppliers will not be able sell at generation time because of the high correlation of RE production over South East Australia. Yes, it increases the cost but it’s obvious the provision has to be made. It much cheaper to provide this at grid level than for consumers to each have their own storage.

  • Radbug

    That’s a cool idea! I would really like to purchase a cheap, second hand, ex-grid array flow battery to back up my roof top PV array!