“Just give us a shot:” Networks say community batteries can right the wrongs of grid gold plating

Should network companies be allowed to deliver competitive services like shared storage from community batteries and kerbside electric vehicle charging? Or should they be kept within the confines of their regulated pole-and-wires businesses?

It’s a hugely divisive topic in Australia – and one that flared up last week following Energy Networks Australia’s formal request for changes to energy market ring-fencing rules to allow distribution network companies to install, own and maintain on-street chargers on existing grid assets.

On the other side of the debate, a separate rule change request from a cohort of consumer advocacy groups led by Nexa Advisory is simultaneously pushing for stronger ring-fencing safeguards, to prevent what they see as increasing regulated network creep into what should be purely competitive markets. 

“Tightening the process is critical to preventing the misuse of monopoly network powers and protecting energy consumers from gold plating and cost blowouts,” said Nexa Advisory chief Stephanie Bashir in March.

“We know the networks are hopeless at this,” said Tristan Edis, an analyst at Green Energy Markets who has been particularly critical of network-delivered community batteries, which he has argued have failed to deliver value for energy consumers, or reduce energy bills.

“These guys are not cost efficient providers.”

What do the network companies have to say? Well, some of them, at least, don’t entirely disagree.

“Well, I think… if I’m if I’m honest, I think that that is probably a legitimate [criticism],” Rob Amphlett Lewis, group executive of distribution at Australia’s biggest DNSP, Ausgrid, told Renew Economy’s Solar Insiders Podcast this week.

“People were right to have concerns when that, when they were looking at some of the … what was described as ‘gold plating’ and … you know, there was a feeling at the time – probably in the 2013, 2014, 2015 … period – that maybe network investment had got away from the regulator, and that we were seeing some pretty ballistic bill rises as a result.”

But that was 10 years ago, says Amphlett Lewis, and with the march of time and the steep evolution of the energy landscape, he argues that networks are changing too and deserve a fresh start.

“I feel in some ways that networks are still being judged on the ills of a decade ago, and we’re not getting credit for the work that we’ve done since then,” he tells Solar Insiders.

“The energy transition, in my mind, is such a big challenge, and it’s a challenge across across a load of different areas. And I just don’t think we can reasonably expect to be able to solve those challenges if we have, you know, one-third of the industry sit on its hands.

“Network businesses are full of people who are technically quite competent, who have ideas, who want to make a difference and are going to lean into it.

“Just give us a shot, let us have a crack, and if we don’t succeed, fine,”

One of the areas Ausgrid is keen to “have a crack” is in the installation of distribution network-connected community batteries, which it argues it can do efficiently and in a way that ultimately drives down costs for consumers.

This is a claim that has been vigorously challenged by critics including Edis, who has argued before on Renew Economy that network-delivered batteries have been far more costly than batteries installed behind the meter in homes and businesses – costs that wind up bighting consumers through higher bills.

Again, Amphlett Lewis does not entirely disagree.

“I encourage that conversation, and I think we’ve seen, in early days with the very first community batteries subsidies that were like $1,500 per kilowatt-hour and, at that number, you should not be building lots of community batteries, no doubt – Tristan, you’re spot on.

“But at $25 a kilowatt-hour subsidy, you should be building as many as you can, as quickly as you can, to help us get through the bumpy period of this transition, until we get to the point where we’ve got a really decarbonised, reliable, secure energy system.”

“We should be held to account”

Amphlett Lewis says that, with reductions in costs and economies of scale, and of course with the ongoing help of government subsidies, Ausgrid can now deliver community battery units at less less than $25 per kilowatt-hour – and he expects this price to continue to fall.

“The things that will drive those costs down, which are generally the manufacturing cost, the manufacturing base, expanding scale advantages… that drive the unit cost of the battery cells down themselves,” he says.

“Those cost advantages are going to come to us. So if we’re at $25/kWh today, where are we going to be in 2030? …Aspirationally, I think we should be able to do it without any subsidy at all.

