Battery storage rules should favour consumers, not networks

Consumer advocates are calling for the emerging energy storage market to be regulated for the benefit of consumers rather than electricity networks.

This is the main message from a position paper released today by Total Environment Centre and endorsed by a range of other organisations representing small energy consumers: the Public Interest Advocacy Centre, Consumer Action Law Centre, Consumer Utilities Advocacy Centre, Alternative Technology Association and Ethnic Communities Council of NSW.

Batteries will supercharge the local energy revolution, smoothing the intermittency of renewables, shaving peak demand and offering prosumers more autonomy. At present the regulatory space is a bit of a Wild West.

There are significant risks that networks could make it hard for third party competitors – especially behind the meter, given their control of the connection process. Ironically, we need regulation to ensure competition.

There are currently about twenty battery projects underway involving networks on both sides of the consumer’s meter or involving microgrids. But they are all trials. As the market evolves and batteries become ‘business as usual’ alternatives to building more poles, wires and substations, it is critical that we get the regulatory regime right for a market that is conservatively estimated to grow at least fifteen-fold over the next fifteen years.

After consulting widely and examining how battery regulation is evolving in other countries, the report proposes three objectives for their regulation in Australia: minimising risks to consumers, increasing consumer choice and competition, and aiding the decarbonisation of the electricity sector.

Drawing on Bruce Mountain’s work for PIAC last year, it considers several options for the regulation of network ownership of batteries on both sides of the meter and in microgrids.

On the consumer’s side of the meter, it recommends – like the AEMC and AER – that networks should not be able to directly own or control batteries. For larger, grid-side batteries, we recommend that all battery services should be open to competition. Networks would not be prevented from procuring battery services on the grid, but they wouldn’t be able to add them to their assets bases and recover the costs from consumers over long periods.

This is not to say that we want to keep networks out of batteries altogether. It’s more a case of ensuring that they can’t use their monopoly positions to distort the market. They can still compete through ‘ring-fenced’ businesses. Provided ring-fencing is effective, it will ensure that networks can’t use their incumbency and privileged access to information to obtain a competitive advantage. They can also buy battery services from third parties in the market.

But there may be situations, such as on remote ends of the grid, where competition is not yet and perhaps may never be available or effective. We therefore also recommend an exemptions framework so that networks can still invest if batteries are the lowest cost solution to problems like aging power lines, increased demand at the end of long skinny lines or new bushfire regulations.

The paper also recommends a number of other reforms to promote competition in the market for batteries as alternatives to building more poles and wires. This is a rapidly evolving space, though, and we are all learning on the job. Nobody has all the answers yet.

Networks and batteries: What’s best for consumers? can be accessed by download from the TEC website, or by emailing markb@tec.org.au.

Mark Byrne is the Energy Market Advocate at the Total Environment Centre