Battery storage projects in Australia have been dealt a blow after a request to exempt them from new network charges was refused, and after a new rule was introduced that they say could severely limit their day to day operations.
As RenewEconomy reported earlier this week, the entire storage industry, including major energy incumbents, warned the Australian Energy Market Commission that the viability of new storage projects would be killed if new networks fees were applied.
Network owners want to clip both sides of the ticket – as they are seeking to do with household solar exports – but the entire generation industry warned that such a measure would be devastating for new projects because of the added costs.
The Australian Energy Market Operator had argued that storage projects should be exempted from network charges when battery and pumped hydro projects were charging or pumping.
However, in its final ruling, the AEMC chose to maintain the status quo, arguing that it was too complex an issue to be dealt with now, and refused AEMO’s request to provide an exemption for those network costs.
The Clean Energy Council said it was disappointed by the rejection of the AEMO rule request, because it created uncertainty for investors by leaving open the possibility that storage facilities, and consumers, could pay twice for network charges.
“Batteries and pumped hydro will now be placed at a commercial disadvantage to coal and gas generators, who do not face network charges,” said the CEC’s director of energy transformation, Christiaan Zuur. “This undermines the efforts of state and territory governments to decarbonise the power system.”
Both the CEC, and the Clean Energy Investment Group, welcomed some changes to the original draft decision, but warned that the “devil will be in the detail” of how the new rules will be applied.
“The CEIG will be watching closely how NSP’s (network owners) approach negotiations with storage proponents,” CEIG chief executive Simon Corbell said.
However, battery storage providers are also upset with the decision to make changes to the way storage projects are registered, which battery storage proponents say will undermine the very strength of the technology – its versatility and flexibility.
At the moment, battery projects register as both a “load” and a “generator” and are assigned two different DUIDs (dispatchable unit identifiers).
The AEMC proposed that a single DUID be issued covering both load and generation. It was hoped by some in the industry that this would be an option, rather than a requirement, but it has been made compulsory, even for existing projects.
“There are a whole bunch of implications for this,” said one battery storage executive who declined to be named because of the sensitivity of the issue. “It will restrict some of the things that batteries can do.”
They provided an example of where FCAS – frequency control – might be offered only if a battery is charging at the time. That flexibility will not be possible under a single DUID.
“This restricts our ability to be flexible,” the executive said. “We thought it would be an optional rule, but it is now not optional. It feels like no one is listening.”
Many storage developers and operators had spoken out about this after the release of the draft determination by the AEMC in July.
“This is not an issue that needs solving and makes it harder to operate batteries effectively,” wrote Neoen, which operates the Hornsdale and Bulgana batteries, and is putting the finishing touches to the Victorian Big Battery, which will replace Hornsdale as the largest in Australia.
Tesla agreed. “The proposal, as drafted, represents less flexibility than the status quo, and would introduce unecessary inefficiency into the dispatch process,” it wrote.
Fluence, which is building the newly announced Hazelwood Battery in Victoria, said much the same thing: “The mooted change to a ‘single DUID’ for scheduled IRUs will add costs for market participants (and AEMO) and it is not clear whether the change would solve any problems or bring significant benefits.”
The AEMC, however, insisted that the overall package – which includes new guidelines on virtual power plants and “hybrid” systems (the combination of storage with wind and/or solar farms) – will make it easier and more attractive for more batteries and hybrid systems to enter the market.
AEMC chair Anna Collyer said the package would make it easier for households and small business customers to earn more revenue for their home battery, because they can sign up with innovative new aggregator businesses who will pay them for discharging power from their batteries at certain times.
The rules on hybrid systems would make it easier to manage electricity flows behind a connection point, effectively allowing a battery to store wind and solar power rather than having the output cut off at certain times.
This is also true for industrial installations with on-site wind and solar farms. “What this means is that the operator is not exposed to the spot market price to purchase energy from the grid and the energy being created by the solar plant is not being wasted,” Collyer said in a statement.
“Some stakeholders have told us this could reduce their energy costs by around 15 per cent.”
On the issue of the single DUID, Collyer insisted it will cut red tape for big batteries, reduce costs and logistical hurdles to participate in the market. “Batteries will no longer need to register twice, to both draw energy from the grid and send it out, as they currently do,” she said.
On the issue of network costs, Collyer acknowledged that many in the industry wanted the exemption to be granted, but the AEMC thought it wrong to do so at this time.
“We are not moving the goal posts on network charges,” she said.
“Energy storage participants will continue to negotiate their transmission services and charges. Our intention is for existing network agreements to remain unchanged. So, for example, if storage is currently paying zero charges, the intention is that should continue to be the case.
“We are not suggesting that storage should automatically be paying network charges. And we agree the rules on prescribed transmission services are not designed for price responsive loads.
“However, reforms to network charges for price responsive load involve other issues we need to consider that are broader than this rule change.
“These issues require further stakeholder engagement and consideration of how all participants, not just storage, will play in the market.
“We need to work through how it aligns with broader reform work including the Energy Security Board’s proposed congestion management model,” she said in reference to another proposed market rule change that has upset a lot of people in the industry.
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