Market reform, not subsidies, needed for battery storage market

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The future of Australia’s energy storage market depends on urgent market reform – not subsidies – says the Clean Energy Council, in a new report that joins the growing chorus for Australia’s policy makers to finally respond to the challenges and opportunities of new technologies.

The CEC has also thrown its support behind proposals of offering a “buy-out” of premium solar feed-in tariffs, and to use this to provide those households with a battery storage system, particularly in Queensland where generous tariffs are due to continue for another decade.

It notes a report from Marchment Hill Consulting in March that suggested such a move could create a 960MW “virtual power plant” at no extra cost – a considerable asset in a grid facing the challenge of dealing with critical peaks in the summer heatwaves over the next few summers.

“Energy storage costs – especially battery storage – are falling,” CEC chief executive Kane Thornton said.

“There is huge potential for these technologies to change the way customers and retailers interact with the grid. However, a combination of market reform, incentives and regulatory change is needed to drive this transition, while ensuring a secure and affordable power system.”

The CEC says Australia’s energy market is outdated, fixed around rapidly ageing and redundant centralised fossil fuel technologies, and reform is needed to unlock the full benefits of energy storage as more wind and solar is built into the grid.

“There remains substantial work to do in modernising Australia’s energy rules and allowing energy storage to fully participate in the market, bringing the benefits of the technology to both the grid and consumers more broadly,” Thornton said.

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“Australia currently lacks a strategic package of energy market reforms that will help to turbo-charge energy storage and tear down the barriers that stand in the way to its wider use around the country.”

The CEC, and most others in the industry, hope that the Finkel Review, due to be delivered in June, will be a circuit breaker for the policy inertia that has gripped the country over the last decade, although there are so many other reviews spinning around the industry right now it would be no surprise to see the government latch on to an outcome it found more comfortable.

Thornton says strategic reform and regulation is the most efficient way to encourage more widespread use of the energy storage over the long term, and subsidies are likely not needed. His views have been echoed by others such as ARENA boss Ivor Frischknecht, and private players in the industry.

Thornton describes energy storage as the “last major puzzle piece” of an evolved energy system because it can complement wind and solar, can boost the reliance of the energy system, can lighten loads at times of peak demand and reduce the need for new investment in poles and wires and other equipment.

It suggests that these reforms will be more important than the government incentives being offered in South Australia and Victoria, in particular, on the nation’s biggest battery storage arrays.

And the costs are falling. The report released on Tuesday: Charging forward: Policy and regulatory reforms to unlock the potential of energy story in Australia, notes that the combination of solar and storage is now cheaper than most other alternatives, including peaking gas plants.

Most of the market reforms are directed at the Australian Energy Market Commission, the rule-making body that is seen by many as a hindrance rather than a help.

The CEC wants it to implement the so-called five-minute settlement period, reform the frequency control regime, review market rules that distort investment away from network services towards poles and wires, require distribution businesses to publish better data, and lower the regulatory investment test threshold for grid upgrades.

Apart from its support of “buying out” long dated premium tariffs and exchanging these for payments in support of battery storage – a proposal once considered but put on hold by the Queensland government – it also wants state authorities to follow Victoria’s example and build other benefits into solar feed-in tariffs, and it supports a shift to demand-based tariffs.

It also wants tighter standards and regulations on battery storage technology and installations.

“Energy storage costs – especially battery storage – are falling. There is huge potential for these technologies to change the way customers and retailers interact with the grid. However, a combination of market reform, incentives and regulatory change is needed to drive this transition, while ensuring a secure and affordable power system,” Thornton said.

The policy paper recommends a total of 13 reforms across four categories to achieve this, ranging from removing regulatory barriers and rewarding the value of storage behind the meter, to protecting consumers, and changes that would allow storage to support grid security through its fast frequency response capability.

