Big batteries have emerged as the more effective provider of peaking services within the electricity market, beating out gas generators on cost and effectiveness, new analysis published by the Clean Energy Council has argued.
Peaking generators play an important role within the electricity system, providing additional supplies of power at short notice when demand for electricity surges to very high levels, such as very hot summer days.
Traditionally, these services have been provided by open cycle gas generators, which have the ability to start generating electricity in less than 15-minutes. However, these generators are generally costly to operate, lay dormant for most of the year and secure most of their revenues during the brief periods throughout the year when wholesale electricity prices are extraordinarily high.
However, Clean Energy Council chief executive Kane Thornton says new analysis shows that battery storage technologies are now competitive as providers of peaking power, as they can inject power into the grid virtually instantaneously, and falling technology prices are seeing batteries become the cheaper option.
“Large-scale batteries are now undoubtedly the best option to meet periods of high electricity demand,” Thornton said.
“Batteries can provide a premium peaking service in periods of high demand traditionally met by peaking gas plant. Batteries can ramp up quickly, have near zero start-up time and provide a better frequency response.”
Analysis undertaken by the Clean Energy Council compared the costs of a new 250MW gas fired generator with those of a 250MW big battery project, finding that the battery could deliver peaking services as much as 30 per cent cheaper, based on current technology prices.
Thornton said that battery technologies, which have the ability to rapidly ramp up and down their output as the needs of the grid dictate, meant they were ideal for providing supplies of power during periods of peak demand.
“Electricity demand must match supply at all times, and so on very hot days when demand spikes we quickly need more supply to respond,” Thornton said.
“Sometimes, it’s only for a few seconds; other times, it’s for a couple of hours. In this respect, the capability of large-scale batteries is unrivalled. Over the past three years, batteries have been essential in keeping the grid stable and keeping power flowing to energy users.”
The energy market is expected to see a surge in new investment in big battery projects, with a total of 8.9GW of new big battery projects being proposed since 2018, including 6.6GW of new battery storage capacity announced this year alone.
“The commercial case for batteries will continue to improve as battery technology advances and new markets are established to reward the services they provide,” Thornton added.
“However, long-term investment certainty remains reliant on appropriate market reforms and forward-looking policies that incentivise new, flexible technologies that are needed to complement renewables.”
But the future prospects of some big battery projects could be compromised by market interventions being threatened by the Morrison government, as part of wider efforts to prop-up the gas industry.
The Morrison government has indicated it will make a decision by the end of April on whether it will proceed to build a new gas fired generator in New South Wales, that it believes is necessary to fill a gap left by the closure of the Liddell power station.
The Australian Energy Market Operator, the regulator responsible for maintaining the supply-demand balance in the electricity grid, has projected that a supply gap of just 154MW would remain upon the closure of the ageing Liddell coal fired power station. But the Morrison government has suggested it could task the government-owned Snowy Hydro Corporation building new gas fired power station in Kurri Kurri, in the New South Wales Hunter region, that could be up to 750MW in size.
Snowy Hydro CEO Paul Broad told senate estimates in February that he believed there was a strong business case for the gas generator, raising speculation that the company will proceed with a full 750MW plant irrespective of what capacity commitments come forward.
Broad said that he did not think that gas generators were in competition with big batteries in the energy market, as they served different part of the energy market.
But the Clean Energy Council’s analysis suggests that the business case for new gas generators is becoming less and less attractive.
“Historically, gas peakers have relied more heavily on cap contracts (with their longer runtime duration), but cap prices have softened and are not expected to see the same extreme volatility as evidenced in the one or two isolated years since the commencement of Australia’s national market,” the Clean Energy Council’s analysis says.
“Coupled with increased uncertainty and volatility in input gas fuel prices, unclear supply volumes, carbon risk premiums and broader policy and political sentiments, the case for new gas investments is becoming increasingly challenging.”