“And that would be the greatest validation of the subsidy approach there could be, is that you’ve subsidised it through the knowledge curve, and now …subsidy is not necessary. We’re off. We’re away, and it’s just an inbuilt part of the energy system that provides one of the avenues to getting the storage we need into the system.

“We’re getting a rate of return that justifies our investment. Customers are getting better network outcomes, low voltage variations, lower curtailment, lower future network investment and the subsidy’s tiny compared to others.

“All those things tell me that I’m right to be confident that we’ve that we’re delivering an outcome here for the community which is worthwhile, and so that’s why we’re doubling down now.

“[But] the cost question is a really good one, and we’re delighted that people like Tristan Edis and others are going to hold us to account on it, because we should be held to account,” Amphlett Lewis adds.

“We’re part of the energy system. Our costs, like everyone else’s in the energy system… are ultimately borne by our customers, and so we should be held to account.”

Storage as a service

To make the benefits of its community batteries more tangible to consumers, Ausgrid has also rolled out an Energy Storage as a Service offer, which allows households located near a community battery to sign up through a retailer (at this stage, either Origin Energy or EnergyAustralia) and get access to the stored solar sourced from that battery.

Amphlett Lewis says Ausgrid currently has 2,500 customers signed up to the Energy Storage as a Service product, but with the number of batteries installed across its network, there are almost 250,000 customers who are, or soon will be, eligible to sign up.

“[This is a] product that will give them a $200 [annual energy bill] saving, so … that’s meaningful, and we’re super proud of that,” he tells Solar Insiders.

For network companies to keep providing these services, however, the rules need to change. Under current rules, networks have been able to dabble in grid-connected batteries through a special waiver to ring-fencing regulations, extended as part of the federal government’s Community Batteries program.

The hope of DNSPs like Ausgrid is that they can prove the value of network-owned batteries and have the rules changed more permanently.

“We’re certainly having a conversation with the AER [Australian Energy Regulator] about about this, and will, as part of our next regulatory determination, you know, be pushing for this to be a part of our sort of standard suite of services that that are regulated in a in a sort of thoughtful and consistent way.

“We’re also talking to government. I think… the good thing that [federal energy minister] Chris Bowen and his department have done is sort of given the opportunity for us to all to lean in and prove ourselves.

“And I think that’s where we’re at, at the moment, is saying, well, there’s been quite a few naysayers on this, and now let’s lean in and get the track record. Let’s get the runs on the board to be able to say, you know, what? We can do this.

“And look, we’re delivering a solution which is cheaper, more accessible to everyone.”

A win, win, win

Amphlett Lewis says he doesn’t see community batteries as being a better solution to home batteries or a direct competitor, but rather an “additional tool” that is needed to make the energy transition work – and to help drive down battery costs across the board.

He’s also conscious that looking at the transition through a lens of consumer energy “haves and have nots” is not always helpful – and nor is demonising households that have invested in rooftop solar or home battery storage.

“A lot of the people who have solar and batteries are not … wealthy people,” Amphlett Lewis says. “They’ve lent in, and they’re doing the right thing by the system, and they’re looking to reduce their energy bills – and that’s very sensible.

“We’ve been delighted to see the uptake of the home battery storage program that the government’s rolled out – I think that’s great to see. just the amount of storage that’s been put in, but we’re focused on the gap, and the gap is those who can’t [add a home battery], for whatever reason that is.

“We’re also focused … it’s our job to focus on the health of the system, and the system needs storage, which is scheduled, managed by market participants, to be doing the right thing in the instance that it’s needed to be done.

“So when there’s a trough or there’s a peak in prices … those storage assets are going to perform in a way that’s going to help the market; lift the trough, bring down the peak, create a bit of stability, lower energy costs for all.

“The other thing [community batteries] do for us is they help us manage voltage and help us manage local peak constraints. So it’s doing two things, you know, for a network and for a market participant.

“Market participants control it most of the time, and only when there’s a network constraint do we pull on it and use it to manage the power quality or the local constraints.

“And then, you know … that’s a win win. And where the win, win, win comes from is that the retailers can sign their customers up to a product that saves them $200 on on their bill.”

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