AGL Energy is looking to invest in large-scale battery storage installations as a potential alternative to new gas peaking plants, suggesting that storage will play a critical role in the changing nature of the electricity grid.
Announcing his company’s results on Thursday, as controversy raged over rolling blackouts in South Australia and forecasts of the same in NSW, CEO Andrew Vesey said AGL had been testing the market for large-scale battery storage, and had received an overwhelming response.
However, he said the decision of whether to go with battery storage or new or peaking plants was “highly contingent” on market developments and policy settings.
This is likely to include the so-called 5 minute rule, where large energy users such as Sun Metals are pushing for a change in market settings that would encourage battery storage. They argue that the current 30 minute settlement rule favours gas-fired generators. AGL has been arguing against the change.
AGL also said that virtual power plants – such as the 1,000 household batteries to be linked in Adelaide, and provide a 5MW solar peaking plant” – would also play a critical role.
“It shows the capability of making end users part of the solution,” Vesey said. The technology exists, he said, it was just a matter of putting it into practice and designing markets accordingly.
AGL said it has so far signed up 175 households for battery storage in its virtual power plant trial, and installed storage in 31 of those. It aims to complete that 1,000 installations by mid next year.
AGL delivered profits above expectations on Thursday, as soaring prices on wholesale electricity markets and the jump in the price of large-scale renewable energy certificates offset the impact of lower volumes and much lower gas margins.
(AGL gets more money when it sells its mostly coal-fired power into high-priced electricity markets, but loses out when it has to buy high-priced gas).
AGL is still pushing for forms of “capacity” rights, that would guarantee payments for generators to provide sufficient capacity to meet demand – a topical point given the rolling blackouts in South Australia on Wednesday and the possibility of the same in NSW on Friday.
He said it would be hard to justify a new peaking gas plant that might run just 3 per cent of the time (unless it had some sort of capacity payments).
Many experts suggest battery storage is a cheaper and better option, because it can add value in other areas – grid stability, network deferment, smoothing renewable output and meeting peak demand. This is what is happening now in the US.
Vesey believes that “energy only” markets will not work as higher levels of renewable energy are introduced into the market. The blackouts occurred in South Australia despite large amounts of capacity, including a 250MW unit of the Pelican Point gas plant – sitting idle.
Vesey reiterated his company’s decision that it will not be building any new coal plants. He said apart from being too expensive, and too hard to finance, AGL had committed to reducing emissions.
The sort of supercritical and ultra supercritical coal-fired generators being promoted by the Coalition government would not allow that to happen. He said carbon capture and storage is not on the horizon.
“We are absolutely bound by our commitment to our emissions policy,” he said.
On South Australia he said it was clearly being affected by extreme weather events – the huge storms that caused a state-wide blackout in September, and the heatwave that led to the brief rolling blackouts this week.
“When you get to extreme events, there is probably not an electric system in world that is perfectly bullet proof,” he said.
RenewEconomy sought further information on the large scale storage plans from AGL but was denied the opportunity of asking questions at its media call (again), and written questions were not responded to before publication.