More information can be found at www.cleanenergycouncil.org.au/technologies/energy-storage.html

Comments

16 responses to “Market reform, not subsidies, needed for battery storage market”

  1. David leitch Avatar
    David leitch

    You will find I suggested this idea in last year here at reneweconmy in an article discussing the interim mugglestone report. First to suggest it as far as I know ????????

      1. David leitch Avatar
        David leitch

        Who’d have thunk it. Great minds think alike but then it’s Ergon… so must just be a jungian conspiracy

        1. Energy Governator Avatar
          Energy Governator

          Ergon did have some forward thinkers for a while, after they saw the benefits of the Townsville-Magnetic Island solar city project. Perhaps there are some still there who realise that solar and storage – properly organised – is the most sensible and economic way to provide most north Qld power needs now. More so given the increasing risk of power line wrecking cyclones in that region.

          1. David leitch Avatar
            David leitch

            Ergon is sure to have its quota of forward thinkers. Every organisation has them. Lots of very smart folk working in the electricity industry.

          2. Energy Governator Avatar
            Energy Governator

            True David. It’s just a matter of whether they are in charge, or not. I have no idea what’s happened inside the shiny new Energy Queensland…

  2. Pedro Avatar
    Pedro

    From where I sit the biggest single barrier to the uptake of domestic scale battery storage in WA is meeting utility compliance. In WA the online Western Power application form is almost incomprehensible. As it was explained to me by a Western Power engineer for AC coupled grid connected systems, the view they take is they add rated power of the grid inverter and the rated power output of the battery inverter together and assume that is the demand load that it is supplying. So if both inverters are to somehow both go offline at the same time then the utility is obligated to supply that load instantly causing the grid to “flicker”, for other nearby power consumers. In my opinion this is an absolute worst case scenario and in reality would very rarely happen.

    The reality is that the excess power produced by the PV array during the day is stored to be used more than likely in the afternoon peak. However Western Power simply can not get their hear around that one.

  3. john Avatar
    john

    There would have to be a contract that keeps these PV and battery installations connected to the grid and the ability to use the batteries to supply the grid, otherwise why would a householder who gets batteries and has the capacity to not need the grid stay connected.
    Yes there may be a period during a severe weather event like a Cyclone or a mid winter 3 day rain event when the battery system will not have capacity however these are rare.
    The contract would have to be compelling to keep householders connected, if not then I can see a class action by those high tariff holders being quickly put into place.

    1. Pedro Avatar
      Pedro

      One thing to consider even if you are meeting a very significant amount of your power requirements most of the time with your PV battery system, being connected to the grid is still worthwhile. The grid for a small rental fee $1-2/day is a virtual back up generator that does not make any noise, you do not have to fuel or service it and in most cases it is very reliable.

      1. john Avatar
        john

        I expect that the fee for having a power line down your street will be high.
        Rather like water supply you are charged for a vacant block of land if a water supply goes past regardless of use.
        Unless the amount paid for a grid controlled delivery of power from a battery pack charged by PV is compelling then i see no reason to stay connected for those 3 days every 3 or 4 year events.

        1. Pedro Avatar
          Pedro

          Currently I pay $0.5/day supply charge. At that price I would be quite happy to stay connected to the grid so that when I get energy storage I can go with a minimal sized battery bank and do not have to get a back up generator. But that is just my particular opinion.

          1. Giles Avatar

            lucky you, and where are you located? i pay $1.50/day

          2. Pedro Avatar
            Pedro

            Perth, WA with Synergy.

            Due to having a large PV system I have not paid a bill for years and I had to google the charges and was very surprised at how cheap it was.

          3. Alastair Leith Avatar
            Alastair Leith

            Synergy currently subsidies coal generation. Labor said they would stop that. ALP Treasurer, Ben Wyatt has already indicated power prices are certain to rise, in part thanks to gas export prices. (Though hopefully Wyatt and McGowan have been briefed tha that PV+storage now is cheaper for a sunny location like Perth/SWIS than gas peakers).

