Australian transmission operator Transgrid has laid out its preferred options to upgrade the capacity of the links between Queensland and NSW, and help the country’s most populous and energy-hungry state navigate its way through a series of coal generator retirements.
But the big news from the Transgrid report is not the technology it declared to be its preferred option, but the technology that only just missed out – battery storage. And given its predicted cost falls in coming years, it must be only a matter of time before this becomes the cheapest, smartest and cleanest solution for the transmission needs of a renewables dominated grid.
The network of the future, it seems pretty clear to those paying attention, will be a combination of decentralised local networks, harnessing the “distributed energy resources” in local renewables, rooftop solar, household and commercial batteries and electric vehicles, and electric super-highways linking these together so they can share their assets as demand and supply changes.
The common assumption is that these long distance transmission needs will be supplied by either new links, and more poles and wires, or upgrading existing links – bigger lines with greater capacity.
The battery industry has been talking for a few years now about the possibility of “virtual transmission”, using big batteries to provide that extra capacity between state grids. The newly released Transgrid report reveals just how close they already are to being the best option.
The upgrade to the links between Queensland and NSW is one of a number of investments considered essential by the Australian Energy Market Operator in its Integrated System Plan to accommodate the shift to renewables. Others include a new link from South Australia to NSW, and upgraded capacity from NSW to Victoria, and a stronger network in the north west of Victoria.
Transgrid on Monday released its analysis of six different options for the upgrade between NSW and Queensland, including two so-called “new” options – one a combination of two 40MW/20MWh batteries, and another a combination of two 200MW/100MWh batteries.
Its preference is Option 1A, updating the lines from Liddell to Tamworth and installing new dynamic reactive support equipment and shunt capacitor banks. A couple of big renewable developers favoured other options, but the net benefits did not match the first one.
What’s interesting though is the assessment of the battery storage options. The bigger battery option, 5B, delivered higher gross market benefits than all the other options, but was hampered by its higher capital costs.
The fascinating aspect is the estimate that the first battery build would cost around $300 million, and then would need to be replaced after 15 years at less than half the cost, or $140 million.
That suggests a price decline of around 60 per cent. Assuming that Transgrid’s got its cost estimates right, the fall in prices over the next few years suggests that batteries will be competitive with other options. Might that present interesting options when other major transmission upgrades are proposed down the track?
“While Option 5B is the top-ranked BESS option, and has the greatest estimated gross benefit of all options, it is only expected to deliver around 60 per cent of the expected net benefits of Option 1A (on a weighted- basis),” the report says.
It says the assessment of these batteries, which it said would operate as a “virtual transmission line” as the battery developers have described, were based on “generic” cost assumptions for battery storage. It says confidential data provided by various battery storage proponents did not change its overall conclusion that 1A was the best option, but it doesn’t say how close they got.
This next graph tells the story in more detail.
It shows that the best battery storage option (option 5B to the right) delivers more gross market benefits, particularly in avoided investment in generation and storage elsewhere, and some avoided fuel costs (coal and gas) and other savings. But its greater capital cost (the green below the line), reduces its net market benefits (represented by the white dot).
But it makes you wonder. If more market benefits can be identified – batteries can do multiple things often not recognised by market or regulatory signals – and if the battery costs are lower than expected, and the lifetime duration longer than the assumed 15 years, there won’t be much difference.
The report notes that benefits could be increased if the battery had more access to markets such as FCAS, although it is not sure about the ability of the battery to spread itself across multiple markets, preferring it to focus on its primary role. And it notes that the battery capacity can be staged. And, if needed quickly, installed within 12 months.
“While Option 5B provides the greatest gross benefits, driven by the fact that it delivers the largest increase in transfer capacity of all options, it is only expected to deliver around 61 per cent of the expected net benefits of Option 1A under this scenario,” Transgrid writes.
“This is because this option has relatively high upfront capital costs, as well as the BESS assets having comparatively shorter asset lives (and so needing reinvestment during the assessment period).”
Interestingly, under the “slow change” scenario, which assume no new link to S.A., no Snowy 2.0, and a slow retirement of coal generators, the bigger battery options falls only 11 per cent short of the preferred 1A on net market benefits.
As it happens, the preferred option is going to be bad news for some people. For a start, it will result in less capacity needed for peaking gas plants (OCGT in grey), and less solar farm capacity (orange), and one or two wind farms in the short term, although longer term more wind in anticipated – although there is no real insight into what is driving these assumptions.