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Tesla says Australia market rules outdated, doesn’t help storage

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Tesla has joined the growing chorus calling for a complete rethink of Australia’s energy market rules, saying they have been designed for old-fashioned centralised fossil fuel technologies, and do not encourage all the potential benefits of battery storage.

In its submission to the Finkel Review of Australia’s energy markets, the high profile California maker of battery storage, solar panels and electric vehicles says new technologies are facing “systemic barriers favouring legacy generation technologies”, and they should be changed.

Tesla made a dramatic intervention in Australia’s energy debate two weeks ago when it launched its Powerwall 2 domestic battery storage device, declaring that it could “solve” Australia’s energy “crisis’ by building a 100MWh to 300MWh battery storage array, something it said it could do within 100 days.

CEO Elon Musk then got involved in a public Twitter conversation with Australian software billionaire Mike Cannon-Brookes, leading to lengthy phone conversations with both prime minister Malcolm Turnbull and South Australia premier Jay Weatherill.

In the following week, both South Australia and Victoria announced tenders for 100MW of battery storage, while Turnbull announced a feasibility study into Snowy Hydro 2, a plan to build 2,000MW of pumped hydro capacity with storage of up to 150-175 hours.

In its submission to Finkel, Tesla says battery storage has multiple functions in the energy market, but few of them can be exploited because of the restrictive nature of the energy market rules.

This claims are not new. Zen Energy’s Ross Garnaut and Lyon Solar’s David Green have spoken at length of these restrictions, as have numerous other battery storage companies.

Those rules include changing the settlement period on wholesale markets from 30 minutes to 5 minutes, which Tesla says would encourage fast-response technology like battery storage, and lift the daily value of battery storage nearly five fold.

It said this reform would help transition the  Australian electricity market “into a more open and accessible model” and would “increase the value of energy storage as a physical hedge in the market for both consumers and generators of energy.”

The 5-minute rule has been proposed by one of the country’s biggest energy consumers, Sun Metals, but is being fought vigorously by most owners of coal and gas technology.

These include so-called ring-fencing rules, which prevent networks from installing battery storage behind the meter and prevent access to multiple revenue streams. “Either they are prohibited from participating through ring fencing rules or the market mechanisms do not exist to reward investment.”

It also wants competitive frequency support market for the provision of inertia to be opened up so utility-scale battery energy storage providers can compete against incumbent providers of ancillary support services.

Tesla wants regulators to ensure that energy storage for micro-grid or off-grid applications in rural and regional areas is allowed as a substitute for new poles and wires, and in urban areas where the alternative is increased network infrastructure investment.

tesla_powerwall_2It also wants to ensure that rules regarding installation of residential battery energy storage are not prohibitively restrictive;  as has been flagged by draft rules from Standards Australia and Queensland regulators which could make it impossible to put battery storage inside buildings.

“Battery energy storage can provide all levels of residential, industrial and commercial customers with greater control of their energy consumption and energy spend,” it says.

“Residential energy storage can provide direct benefits to customers by providing backup power during system outages as well as providing significant value to the networks because of its location directly at the customer load, allowing it to offset the need for distribution, transmission, and generation capacity.

“For large-scale industrial clients, battery energy storage can be used to reduce peak demand and peak demand charges, provide on-site back up and arbitrage time-of-use pricing, in order to reduce business energy spend.

“For vulnerable consumers in remote and regional areas, battery energy storage can displace diesel generation, or offset the need for additional grid connecting infrastructure to be established. This can often provide a higher level of service to the end customer whilst reducing the cost to provide the service.”

One model that it is pushing is the “aggregator model”, where energy storage can be used to sell electricity from a home or business into the wholesale market, or to provide grid frequency support services, or demand management.

“This approach benefits both the consumer – through access to the wholesale electricity market or alternative revenue streams, and the networks – through voltage and reactive power support.”

But it says the major barrier to aggregation is that it disrupts the current relationship between consumers, retailers and network service providers. As a result a number of legacy rules and systems need to be revisited.  

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  • humanitarian solar

    Tesla have produced a brilliant analysis of the negative attributes of the incumbents.

  • Rob

    So in effect we are all, as energy consumers, subsidising fossil fuels by paying higher prices than would ultimately prevail with renewables. Due to rules that restrict renewables from being able to compete with fossil fuels. Section 45 of the Competition and Consumer Act prohibits contracts, arrangements or understandings that are likely to substantially lessen competition in a market. I hope the ACCC is going to examine this outrageous example of anti-competitive behavior by the encumbent fossil fuel generators.

    • DJR96

      The point is that it is the regulations that are enabling this behaviour. Technically the incumbents are operating within the law.

      So the very laws and regulations managing the whole system is contrary to the National Electricity Objective, the NEO:-
      “To promote efficient investment in, and efficient operation and use of, electricity services for the long term interests of consumers of electricity with respect to – price, quality, safety, reliability, and security of supply of electricity; and the reliability, safety and security of the national electricity system.”

      • Rob

        How was that allowed to happen I wonder? Hopefully someone who cares will investigate these contradictions so that there is true competition in the market. The irony is the COALition is always banging on about the free market and how that solves everything but here they are supporting anything but a free market.

