State looks to tariff changes to help take the heat out of decarbonisation for big business

New South Wales (NSW) has started looking at tariff reform to help industries use heat as energy, as the state’s decarbonisation focus shifts to the much harder to abate end of the economic spectrum. 

Currently, network charges don’t recognise the fact that heat energy storage technologies shift industrial electricity use to times when it’s more available.

“There is a significant amount of work underway on how we can reform and have appropriate energy tariffs that can help high-temperature heat to utilise thermal storage,” Department of Energy, Environment, Climate Change and Water (DEECCW) policy head Tim Stock said at the Renewable Heat conference in Melbourne this week.

“And how to… [use it to] arbitrage the energy market for those large heat loads to be able to to be able to get the benefit of the transition for those industrial customers.”

NSW DEECCW did not respond to requests for further information. 

The state has a 70 per cent emissions reduction goal for 2035, and currently industry makes up 42 per cent of the state’s gas use, Stock says.

Of this, 17 sites that need very high heat sources, such as aluminium smelters, make up 88 per cent of the state’s industrial emissions.

Thermal heat storage is a very new concept for most of Australian industry but as sellers have been promising for years, potential customers are beginning to come in from the cold.

These systems, known as electric thermal energy storage (eTES), store grid power as heat in a carbon block to reel back out as electricity, steam or heat.

Local company MGA Thermal, which stores energy in carbon blocks, signed its first commercial customer this year with a 195 megawatt-hour (MWh) project Western Australia company. 

A travel-sized MGA Thermal brick. Image: Rachel Williamson

One sticking point are network charges, which make up as much as half of the cost of electricity for industrial and commercial businesses and don’t recognise or reward users that no longer have a flat load.

Powercor in Victoria and Essential Energy in NSW have run trials on flexible tariffs but not much has changed on the regulatory front yet.

Unsurprisingly, many in the thermal energy industry are keen to see more tariffs sympathetic to their industry.

Emma Peacock, advisor to US company Antora, says network charges are the the single largest barrier to the deployment of thermal energy storage at scale across Australia.

“At the moment those fixed costs, which is about how you use the network, are not recognising flexible demand,” Peacock tells Renew Economy.

“We entirely avoid those peak demands, and we’re looking for structures that incentivise that ability to absorb electricity when there’s surplus in the system, and in turn we can help improve utilisation of the existing network and defer further buildout.”

Peacock says one idea of what a sympathetic tariff would look like is one they’ve negotiated with local utility at its 5 gigawatt-hour (GWh) thermal battery, Project Big Stone in South Dakota.

“We’ve been able to negotiate this flexible tariff structure with the local utility company, Otter Tail Power. It basically means our load is… not being charged in the same way that a load accessing those peak hours is,” she says.

“We’d like to see network tariff structures that explicitly recognise and reward highly flexible loads, including eTES and other industrial demand that is fully curtailable, avoids peak periods, and can absorb renewable curtailment by applying transparent network charges that reflect the materially lower network costs these loads impose.”

The push to decarbonise these companies is growing, with NSW offering $25,000 grants to help businesses reach net zero. 

The $2 million fund is for companies that spend more than $200,000 a year on energy, or more than $500,000 across multiple sites.

Planning activities covered by the second round of grants include the development of greenhouse gas inventories, climate risks and opportunity assessments, identifying cost savings measures and fuel switching opportunities, emission reduction action planning, and target setting.

Funding can also be used to support certain businesses that hold an Environment Protection Licence to develop their first Climate Change Mitigation and Adaptation Plan so as to comply with new NSW Environment Protection Authority (EPA) requirements.

Grants are open to eligible commercial and industrial businesses across all industry sectors including manufacturing, agriculture, transport and logistics, retail, and aged care residential services.

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