Australia must start valuing storage duration to solve winter demand peaks and renewable droughts

Australia needs to value duration over capacity when it comes to energy storage to handle the new winter peak, says a new report. 

A mix of eight-hour and longer duration storage is the cheapest way to secure Australia’s grid at $90 per megawatt hour (/MWh) on a Long-Run Marginal Cost (LRMC) basis, says the report by Endgame Economics. 

That is compared to $145/MWh if Australia only relied on 2-hour battery storage – a future that is not likely, but one that Endgame Economic director Oliver Nunn says people need to understand is also not feasible. 

‘We’ve had heaps of people come to us and say why can’t we do that with short duration batteries. More concerningly there’s a lot of views in the system that short duration batteries are what we need to invest more in,” he says. 

“We keep investing in short duration batteries because they give us gigawatts, but it’s the gigawatt hours we need.”

The focus on duration comes from Endgame Economics’ modelling that concerns over summer blackouts will be replaced with winter supply troughs as households switch on heating and dryers at the same time as renewables are delivering the lowest volumes of energy during the year.

In this situation, storage – or other dispatchable generation – will need to be able to discharge power over longer periods each day and night, rather than smooth out short blips.

Need more 8+hour storage

Battery developers are moving towards four-hour batteries and in most of the auctions now conducted in Australia, four hours of storage is the standard duration.

There are a smattering of eight hour and even 12 hour batteries are being proposed, albeit all in New South Wales (NSW) thanks to its Long Term Energy Storage Agreements (LTSEA) tender process, and largely because other technologies such as pumped hydro have struggled to compete.

RWE’s eight hour battery is being built next to the German company’s existing 249 MW Limondale solar farm near Balranald in NSW, and will be the first of its size in Australia.

Korean company Ark Energy is building its own eight-hour lithium-iron phosphate battery, sized at 275MW with 2,200MWh of storage next to its 500MW Richmond, NSW, solar project.

And two more eight-hour BESS projects won NSW government backing in its third renewable energy tender late last year, as well. 

Origin Energy is betting on a startup to deliver a 12-hour redox flow battery for its Eraring coal power site.

In May, NSW launched its largest tender yet, looking for 1 GW of new capacity that can deliver at least eight hours of storage.

But it also launched a review to look at whether lowering the minimum duration of storage would see more projects come through the tender system and what might encourage developers to build more longer duration storage. 

At the same time, the federal government issued the first of its twice-yearly Capacity Investment Scheme auctions which is looking for 23 gigawatts of new renewables and 9 GW of at least four-hour storage.

The Endgame Economics report, written in response to the NSW review, argues 300-400 GWh of storage capacity will be needed by 2050 and the cheapest way to achieve that is with four-, eight-, 24-hour and 48-hour storage solutions.

Policy shift away from just capacity

NSW and other states must set targets if they wish to beat the more-gigawatts-is-better mindset, says Sara Taylor, government affairs head at compressed air energy storage company Hydrostor.

“[We’d like to see] a parallel pathway similar to the [federal] Capacity Investment Scheme but which factors in the longer lead time for long duration to come online. One that compares long duration storage against long duration storage, rather than trying to compare a 12 hour pumped hydro with a two-hour battery,” she says.

There also needs to be a mindset shift that places value on other elements of long duration storage technology, such as those which can also offer synchronous options or industrial heat. 

Nunn says that mindset shift starts with policy change. 

“What we’ve got to start thinking about is we’ve got to change our perspective on what the needs of the system are,” he says.

“One of those policies is to make sure we don’t select short duration resources that look very attractive on a capacity basis when we need longer duration resources.”