AEMO hints at role of battery storage as big solar, wind farms added to grid

A new report by the Australian Energy Market Operator has hinted at some of the major changes facing the nation’s electricity networks – including the need to install grid-scale battery storage to alleviate grid congestion – as they evolve to incorporate more and more large-scale solar and wind generation.

In its Victorian Annual Planning Report (VAPR), released on Thursday, AEMO noted that the key driver for potential network augmentation was shifting away from peak demand management, and towards enabling higher levels of concentrated renewable energy generation in areas of low network capability.

The report, which focuses on Victoria’s north-west, said that favourable wind and solar conditions in the region had led to a high level of interest in renewable generation connection – but that this additional connection was expected to exceed network capability.

It’s a concern that has been on AEMO’s radar for some time now. In 2013, it warned that up to one third of the output from wind farms in South Australia and Victoria would need to be curtailed in the future, unless changes were made to the operations of the grid.

In its report this week, AEMO said that the connection of up to 200MW of additional generation in north-west Victoria would need to be supported by minor augmentations, such as line upgrades and control schemes, while the addition of more than 400MW would require major augmentation, such as new transmission lines.

One possible solution, the report noted, was the use of large, grid-connected battery storage – between 10-50MWh – as a way to reduce wind curtailment, by storing excess wind energy to avoid network congestion.

Although this option was not yet economically viable – the report found that the assumed cost of a battery to alleviate congestion in north west Victoria was approximately 2.5 times the market benefits returned, given a 20-year battery lifespan – AEMO said the benefits of battery storage were expected to improve as costs decreased and technologies improved.

And it noted that “generator proponents could consider the additional benefits of price arbitrage, contracting, and ancillary service provision if they chose to integrate battery storage into a renewable generation project.”

Indeed, AEMO notes that alleviating the kind of network limitations in north-west Victoria that would cause wind farm output to be curtailed could drive gross market benefits of around $30 million over a 40-year period, on the basis that 400MW+ of renewable generation be was connected in the area.

These market benefits, the report says, would be as a result of “facilitating additional renewable generation, which can displace coal and gas-fired generation that have higher fuel costs.

“These benefits would further increase, the report adds, “if Victorian brown coal generators retire, as the renewable generation could displace even higher-cost black coal or gas-fired generation.

“Further, if Australia’s LRET target cannot be met without this renewable generation, the penalty price paid for any shortfall would be treated as a resource cost in any RIT-T assessment, as this cost conceptually represents a reduction in environmental benefits.

“Therefore, the benefits of augmentation would increase in instances where the projected renewable generation curtailment is expected to result in LRET shortfalls,” AEMO says.

And if substantial brown coal generation is retired, it says, “wind could displace higher-cost generation, increasing the market benefits of augmentation to facilitate connection.”