Battery storage: Decision on crucial rule change delayed again

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A crucial decision on a rule change that could have a critical impact on the future of battery storage in Australia has been delayed again by AEMC.

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A decision on a rule change that could have a critical impact on the future of battery storage in Australia has been delayed again by the country’s main energy market rule maker, apparently because of the complexity and potential impact of the decision.

The Australian Energy Market Commission has been wrestling with a proposal to change the settlement period for wholesale market prices from 30-minutes to 5 minutes, to align with the current dispatch period.

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Proponents, such as the Queensland zinc producer Sun Metals, argues that the current arrangements distorts the market, allows for what is called “re-bidding”, or effectively gaming the market, and that ends up costing consumers more.

The issue  has been identified as one of the major targets for reform in the Australia energy markets. The rule change is supported not just by battery storage companies, but also many independent analysts, and groups such as the Clean Energy Fiannce Corporation and the Australian Renewable Energy Agency, who argued that it was one of the critical decisions needed to be made to support the roll-out of more renewable energy in Australia.

However, the fossil fuel industry has been strongly opposed, arguing that the changes would be costly and could force some gas generation out of the market, just at a time when more gas generation is considered necessary to keep the system in balance.

A preliminary discussion paper issued by AEMC staff late last year, indicated there was little doubt that “economic theory” would support the alignment of bidding and settlement period, and noted that the US regulator has instructed all its markets to do just that.

But it also warns about the “potential costs” and other adverse outcomes, and said it wants to be sure that the benefits outweighed the costs. It is these considerations that appear to be behind the decision to delay a draft decision until July 6, with a final decision now not likely until September.

The 5-minute rule change was a key focus of recent hearings from the Senate inquiry into the resilience of the energy market, with both CEFC chief executive Oliver Yates and ARENA boss Ivor Frischknecht – along with others – speaking strongly in favour of it.

“Five-minute interval pricing, from our own analysis on battery projects, would change the revenue profile significantly and would then encourage batteries to come into the market and be available for short-term supply,” Yates said.

Battery storage, its proponents argue, will not just compete with gas generators as a competitive source of peaking power, and as a cheaper alternative to network upgrades, but also provide the rapid response, grid security that could prevent blackouts.

These arrays could be set up as large free standing installations, in smaller units across the network, adjoining wind and solar farms, or even gas plants, or installed in homes and businesses and linked together through software as a “virtual power plant.”

“This is exactly what you want: a very fast response,” Yates said. “Unfortunately, clouds come over solar systems, and that will change their generation. That is a different development, so you need a responsive asset in the market to be able to respond to that.”

The ANU’s Evan Franklin agreed, telling the same hearing: “Using a 30-minute settlement period is a disincentive for resources which can act in the best interests of the system for one minute or five minutes or 10 minutes.”

He said the current 30-minute settlement does not encourage enough fast-response technology into the grid – the sort that could perhaps have averted the state-wide blackout in South Australia last September when tornadoes tore down three major transmission lines in a matter of minutes.

“One of the aspects of resilience that I talked about in the submission is that dynamic system response which is something that occurs over a matter of seconds. That requires some different incentives or maybe even different markets to be in place.”

His colleague, Matthew Stocks, also said he was a strong supporter of the change in settlement times.

“One of the things that are happening, particularly with storage, is that people will be able to respond faster—we are talking seconds for batteries and less than a minute for pumped hydro,” he said.

“If storage is going to come into that, if you really want it to develop that very fast instantaneous response.’

“It needs to be rewarded for filling in that gap and not end up being paid six times less than what that was deemed to be worth because whoever supplies in that six-minute period only gets about $2,000 a megawatt hour rather than the $14,000 that they bid.”

AEMC head John Pierce told the same hearing that such changes were a “fundamental issue for the structure of the market”, but he did not indicate which way the rule maker was likely to fall. It is the AEMC commissioners that make the decision, not the staff.

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10 Comments
  1. DJR96 2 years ago

    Finally some sense coming through to support this 5-minute ruling. It is absolutely essential to make any further progress with improving the network.

    The existing market structure has served us ok whilst the participants played with some integrity. But this summer has shown that that integrity has gone completely out the window with those players gaming the market to screw us all over. Completely against the NEO.

    The NEO is the primary objective and the market structure must support that. The AEMC should not even be considering any sympathy towards the very players that have abused it. It has to show some courage and stand up to them. NEO comes first for the benefit of all of Australia, not just a few FF players.

    • Greg Hudson 2 years ago

      It isn’t limited to FF players gaming the system. I believe Origin and Snowy Hydro could also be doing it.

  2. Tom 2 years ago

    Coal : 1 | 0 : Consumer

  3. Ray Miller 2 years ago

    The AEMC is more and more looking like a protection racket than a robust commission managing the NEM’s energy transition. We have a line up of solutions and financing which is needed NOW but is being nobbled at every opportunity.

    What is going on with the performance of AEMO and the AEMC being very average? Maybe they are being paid far too much for what they are delivering?

    • lin 2 years ago

      If they are anything like our political “class”, they may have their eyes on future career prospects within the industries they are regulating. Used to be called corruption. Now it is business as usual.

  4. Ian 2 years ago

    Not surprising the fossil lobby hold back on innovative solutions.
    There should be no delay to the 5 min ruling given the opportunities for system improvements

  5. Brian L Burleigh 2 years ago

    Great exposition on batteries, but nothing on their competitive advantage in the secondary FCAS market where they would shine. This secondary market requires generators to keep capacity in reserve just in case something else breaks down.
    Can we have some discussion of the potential, please?

  6. Ian Porter 2 years ago

    If complexity is an issue, then bring in experts to assist. If potential impact of the decision is an issue, get the experts you brought in to solve the complexity to advise if the impact to consumers is positive and if it is, then implement it.

    However, if this is so complex, how come other countries have managed it and why are we waiting a period of time. The complexity won’t improve with time but the impact on consumers will.

    I smell a racket here. This regulator is not active in doing what it was commissioned to do.

    • Greg Hudson 2 years ago

      As long as the experts don’t come from the FF lobby group (Frontier Foundation?) please correct me on the name if I am wrong.

  7. Radbug 2 years ago

    I anticipate at least a three-fold increase in charge density in lithium or sodium batteries before the end of the year. This will ensure that no Barina-sized car made, in the world, will be Otto-cycle-powered by Christmas 2018. Given the storage opportunity here, what is the government’s policy towards the importation of small cars after Christmas 2018?

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