        • DJR96

          It’s happened because all the “experts” in charge of the AEMC, responsible for rule changes and advising any government body are all from the coal and gas industry. Needless to say they are in the best position to ensure the regulations suit their industries.

          It is why all renewable generation and any new technology is scantly considered as a barely tolerated nuisance to the network. Current regulations mean they can only be considered a supplement to the network and not be given any role in actually assisting the control of the network.

          I think the coalition is starting to come around. They now recognise that the market is not working as it should and something has to be done soon.

          I’d like to think we’ll see some reforms pushed forward to address a bunch of issues. It can’t be left to the AEMC to go through their glacial pace of implementing small incremental changes. They have no vision to move forward with. Only to preserve the status quo.

  • MaxG

    Of course the incumbents will want to protect their monopoly position at any cost — nothing new there.

  • The split benefits problem seems to be the biggest real issue preventing the widespread adoption of batteries. Energy balancing is a retail problem and grid stability is a network problem. Batteries benefit both, but coming to arrangements to equitably splits costs and benefits is difficult.

    In embedded/private networks, the retailer is (generally speaking) also the network. This is therefore the market segment where batteries may find a good business case, as retailers are able to absorb the cost and then reduce their network connection charges further.

    Cheers.

    Dave P.

    • Andy Saunders

      And, related, who controls behind-meter storage? The retailer wants peak wholesale-price generation on call (giving an incentive to maintain full charge and discharge during price spikes – which are not always demand highs), the distributor wants peak shaving in a local region (giving an incentive to maintain full charge and regionally control) and to provide FCAS services (money for jam), the transmission operator wants similar but on a wider scale, whereas the consumer wants internal consumption fully offset (incentive for discharge in *consumer’s* high-consumption periods) and if they know about it, fair compensation for wholesale price spikes. And even wholesale pricing arbitrage if they have enough storage left over (the generators, and T&D would hate this – means households can get paid for price volatility… and it’s currently illegal).

      Point is, future storage control solutions are likely to have mis-matched incentives, and there *will* be some rorts.

    • David leitch

      I have long thought that the ring fencing rules are totally counter productive and contrary to all the modeling.

  • Robert Westinghouse

    Give the power (batteries and PV) to the people. But the government remains fully in bed with big business and will not allow this. Preferring to shackle normal
    Australians to every increasing power bills. Wake up Australia the government
    has had it hands in our pockets for too long….we want proper feed-in tariffs
    and real cash rebates on PV and Batteries. Nothing less will do.

    • nakedChimp

      The FF industry had their hands in your pockets.. the government just got lobbied and taken over by them.

      You have to change the way money works to make it better, otherwise you’ll get the same result after the next ‘reboot’.

  • Robin_Harrison

    As superior economics applies ever more pressure, we can expect the FF industry to get considerably more dirty and desperate in their attempts to avoid their inevitable demise. I wonder what FF industry department covers the costs of politicians and regulators.

    • Alastair Leith

      In USA they funnel it all through dark-money clearing houses for arms length plausible deniability. We know several RWNJ MPs who attend Koch Brother Heartland Foundation hosted events. FF (eg. Exonn) put a lot of money into HF.

      • Robin_Harrison

        To the informed these paid for politicians are already starting to sound ridiculous. it’s going to be interesting watching their increasingly desperate contortions as the economic pressure mounts and the population becomes better informed.
        Hopefully the superior and improving economics will prevent this becoming an ideological bunfight to a stand-around-muttering stalemate as they’ve managed with the climate change debate.

        • Alastair Leith

          There’s a story on RenewEconomy and elsewhere about India and China having coal plant construction in massive decline over the last 12 months and the number of planned coal plant construction projects on hold rising form near zero to over 600 in same period. Any MP who thinks they are going to be able to through a billion dollars at a coal mine or coal train line and not get thrown out of office for economic mismanagement/vandalism is kidding themselves frankly.

          Premier Palaszczuk is playing a risky game of chicken with Adani and the public purse. I just hope somebody she trusts has their eyes wide open on this.

          • Robin_Harrison

            Unfortunately politicians work on the short term. They only have to sound plausible till they get their kickbacks.

  • howardpatr

    Turnbull will sit about obfuscating, as he tries to pacify the RWRNJs in the LNP, while the gas and renewables markets become even more dysfunctional.

  • howardpatr

    In the future the image in the article might well be found in our suburbs as rooftop surplus solar energy is fed into storage and then supplied back to producers with transactions, including sales into the grid, being monitored by block-chain technology.

  • Phil

    The consumers may well just make the decision to go 100% off grid themselves. Problems solved.

    If the next Tesla Powerwall 3 is $10k installed and 28kwh of storage with a 10kw inverter built in watch out !

    • Brunel

      In Spain they tried to have a sun tax!

      • Phil

        I predict a grid fee , or insurance denial if you don’t connect if it passes your home.That fee will be double the city rate in the regional areas.

        Much like sewer and town water. You can NOT not pay even if you disconnect.

        Why i bought my last block and build just out of reach of poles and wires

        It’s also interesting they never mention the extra cost of living in Australian regional areas when they promote it as great place to be .Excluding home costs and toll roads of course. You pay a lot more for just about everything else even food. Add 20- 300% for a lot of things

        • Brunel

          Rural areas need high speed rail and flying motorcycles.

      • icowrich

        Straight out of Frederic Bastiat!