New rules to reward batteries for keeping the lights on, and make hybrids a reality

Fast responding big batteries and wind and solar projects are set to be financially rewarded for helping to avoid blackouts under new reforms signed off by the Australian Energy Market Commission (AEMC) on Thursday.

The AEMC has also approved a range of new reforms to significantly reduce the red-tape encountered by aggregators of distributed energy resources, like residential battery storage and rooftop solar PV systems, and to simplify the rules for hybrid projects that combine different technologies.

AEMC chair Anna Collyer says the package of reforms comes ahead of an anticipated ramp-up in investment in energy storage technologies, which will play an increasingly important role in the energy market as thermal generators retire.

“The changes we’re announcing today recognise that energy is no longer a one-way transaction,” Collyer said.

“The energy market is moving to a future that will be increasingly reliant on storage to firm up the expanding volume of renewable energy as well as address the growing need for critical system security services as the ageing fleet of thermal generators retire.

“Within two decades, installed storage is expected to increase by 800% − it will be central to energy flowing two ways.”

On Thursday, the AEMC published its final determination to create a new fast frequency response market that will provide a financial reward for electricity projects that have the ability to rapidly respond and balance out fluctuations in the electricity system within just a few seconds.

With no moving parts, battery technologies have demonstrated their lightning-fast ability to adjust their output in response to changes in the energy system’s supply-demand balance, and Infigen Energy had requested the creation of a new rapid response market to reward batteries for this ability.

Frequency response services have existed in the energy market for some time, but until now, the fastest timeframe has been a six-second frequency response market.

The new market announced by the AEMC will provide payment to technologies that are able to respond to fluctuations in just one to two seconds and will predominantly benefit batteries and solar photovoltaic projects.

“As our energy mix continues to change, we will need these new, ultra-fast options. They’re like an insurance policy for keeping the energy system in balance and avoiding blackouts,” Collyer said.

The new fast frequency response market will commence in October 2023.

An additional part of the reform package announced by the AEMC on Thursday is the proposed creation of a new category of electricity market participants that will incorporate ‘integrated resource providers’.

This proposed ‘universal’ category will encompass providers of energy storage or aggregated distributed energy resources in the electricity market, simplifying how their registration and participation is regulated.

Projects that fall within that category, which will include big batteries, pumped hydro and aggregators of small distributed energy resources like rooftop solar and residential storage, will all have the same market rules under the new category.

The AEMC said that this new category would recognise the multiple roles these types of technologies can play while having a single connection point to the market.

For example, battery projects would no longer need to submit separate registrations to act as both a generator and as a market load. It will also include hybrid projects that include multiple technologies – like combined solar and battery installations – that would be subject to a single set of rules.

Most of the battery facilities next to wind and solar farms, or those projects combining wind and solar, had to file separate registrations and be dispatched separately.

The new rules will enable hybrid projects – like the newly connected Kennedy Energy Park – to combine their output and deliver significant efficiencies. See: Wind, solar and battery hybrids desperately need a change in market rules.

This change, the AEMC says, will create new opportunities for owners of residential battery storage systems to receive new sources of revenue by participating in newly enabled aggregation services where multiple smaller battery systems are coordinated together to work like a much larger battery in the market.

“This change works in tandem with our existing proposals on distributed energy resources currently under consideration, which are designed to make home batteries a more attractive way to maximise solar investments,” Collyer said.

“It’s also central to the Commission’s plans to make the rules more forward-looking so that they work for technology that hasn’t been invented yet.

“If we make the rules more elastic to focus on what market service you offer rather than who you are, they will stay relevant in the face of rapid change and support energy innovation. And it lays important foundations for the Energy Security Board’s post 2025 market design to become operational.”

The proposed rule change, to create the new market participant category, is proposed to come into effect in April 2023.

This proposed ‘energy storage plan’ is currently open for consultation, with the AEMC accepting submissions on the proposed new rules until 16 September 2021, with a final decision to be made sometime in October.