            So we can expect electricity bills on the SWIS to change, and the price structuring is likely to change with it. Not sure how much gold plating Western Power was allowed to get away with compared with Eastern states? Certainly there’s transmission issues for new RE projects. Colgar (206 MW) was subject to constraint on export capacity when it went in 8 years argo and still is subject to constrained bidding into the wholesale market, currently managed manually with phone calls or emails! Sustainable Energy Now estimate SWIS would need around $900 million dollars of new HV transmission investment to get to 85-100% RE under various scenarios. Good thing is tranmission investment has been paying for itself where they’ve had the foresight to put it in advance of on-shore wind projects in the USA. It takes a long time so should be top of the list for Government and utility agency planning processes. Greens and Sustainable Energy Now have both called for a new office of Government to do this kind of planning for the grid of the future, 100% RE clean power.

            WP are currently are studying peer2peer energy trading (the White Gum Valley project with CUSP and Landcorp) and how a micropayment for network use can keep them in the poles and wires game.

  4. Ian Avatar
    Ian

    More work needs to be done to aim for the ideal of having off-grid systems.. The simplest grid tied solar array was fine in the early days of home solar adoption. People installed minute solar pv arrays and were paid a premium for gross FiT. Now large solar arrays can be installed relatively cheaply, batteries are expensive but ( almost) viable investments and FiT’s are low. There has been some work to place computer controlled switches on appliances to orchestrate the use of self-produced electricity but this seems fairly primitive, batteries are thrown in the mix but the grid is still needed to stabilise the home solar and battery system and provide long- term storage.

    Ideally, a home solar and storage system should be able to island in the event of a grid failure/blackout, there should be enough solar output to cover maximum load conditions in mid winter ( or summer) whichever is worst, and enough storage to time shift energy production to night use on an average sunny day. The system should be able to switch appliances on and off according to solar output, battery charging requirements and according to some sort of hierarchy of importance, and according to weather predictions etc. The required battery storage size should be just adequate to preserve battery life (DOD consideration) and then just enough to get the household through the night after a reasonably sunny day. The battery should be fully charged by the end of a day’s solar production, ready for the night.

    An energy use hierarchy can follow these principles for example: Appliances such as fridges and hot water systems should be run in a discretionary manner to compliment other household energy requirements but not allowed to function below par. ie a fridge should not heat up to cause food spoilage and hot water should not run out mid-shower! Other loads like swimming pool filters, pool heaters etc are less ‘critical’ and should be run lower on the hierarchy . Incidental loads such as kettles, cookers, vacuum cleaners, hair dryers etc should be immediately available and cause other loads to ‘demand respond’. Appliances like dish washers, washing machines and ( dare one say it) cloths driers should be run within the hierarchy of energy use, or for instant availability or somewhere within time bounds and obviously allowed to run throughout their cycle once started. Air conditioners/heaters would be very interesting devices to catagorise in a hierarchy of loads as these can ‘soak up’ excess energy production in the day to provide preheating or cooling of the house in a luxury-item way and may be regarded as essential to run at times when weather causes discomfort.

    You might say what a lot of BS, get over your first -world problems, light a candle and take a cold shower, but in reality to have a half-decent and economic solar plus storage system “demand response” from smart appliance control will optimise energy consumption for the available solar array without wasting the solar resource, ie curtailing solar output or leaking excess into the grid, and optimise storage use without compromising battery life, or needlessly importing electricity from the grid.

  5. Cooma Doug Avatar
    Cooma Doug

    It is becoming obvious to me that the status of the old system lingers in our heads. We are burried in a flood of technical solutions but we cant see many of the simplest solutions in the shadow of the coal furnace.

    We can split the grid up into what is effectively millions of small grids. The system security, frequency and voltage in each one, empowered by the technology to be reactively independent, yet still connected and response available for the entire system.

    This splitting of the energy grid into milli second storage and rapid load response islands will have low cost.
    The elimination of more infrastructure than most of us can imagine is one huge plus.

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